UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
VAALCO ENERGY, INC.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
91851C201
(CUSIP Number)
LAWRENCE C. TUCKER
Brown Brothers Harriman & Co.
59 Wall Street
New York, New York
(212) 483-1818
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
April 21, 1998
(Date of Event which Requires Filing of
this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
2
CUSIP No. 91851C201
1 NAME OF REPORTING PERSON
THE 1818 FUND II, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E)
6 CITIZENSHIP OR PLACE OR ORGANIZATION
DELAWARE
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 31,263,441
OWNED BY 9 SOLE DISPOSITIVE POWER
EACH -0-
REPORTING 10 SHARED DISPOSITIVE POWER
PERSON WITH 31,263,441
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
31,263,441
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
70.27%
14 TYPE OF REPORTING PERSON
PN
<PAGE>
3
CUSIP No. 91851C201
1 NAME OF REPORTING PERSON
BROWN BROTHERS HARRIMAN & CO.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E)
6 CITIZENSHIP OR PLACE OR ORGANIZATION
NEW YORK
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 31,263,441
OWNED BY 9 SOLE DISPOSITIVE POWER
EACH -0-
REPORTING 10 SHARED DISPOSITIVE POWER
PERSON WITH 31,263,441
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
31,263,441
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
70.27%
14 TYPE OF REPORTING PERSON
PN
<PAGE>
4
CUSIP No. 91851C201
1 NAME OF REPORTING PERSON
T. MICHAEL LONG
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E)
6 CITIZENSHIP OR PLACE OR ORGANIZATION
UNITED STATES
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 31,263,441
OWNED BY 9 SOLE DISPOSITIVE POWER
EACH -0-
REPORTING 10 SHARED DISPOSITIVE POWER
PERSON WITH 31,263,441
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
31,263,441
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
70.27%
14 TYPE OF REPORTING PERSON
IN
<PAGE>
5
CUSIP No. 91851C201
1 NAME OF REPORTING PERSON
LAWRENCE C. TUCKER
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E)
6 CITIZENSHIP OR PLACE OR ORGANIZATION
UNITED STATES
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 31,263,441
OWNED BY 9 SOLE DISPOSITIVE POWER
EACH -0-
REPORTING 10 SHARED DISPOSITIVE POWER
PERSON WITH 31,263,441
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
31,263,441
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
70.27%
14 TYPE OF REPORTING PERSON
IN
<PAGE>
6
Item 1. Security and Issuer.
This Statement on Schedule 13D relates to the common stock, par value
$.10 per share (the "Common Stock"), of Vaalco Energy, Inc., a Delaware
corporation (the "Company"), whose principal executive office is located at 4600
Post Oak Place, Suite 309, Houston, Texas 77027.
Item 2. Identity and Background.
(a), (b), (c) and (f). This Statement on Schedule 13D is being filed by
The 1818 Fund II, L.P., a Delaware limited partnership (the "Fund"), Brown
Brothers Harriman & Co., a New York limited partnership and general partner of
the Fund ("BBH&Co."), T. Michael Long ("Long") and Lawrence C. Tucker ("Tucker")
(the Fund, BBH&Co., Long and Tucker are referred to collectively herein as the
"Reporting Persons"). The Fund was formed to provide a vehicle for institutional
and substantial corporate investors to acquire significant equity interests in
medium-sized publicly owned United States corporations. BBH&Co. is a private
bank. Pursuant to a resolution adopted by the partners of BBH&Co., BBH&Co. has
designated and appointed Long and Tucker, or either of them, the sole and
exclusive partners of BBH&Co. having voting power (including the power to vote
or to direct the voting) and investment power (including the power to dispose or
to direct the disposition) with respect to the Common Stock.
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7
The address of the principal business and principal offices of the Fund
and BBH&Co. is 59 Wall Street, New York, New York 10005.
The business address of each of Long and Tucker is 59 Wall Street, New
York, New York 10005. The present principal occupation or employment of each of
Long and Tucker is as a general partner of BBH&Co. Long and Tucker are citizens
of the United States.
The name, business address, present principal occupation or employment
(and the name, principal business and address of any corporation or other
organization in which such employment is conducted) and the citizenship of each
general partner of BBH&Co. is set forth on Schedule I hereto and is incorporated
herein by reference.
(d) and (e). During the last five years, neither any Reporting Person
nor, to the best knowledge of each Reporting Person, any person identified on
Schedule I has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
which any such person was or is subject to a judgement, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
<PAGE>
8
Item 3. Source and Amount of Funds or Other Consideration.
Pursuant to a Stock Acquisition Agreement and Plan of Reorganization,
dated as of February 17, 1998 and amended as of April 21, 1998 (the "Stock
Acquisition Agreement"), among the Company, the Fund and 1818 Oil Corp., a
Delaware corporation and wholly-owned subsidiary of the Fund ("1818 Oil"), upon
the closing of the transactions contemplated by the Stock Acquisition Agreement
(the "Acquisition Closing"), the Company issued, and the Fund acquired from the
Company, (i) 10,000 shares of preferred stock, par value $25.00 per share (the
"Preferred Stock"), of the Company and (ii) 3,763,441 shares of Common Stock. A
copy of the Stock Acquisition Agreement and Amendment No. 1 thereto are attached
hereto as Exhibits 1 and 2 respectively and are hereby incorporated by
reference. The Fund has also entered into a Registration Rights Agreement, dated
as of April 21, 1998 (the "Registration Rights Agreement"), between the Company
and the Fund, pursuant to which the Company has agreed, under the terms and
conditions set forth therein, to register under the Securities Act of 1933, as
amended, the Common Stock issuable upon the conversion of the shares of
Preferred Stock held by the Fund and all other shares of Common Stock held by
the Fund. A copy of the Registration Rights Agreement is attached hereto as
Exhibit 3 and is hereby incorporated by reference.
The consideration paid by the Fund for the shares of Preferred Stock it
purchased under the Stock Acquisition Agreement consisted of all of the issued
and outstanding shares of common stock, par value $.01 per share (the "1818 Oil
<PAGE>
9
Common Stock"), of 1818 Oil and the consideration for the shares of Common Stock
it purchased under the Stock Acquisition Agreement consisted of $7,000,000 in
cash.1/
The cash portion of the consideration (as well as the consideration the
Fund originally paid for the shares of 1818 Oil Common Stock) was obtained by
the Fund from capital contributions made by its partners pursuant to
pre-existing capital commitments.
Item 4. Purpose of Transaction.
The Fund has acquired the securities of the Company for investment
purposes only.
As described below, in connection with the closing under the Stock
Acquisition Agreement, the Fund acquired certain rights and privileges with
respect to the Board of Directors and management of the Company which may impede
the acquisition of control of the Company by any person. Pursuant to the terms
of the Preferred Stock, all of the outstanding shares of which are held by the
Fund, for so long as the number of outstanding shares of Preferred Stock
represent (after giving effect to any adjustments) on a fully-diluted basis at
least five percent (5%) of the
<PAGE>
10
total number of shares of Common Stock outstanding, the holders of the Preferred
Stock have the right to elect three members of the Board of Directors of the
Company. As of the Acquisition Closing, the number of members of the Board of
Directors was increased from five to eight to allow the Fund, as holder of all
of the outstanding shares of Preferred Stock, to designate three individuals to
be directors of the Company, and such individuals have been elected to the Board
of Directors. In addition, the holders of shares of Preferred Stock vote
together with the holders of shares of Common Stock on all matters submitted to
the holders of Common Stock at any annual or special meeting of the Company (or
any written consent in lieu thereof), including the election of directors.
Accordingly, as described in Item 5 below, as of the date hereof the combined
voting power of the shares of Common Stock and the shares of Preferred Stock
held by the Fund would allow the Fund to control any vote submitted to the
shareholders of the Company (or any written consent in lieu thereof) which
requires the consent of a majority of holders of shares of Common Stock. A copy
of the Certificate of Designation of the Preferred Stock is attached hereto as
Exhibit 4 and is hereby incorporated by reference.
Pursuant to the terms of the Stock Acquisition Agreement, the By-Laws
of the Company were amended as of the Acquisition Closing to provide that the
consent of at least one director elected by the class vote of the holders of
shares of Preferred Stock is required for the Board of Directors to approve
certain actions by the Company, including, without limitation, (i) the issuance
of any equity securities of the Company or any subsidiary thereof, or rights of
any kind convertible or exchangeable for any equity securities of the Company or
any subsidiary thereof, or
<PAGE>
11
any option, warrant or other subscription or purchase right with respect to
equity securities of the Company or any subsidiary thereof; (ii) any transaction
of merger or consolidation of the Company or any subsidiary thereof with one or
more persons or any transaction of merger or consolidation of one or more
persons into or with the Company or any subsidiary thereof; (iii) any sale,
conveyance, exchange or transfer to another person of (x) the voting stock of
the Company or any subsidiary thereof or (y) all or substantially all of the
assets of the Company or any subsidiary thereof, (iv) outside of the ordinary
course of business (x) any sale, conveyance, exchange, transfer or lease or
other disposition to another person of any material assets, rights or properties
of the Company or any subsidiary thereof or (y) any purchase, lease or other
acquisition of any material assets, rights or properties of another person; (v)
any amendment, modification or restatement of the Restated Certification of
Incorporation or By-Laws of the Company, or the certificate of incorporation of
any subsidiary of the Company (including, without limitation, a change in the
number of directors which constitutes the Board of Directors).
The Company has informed the Fund that, as a result of the closing
under the Stock Acquisition Agreement and a separate private placement of shares
of Common Stock, the Company currently does not have reserved and available for
issuance such number of authorized but unissued shares of Common Stock as would
<PAGE>
12
be sufficient to permit the conversion of all of the outstanding shares of
Preferred Stock and all outstanding warrants and options with respect to the
Common Stock (collectively, the "Options") into shares of Common Stock. Pursuant
to a letter agreement, dated as of April 21, 1998 (the "Letter Agreement"),
among the Company, the Fund, Robert L. Gerry ("Gerry") and W. Russell Scheirman
("Scheirman"), the Fund, Gerry and Scheirman (i) waived any breach by the
Company of the terms of the Preferred Stock and Options held by each of them as
a result of there not being a sufficient amount of Common Stock available for
issuance upon the conversion or exercise of such securities; (ii) agreed not to
convert a certain number of shares of Preferred Stock and Options held by each
of them so that the Company would not be in breach of its obligations to other
persons with respect to the Company's having a sufficient amount of authorized
but unissued shares of Common Stock to allow for the conversion into Common
Stock of all of the Options held by such other persons; and (iii) agreed to vote
in favor of an amendment to the Restated Certificate of Incorporation of the
Company to allow the Company to have reserved and available for issuance such
number of shares of Common Stock as would be sufficient to allow for the
conversion of all outstanding shares of Preferred Stock and all outstanding
Options. A copy of the Letter Agreement is attached hereto as Exhibit 5 and is
hereby incorporated by reference.
The Reporting Persons may from time to time acquire additional shares
of Common Stock in the open market or in privately negotiated transactions,
subject to the availability of shares of Common Stock at prices deemed
favorable, the Company's business or financial condition and to other factors
and conditions the
<PAGE>
13
Reporting Persons deem appropriate. Alternatively, the Reporting Persons may
sell all or a portion of the shares of Common Stock or Preferred Stock in open
market or in privately negotiated transactions, subject to the factors and
conditions referred to above and compliance with applicable laws.
Except as described in the Registration Rights Agreement and the Letter
Agreement and as set forth above in this Item 4, no Reporting Person has any
present plans or proposals which relate to or would result in: (a) the
acquisition by any person of additional securities of the issuer, or the
disposition of securities of the issuer; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Company or any of its subsidiaries; (c) a sale or transfer of a material amount
of assets of the Company or of any of its subsidiaries; (d) any change in the
present board of directors or management of the Company, including any plans or
proposals to change the number or term of directors or to fill any existing
vacancies on the board; (e) any material change in the present capitalization or
dividend policy of the Company; (f) any other material change in the Company's
business or corporate structure; (g) changes in the Company's charter, bylaws or
instruments corresponding thereto or other actions which may impede the
acquisition of control of the Company by any person; (h) causing a class of
securities of the Company to be delisted from a national securities exchange or
to cease to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association; (i) a class of equity securities of
the Company becoming eligible for termination of registration pursuant to
Section 12(g)(4) of the Securities Exchange Act of 1934; or (j) any action
similar to any of those enumerated above.
<PAGE>
14
Item 5. Interest in Securities of the Issuer.
(a) through (c). As set forth above, in connection with the closing
under the Stock Acquisition Agreement the Fund acquired 10,000 shares of
Preferred Stock and 3,763,441 shares of Common Stock. Accordingly, as of April
27, 1998, assuming the conversion of the shares of Preferred Stock held by the
Fund into shares of Common Stock as of such date, the Fund may be deemed to own
31,263,441 shares of Common Stock, which, based on calculations made in
accordance with Rule 13-d3(d) promulgated under the Securities Exchange Act of
1934, as amended, and there being 16,986,527 shares of Common Stock outstanding
on April 27, 1998 (as represented to the Fund by the Company), represents 70.27%
of the outstanding shares of Common Stock.
By virtue of BBH&Co.'s relationship with the Fund, BBH&Co. may be
deemed to beneficially own 31,263,441 shares of Common Stock, representing
approximately 70.27% of the outstanding shares of Common Stock (based on the
number of shares of Common Stock outstanding on April 27, 1998 as represented by
the Company to the Fund). By virtue of the resolution adopted by BBH&Co.
designating Long and Tucker, or either of them, as the sole and exclusive
partners of BBH&Co. having voting power (including the power to vote or to
direct the voting) and investment power (including the power to dispose or to
direct the disposition) with respect to the securities of the Company, each of
Long and Tucker may be deemed to beneficially own 33,263,441 shares of Common
Stock, representing approximately 70.27% of the outstanding shares of Common
Stock (based on the
<PAGE>
15
number of shares of Common Stock outstanding on April 27, 1998 as represented by
the Company to the Fund).
Except as set forth above, no Reporting Person nor, to the best
knowledge of each Reporting Person, any person identified on Schedule I,
beneficially owns any shares of Common Stock or has effected any transaction in
shares of Common Stock during the proceeding 60 days.
Paragraphs (d) and (e) of Item 5 of Schedule 13D are not applicable to
this filing.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to the Common Stock of the Issuer.
The Company and the Fund are parties to the Registration Rights
Agreement which gives the Fund, among other things, the right, on the terms and
conditions set forth therein, to require the Company to register for sale to the
public the shares of Common Stock issued upon the conversion of the Preferred
Stock and any shares of Common stock held by the Fund.
Except as described elsewhere in this Statement and as set forth in the
Stock Acquisition Agreement, the Registration Rights Agreement and the Letter
Agreement, copies of which are attached hereto as Exhibits 1 (and 2), 3, and 5
respectively, and incorporated herein by reference, to the best knowledge of the
Reporting Persons, there exist no contracts, arrangements, understandings or
relationships (legal or otherwise) among the persons named in Item 2 and between
<PAGE>
16
such persons and any person with respect to any securities of the Company,
including but not limited to transfer or voting of any securities of the
Company, finder's fees, joint ventures, loan or option arrangements, puts or
calls, guarantees of profits, division of profits or loss, or the giving or
withholding of proxies.
Item 7. Material To Be Filed as Exhibits.
1. Stock Acquisition Agreement and Plan of Reorganization, dated as of
February 27, 1998, among the Company, the Fund and 1818 Oil.
2. Amendment No. 1 to the Stock Acquisition Agreement and Plan of
Reorganization, dated as of April 21, 1998, among the Company, the Fund and 1818
Oil.
3. Registration Rights Agreement, dated as of April 21, 1998, between
the Company and the Fund.
4. Certificate of Designation of the Preferred Stock.
5. Letter Agreement, dated April 21, 1998, among the Company, the Fund,
Gerry and Scheirman.
<PAGE>
17
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief,
each of the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: April 30, 1998
THE 1818 FUND II, L.P.
By: Brown Brothers Harriman & Co.,
General Partner
By: /S/ Lawrence C. Tucker
----------------------
Name: Lawrence C. Tucker
Title: Partner
BROWN BROTHERS HARRIMAN & CO.
By: /s/ Lawrence C. Tucker
----------------------
Name: Lawrence C. Tucker
Title: Partner
/s/ T. Michael Long
-------------------
T. Michael Long
/s/ Lawrence C. Tucker
----------------------
Lawrence C. Tucker
<PAGE>
18
SCHEDULE I
Set forth below are the names and positions of all of the general
partners of BBH & Co. The principal occupation or employment of each person
listed below is private banker, and, unless otherwise indicated, the business
address of each person is 59 Wall Street, New York, New York 10005. Unless
otherwise indicated, each person listed below is a citizen of the United States.
Business Address
(if other than as
Name indicated above)
- ---- ----------------
Peter B. Bartlett
Brian A. Berris
Walter H. Brown
Douglas A. Donahue, Jr. 40 Water Street
Boston, Massachusetts 02109
Anthony T. Enders
Alexander T. Ercklentz
Terrence M. Farley
Elbridge T. Gerry, Jr.
Robert R. Gould
Kyosuko Kashimoto 8-14 Nihonbashi 30-Chome Chuo-ku
(citizen of Japan) Tokyo 103, Japan
Radford W. Klotz
Noah T. Herndon 40 Water Street
Boston, Massachusetts 02109
Landon Hilliard
<PAGE>
19
Business Address
(if other than as
Name indicated above)
- ---- ----------------
Michael Kraynak, Jr.
T. Michael Long
Hampton S. Lynch
Michael W. McConnell
William H. Moore III
Donald B. Murphy
John A. Nielsen
Eugene C. Rainis
A. Heaton Robertson 40 Water Street
Boston, Massachusetts 02109
Jeffrey A. Schoenfeld 40 Water Street
Boston, Massachusetts 02109
Stokley P. Towles 40 Water Street
Boston, Massachusetts 02109
Lawrence C. Tucker
Maarten van Hengel
Douglas C. Walker 1531 Walnut Street
Philadelphia, Pennsylvania 19102
Laurence F. Whittemore
Richard H. Witmer, Jr.
<PAGE>
20
INDEX TO EXHIBITS
Page
Exhibit Description Number
------- ----------- ------
1 Stock Acquisition Agreement and Plan
of Reorganization, dated as of
February 27, 1998, among the
Company, the Fund and 1818 Oil
2 Amendment No. 1 to the Stock
Acquisition Agreement and Plan of
Reorganization, dated as of April 21,
1998, among the Company, the Fund
and 1818 Oil
3 Registration Rights Agreement, dated
as of April 21, 1998, between the
Company and the Fund
4 Certificate of Designation of the
Preferred Stock
5 Letter Agreement, dated April 21,
1998, among the Company, the Fund,
Gerry and Scheirman
STOCK ACQUISITION AGREEMENT
AND PLAN OF REORGANIZATION
by
and
among
VAALCO ENERGY, INC.
a Delaware corporation
("Vaalco"),
and
The 1818 Fund II, L.P.
a Delaware limited partnership
("Fund"),
covering all of the capital stock of
1818 Oil Corp.
a Delaware corporation
(the "Company")
Dated as of February 17, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS.......................................................1
Section 1.1 Definitions..................................................1
ARTICLE 2. EXCHANGE OF STOCK.................................................4
Section 2.1 Acquisition of Stock.........................................4
Section 2.2 Issuance of Shares...........................................4
ARTICLE 3. CLOSING...........................................................4
Section 3.1 Closing Date, Time and Place.................................4
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF VAALCO..........................4
Section 4.1 Organization.................................................4
Section 4.2 Affiliated Entities..........................................5
Section 4.3 Capitalization...............................................5
Section 4.4 Authority; Enforceable Agreements; Validity of
Vaalco Shares................................................5
Section 4.5 No Conflicts or Consents.....................................6
Section 4.6 Corporate Documents, Stockholder Agreements and Board of
Directors....................................................6
Section 4.7 SEC Documents; Financial Statements; Liabilities.............7
Section 4.8 Oil and Gas Properties.......................................7
Section 4.9 Investment Company...........................................9
Section 4.10 Public Utility Company.......................................9
Section 4.11 Environmental and Safety Matters.............................9
Section 4.12 Tax Matters.................................................10
Section 4.13 Litigation..................................................11
Section 4.14 Broker's and Finder's Fee...................................11
Section 4.15 Absence of Sensitive Payments...............................11
Section 4.16 Compliance with Law.........................................12
Section 4.17 Contracts...................................................12
Section 4.18 Employment Plans/Employment Agreements......................12
Section 4.19 Absence of Certain Changes or Events........................14
Section 4.20 Investment Experience.......................................14
Section 4.21 Purchase for Own Account....................................14
Section 4.22 Settlement Payments.........................................15
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF FUND...........................15
Section 5.1 Organization................................................15
Section 5.2 Affiliated Entities.........................................15
Section 5.3 Capitalization..............................................15
Section 5.4 Seller Status...............................................16
Section 5.5 Authority; Enforceable Agreements...........................16
Section 5.6 No Conflicts or Consents....................................16
Section 5.7 Corporate Documents, Stockholder Agreements and Board of
Directors...................................................17
Section 5.8 Financial Statements; Liabilities...........................17
Section 5.9 Absence of Certain Changes or Events........................17
Section 5.10 Investment Experience.......................................18
Section 5.11 Purchase for Own Account....................................18
Section 5.12 Hunt Overseas Exploration Company, L.P......................18
Section 5.13 Employees...................................................19
Section 5.14 Litigation..................................................19
Section 5.15 Contracts...................................................19
Section 5.16 Investment Company..........................................19
Section 5.17 Public Utility Company......................................19
<PAGE>
Section 5.18 Environmental and Safety Matters............................19
Section 5.19 Tax Matters.................................................20
Section 5.20 Broker's and Finder's Fee...................................21
Section 5.21 Absence of Sensitive Payments...............................21
Section 5.22 Compliance with Law.........................................21
Section 5.23 Employment Plans/Employment Agreements......................21
Section 5.24 Hunt Representations........................................23
ARTICLE 6. COVENANTS........................................................23
Section 6.1 Cooperation and Best Efforts................................23
Section 6.2 Conduct of Business By Both Parties Prior to
the Closing Date............................................23
Section 6.3 Press Releases..............................................24
Section 6.4 Access to Information and Confidentiality...................24
Section 6.5 Hunt Arrangements...........................................25
Section 6.6 Financial Statements........................................25
Section 6.7 Certificates; Other Information.............................26
Section 6.8 Preservation of Corporate Existence and Legally
Available Funds.............................................26
Section 6.9 Compliance with Organizational Documents....................27
Section 6.10 Compliance with Laws........................................27
Section 6.11 Notices.....................................................27
Section 6.12 Reservation of Shares.......................................27
Section 6.13 Inspection..................................................27
Section 6.14 Registration and Listing....................................28
Section 6.15 Registrations...............................................28
Section 6.16 Contribution of Company Debt................................28
Section 6.17 Private Placement Memorandum................................28
Section 6.18 Directors and Officers Insurance............................29
ARTICLE 7. NEGATIVE COVENANTS...............................................29
Section 7.1 Consolidation and Mergers...................................29
Section 7.2 Transactions with Affiliates................................29
Section 7.3 No Inconsistent Agreements..................................29
Section 7.4 Fiscal Year.................................................30
Section 7.5 Amendments to Certificate of Incorporation and By-Laws......30
Section 7.6 Registration Rights.........................................30
ARTICLE 8. CLOSING CONDITIONS...............................................30
Section 8.1 Conditions Applicable to All................................30
Section 8.2 Conditions to Vaalco's Obligations..........................31
Section 8.3 Conditions to Fund's Obligations............................32
Section 8.4 Waiver of Conditions........................................34
Section 8.5 Vaalco Deliveries...........................................34
Section 8.6 Fund Deliveries.............................................34
ARTICLE 9. TERMINATION......................................................35
Section 9.1 Termination of Agreement....................................35
Section 9.2 Procedure for and Effect of Termination.....................35
Section 9.3 Sole Remedy; Waiver.........................................35
ARTICLE 10. MISCELLANEOUS...................................................35
Section 10.1 Notices.....................................................35
Section 10.2 Governing Law...............................................36
Section 10.3 Counterparts................................................36
Section 10.4 Interpretation; Schedules...................................36
Section 10.5 Entire Agreement; Severability..............................37
Section 10.6 Amendment and Modification..................................37
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Section 10.7 Binding Effect; Benefits...................................37
Section 10.8 Assignability..............................................37
Section 10.9 Expenses...................................................37
Section 10.10 Gender and Certain Definitions.............................37
Section 10.11 Survival of Representations and Warranties; Remedies.......37
Section 10.12 Waiver of Jury Trial.......................................37
Certificate of Designation Exhibit A
Registration Rights Agreement Exhibit B
Amendments to By-Laws Exhibit C
Agreements with Schneeflock Exhibit D
Certificate of Incorporation and By-Laws of Vaalco Exhibit E
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STOCK PURCHASE AGREEMENT
This AGREEMENT dated as of February 17, 1998, by and among Vaalco Energy,
Inc., a Delaware corporation ("Vaalco"), and The 1818 Fund II, L.P., a Delaware
limited partnership ("Fund"), and 1818 Oil Corp., a Delaware corporation (the
"Company").
WITNESSETH:
WHEREAS, Vaalco desires to acquire all of the issued and outstanding
capital stock of the Company pursuant to the terms and conditions hereof; and
WHEREAS, Fund desires to transfer all of the capital stock of the Company
to Vaalco in exchange for the Vaalco Shares (as defined herein) pursuant to a
plan of reorganization under Sections 354 and 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended;
NOW, THEREFORE, in consideration of the representations, warranties and
covenants contained herein, the parties agree as follows:
ARTICLE 1. DEFINITIONS
SECTION 1.1 DEFINITIONS. As used in this Agreement, the following
terms when capitalized have the meanings indicated.
"AFFILIATE" shall have the meaning ascribed by Rule 12b-2 promulgated
under the Exchange Act.
"AGREEMENT" shall mean this Agreement, including the Schedules and
Exhibits hereto, all as amended or otherwise modified from time to time.
"CERTIFICATE OF DESIGNATION" means the Certificate of Designation
designating the rights, privileges and preferences of the Vaalco Shares, in the
form attached hereto as Exhibit A.
"CLOSING" shall have the meaning ascribed to it in Section 3.1.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY AUDITED FINANCIAL STATEMENTS" shall mean the audited balance
sheets, and the related statements of earnings, stockholders' equity and cash
flows, and the related notes thereto of Company as of and for the three months
ended December 31, 1995 and the twelve months ended December 31, 1996.
"COMPANY FINANCIAL STATEMENTS" shall mean the Company Audited Financial
Statements and the Company Interim Financial Statements.
"COMPANY INTERIM FINANCIAL STATEMENTS" shall mean the unaudited balance
sheet, and the related unaudited statements of earnings and cash flows of the
Company as of and for the nine months ended September 30, 1997.
<PAGE>
"COMPANY LATEST BALANCE SHEET" shall mean the balance sheet included in
the Company Interim Financial Statements.
"CONSOLIDATED NET WORTH" means, as of the date of determination with
respect to any Person, the consolidated stockholders' equity of the Person and
its consolidated subsidiaries, determined in accordance with generally accepted
accounting principles.
"CONTRACTUAL OBLIGATIONS" means as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument to which such Person is a
party or by which it or any of its property is bound.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"GOVERNMENTAL AUTHORITY" means the government of any nation, state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing (including,
without limitation, a government controlled oil company).
"HAZARDOUS MATERIALS" means those substances which are regulated by or
form the basis of liability under Environmental Laws.
"HOLDER" means the Fund and any subsequent direct or indirect transferee
of the Vaalco Shares or Common Stock issued upon conversion of the Vaalco
Shares, other than a transferee, (i) who has acquired the Vaalco Shares or the
Common Stock issuable upon conversion of such Vaalco Shares that have been the
subject of a distribution registered under the Securities Act or (ii) in the
case of Common Stock issuable upon conversion of the Vaalco Shares, who has
acquired such Common Stock after such stock has been the subject of a
distribution to the public pursuant to Rule 144 under the Securities Act or
otherwise distributed under circumstances not requiring a legend as described in
Section 2.2.
"LIENS" shall mean pledges, liens, defects, leases, licenses, equities,
conditional sales contracts, charges, claims, encumbrances, security interests,
easements, restrictions, chattel mortgages, mortgages or deeds of trust, of any
kind or nature whatsoever.
"MAJORITY HOLDERS" means Holders who own a majority of the shares of
Vaalco Common Stock issued or issuable upon conversion of the Vaalco Shares.
"MATERIAL ADVERSE CHANGE" is a change which had or would have a Material
Adverse Effect.
"MATERIAL ADVERSE EFFECT" shall mean with respect to any Person, a
material adverse effect on the financial condition, results of operations,
business or prospects of such Person and, in the case of Vaalco, its
Consolidated Group taken as a whole.
"PERSON" shall mean an individual, firm, corporation, general or limited
partnership, limited liability company, limited liability partnership, joint
venture, trust, governmental authority or body, association, unincorporated
organization or other entity.
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"PRE-CLOSING PERIODS" shall mean all Tax periods ending at or before the
Closing and, with respect to any Tax period that includes but does not end at
the Closing, the portion of such period that ends at and includes the Closing.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
between Vaalco and the Fund, in the form attached as Exhibit B.
"RETURNS" shall mean all returns, reports, estimates, declarations and
statements of any nature regarding Taxes for any Pre-Closing Period required to
be filed by the taxpayer relating to its income, properties or operations.
"REQUIREMENTS OF LAW" means as to any Person, any law, treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
"SEC" means the U. S Securities and Exchange Commission or any similar
agency then having jurisdiction to enforce the Securities Act.
"SECURITIES ACT" means The Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder.
"SOLVENT" means, with respect to any Person, that the fair saleable value
of the assets and property of such Person is, on the date of determination,
greater than the total amount of liabilities (including contingent and
unliquidated liabilities) of such Person as of such date and that, as of such
date, such Person is able to pay all liabilities of such Person as such
liabilities mature. In computing the amount of contingent or liquidated
liabilities at any time, such liabilities will be computed as the amount which,
in light of all the facts and circumstances existing at such time, represents
the amount that is probable to become an absolute and matured liability.
"TAXES" shall mean any federal, state, local, foreign or other taxes
(including, without limitation, income, alternative minimum, franchise,
property, sales, use, lease, excise, premium, payroll, wage, employment or
withholding taxes), fees, duties, assessments, withholdings or governmental
charges of any kind whatsoever (including interest, penalties and additions to
tax).
"VAALCO AUDITED FINANCIAL STATEMENTS" shall mean the audited balance
sheets and related statements of income, stockholders' equity and cash flows,
and the related notes thereto of the Vaalco Consolidated Group as of and for the
three years December 31, 1996.
"VAALCO CONSOLIDATED GROUP" shall mean Vaalco and any entity in which
Vaalco owns an equity interest and which is consolidated with Vaalco under
generally accepted accounting principles.
"VAALCO FINANCIAL STATEMENTS" shall mean the Vaalco Audited Financial
Statements and the Vaalco Interim Financial Statements, collectively.
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"VAALCO INTERIM FINANCIAL STATEMENTS" shall mean the unaudited balance
sheet, and the related unaudited statements of income and cash flows of the
Vaalco Consolidated Group as of and for the nine months ended September 30,
1997.
"VAALCO LATEST BALANCE SHEET" shall mean the balance sheet of Vaalco
included in the Vaalco Interim Financial Statements.
ARTICLE 2. EXCHANGE OF STOCK
SECTION 2.1 ACQUISITION OF STOCK. Subject to the terms and conditions
herein set forth, (i) Vaalco agrees that it will acquire, and the Fund agrees to
transfer to Vaalco, 229 shares of the common stock, $.01 par value (the "Company
Shares"), of the Company, and (ii) the Fund agrees to acquire shares (the
"Vaalco Common Shares") of common stock of Vaalco, $0.10 par value ("Vaalco
Common Stock") in an aggregate amount of $5,000,000. Upon payment for the
Company Shares pursuant to Section 2.2 hereof, the Fund will deliver
certificates representing the Company Shares, duly endorsed for transfer to
Vaalco, free and clear of any Liens, other than any restrictions on transfer
arising under federal and state securities laws which may constitute Liens.
SECTION 2.2 ISSUANCE OF SHARES. The consideration for the Company Shares
will be 10,000 shares of the preferred stock, $25.00 par value (the "Vaalco
Preferred Shares" and, together with the Vaalco Common Shares, the "Vaalco
Shares"), of Vaalco which shares will be validly issued, fully paid and
non-assessable. The Vaalco Preferred Shares shall have the rights and
preferences set forth herein and in the Certificate of Designation. The
consideration for the Vaalco Common Shares payable by the Fund to Vaalco shall
be a price per share equal to the lesser of the Placement Price (as hereinafter
defined) and $2.50. The Vaalco Shares and any shares of common stock of Vaalco,
$0.10 par value per share ("Vaalco Common Stock"), issued upon conversion of the
Vaalco Preferred Shares will not be registered, and will bear a restrictive
legend as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE
EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH LAWS.
ARTICLE 3. CLOSING
SECTION 3.1 CLOSING DATE, TIME AND PLACE. The closing of the transactions
provided for in this Agreement ("Closing"), shall take place at 10:00 a.m. on
March 11, 1998 at the offices of Butler & Binion, L.L.P., or at such other date,
time and place as the parties hereto shall agree. At the Closing, the parties
shall make the deliveries required by Article 8 hereof.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF VAALCO
Vaalco represents and warrants to Fund, as of the date hereof as follows:
SECTION 4.1 ORGANIZATION. Vaalco is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all corporate power
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and authority to carry on its business as now being conducted and to own its
properties. Each other member of the Vaalco Consolidated Group is duly organized
under the laws of the state of its organization and has all the requisite power
and authority under the laws of such jurisdiction to carry on its business as
now being conducted and to own its properties. Each member of the Vaalco
Consolidated Group is duly qualified to do business and is in good standing in
each state and foreign jurisdiction in which the character or location of the
properties owned or leased by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so qualified
or in good standing would not have a Material Adverse Effect on Vaalco.
SECTION 4.2 AFFILIATED ENTITIES.
(a) Schedule 4.2 lists each member of the Vaalco Consolidated Group.
All shares of the outstanding capital stock or equity interests in each member
of the Vaalco Consolidated Group have been duly authorized and validly issued
and are fully paid and nonassessable and are not subject to preemptive rights
and, except as set forth in Schedule 4.2, are owned by Vaalco, by another member
of the Vaalco Consolidated Group or by Vaalco and another member of the Vaalco
Consolidated Group, free and clear of all Liens.
(b) Except as listed on Schedule 4.2, Vaalco does not, directly or
indirectly, own of record or beneficially, or has the right or obligation to
acquire, any outstanding securities or other interest in any corporation,
partnership, joint venture or other entity.
SECTION 4.3 CAPITALIZATION. The authorized capital stock of Vaalco
consists exclusively of 50,000,000 shares of Vaalco Common Stock, of which
15,566,527 shares are issued and outstanding and 5,395 shares are held in its
treasury as of the date hereof, and 5,000,000 shares of preferred stock, $25.00
par value per share, none of which shares are outstanding as of the date hereof
or held in its treasury. The Vaalco Shares to be issued at the Closing have been
duly authorized and when issued will have been validly issued and fully paid and
non-assessable and not subject to preemptive rights. All issued and outstanding
shares of capital stock have been validly issued, are fully paid and
non-assessable and were issued free of preemptive rights, in compliance with any
rights of first refusal, and in compliance with all legal requirements. No share
of capital stock of Vaalco has been, or may be required to be, reacquired by
Vaalco for any reason or is, or may be required to be, issued by Vaalco for any
reason, including, without limitation, by reason of any option, warrant,
security or right convertible into or exchangeable for such shares, or any
agreement to issue any of the foregoing, except for 3,075,000 of Vaalco Common
Stock shares reserved for issuance pursuant to options described in Schedule 4.3
granted to the current and former employees of the Vaalco Consolidated Group
named in Schedule 4.3.
SECTION 4.4 AUTHORITY; ENFORCEABLE AGREEMENTS; VALIDITY OF VAALCO SHARES.
(a) Vaalco has the requisite corporate power and authority to enter
into this Agreement and to consummate the transactions described herein. The
execution and delivery of this Agreement by Vaalco and the consummation by
Vaalco of the transactions described herein have been duly authorized by all
necessary corporate action on the part of Vaalco.
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(b) This Agreement has been duly executed and delivered by Vaalco,
and (assuming due execution and delivery by the other parties hereto)
constitutes a valid and binding obligation of Vaalco, enforceable against Vaalco
in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally and general principles of equity. The other agreements entered,
or to be entered, into by Vaalco in connection with this Agreement have been, or
will be, duly executed and delivered by Vaalco, and (assuming due execution and
delivery by the other parties thereto) constitute, or will constitute, valid and
binding obligations of Vaalco, enforceable against Vaalco in accordance with
their terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
and general principles of equity.
(c) The Vaalco Shares have been duly authorized and, when issued as
contemplated by this Agreement, will be fully paid and non-assessable, and will
entitle the holder thereof to the rights and preferences set forth in the
Certificate of Designation.
SECTION 4.5 NO CONFLICTS OR CONSENTS.
(a) Neither the execution, delivery or performance of this Agreement
by Vaalco nor the consummation of the transactions contemplated hereby will (i)
violate, conflict with, or result in a breach of any provision of, constitute a
default (or an event that, with notice or lapse of time or both, would
constitute a default) under, result in the termination of, or accelerate the
performance required by, or result in the creation of any adverse claim against
any of the properties or assets of any member of the Vaalco Consolidated Group
under, (A) the certificates of incorporation, bylaws or any other organizational
documents of any member of the Vaalco Consolidated Group, or (B) any note, bond,
mortgage, indenture, deed of trust, lease, license, agreement, production
sharing contract, concession or other instrument or obligation to which any
member of the Vaalco Consolidated Group is a party, or by which any member of
the Vaalco Consolidated Group or any of its assets are bound, or (ii) violate
any order, writ, injunction, decree, judgment, statute, rule or regulation of
any governmental body to which any member of the Vaalco Consolidated Group is
subject or by which any member of the Vaalco Consolidated Group or any of the
assets of the foregoing are bound.
(b) Except as set forth on Schedule 4.5(b), no consent, approval,
order, permit or authorization of, or registration, declaration or filing with,
any Person or of any Governmental Agency is required for the execution, delivery
and performance by Vaalco of this Agreement and the covenants and transactions
contemplated hereby or for the execution, delivery and performance by Vaalco of
any other agreements entered, or to be entered, into by Vaalco in connection
with this Agreement.
SECTION 4.6 CORPORATE DOCUMENTS, STOCKHOLDER AGREEMENTS AND BOARD OF
DIRECTORS. Vaalco has delivered to the Fund true and complete copies of its
certificate of incorporation and bylaws, as amended or restated through the date
of this Agreement. The minute books of each member of the Vaalco Consolidated
Group contain reasonably complete and accurate records of all corporate actions
of the equity owners of the various entities and of the boards of directors or
other governing bodies, including committees of such boards or governing bodies.
The stock transfer records of Vaalco are maintained by its transfer agent and
registrar and, to the knowledge of Vaalco, contain complete and accurate records
of all issuances and redemptions of stock by Vaalco. Except as set forth
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on Schedule 4.6, neither Vaalco nor, to the knowledge of Vaalco, any of its
Affiliates, is a party to any agreement with respect to the capital stock of
Vaalco other than this Agreement.
SECTION 4.7 SEC DOCUMENTS; FINANCIAL STATEMENTS; LIABILITIES.
(a) Except as disclosed to the Fund, since January 1, 1995, Vaalco
has filed all reports, schedules, forms, statements and other documents required
to be filed with the SEC (the "Vaalco SEC Documents"). The Vaalco SEC Documents,
and any such reports, forms and documents filed by Vaalco with the SEC after the
date hereof, as amended, complied, or will comply, as to form in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Vaalco SEC Documents, and none of the Vaalco SEC Documents
contained, any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) The Vaalco Financial Statements included in the Vaalco SEC
Documents have been audited by Deloitte & Touche, independent accountants (in
the case of the Vaalco Audited Financial Statements) in accordance with
generally accepted auditing standards, have been prepared in accordance with
United States generally accepted accounting principles applied on a basis
consistent with prior periods, and present fairly the financial position of
Vaalco at such dates and the results of operations and cash flows for the
periods then ended, except, in the case of the Vaalco Interim Financial
Statements, as permitted by Regulations S-B and S-X of the SEC. The Vaalco
Interim Financial Statements reflect all adjustments (consisting only of normal,
recurring adjustments) that are necessary for a fair statement of the results
for the interim periods presented therein. Except as set forth on Schedule 4.7,
there has not been any Material Adverse Change in the financial condition of
Vaalco since December 31, 1996.
(c) The Vaalco Latest Balance Sheet includes appropriate reserves
for all Taxes and other liabilities incurred as of such date but not yet
payable.
(d) Since the date of the Vaalco Latest Balance Sheet, there has
been no change that has had or is likely to have a Material Adverse Effect on
Vaalco.
SECTION 4.8 OIL AND GAS PROPERTIES.
(a) Each member of the Vaalco Consolidated Group has good and
marketable title to and is possessed of its oil and gas properties and has good
title to all of its personal property including concessions, licenses,
production sharing contracts, joint operating agreements, and gas contracts,
free of any and all adverse claims, rights of others, liens, encumbrances,
security interests, contracts, agreements, preferential purchase rights or other
restrictions or limitations of any nature or kind except those which are
Permitted Encumbrances as defined below. All proceeds from the sale of each
member of the Vaalco Consolidated Group's share of the hydrocarbons being
produced from its oil and gas properties are currently being paid in full to the
Vaalco Consolidated Group 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. "Permitted Encumbrances" means:
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(i) the matters reflected in or otherwise disclosed by the provisions
hereof, or the matters referred to therein;
(ii) liens for taxes not yet delinquent;
(iii) mechanics' and materialmen's liens (and other similar liens), and
liens under operating and similar agreements, to the extent the same relate to
expenses incurred in the ordinary course of business and which are not yet due
or are being withheld by law or the validity of which is being contested in good
faith by appropriate action; .
(iv) preferential purchase rights and third party consents and transfer
restrictions entered into in the ordinary course of business which affect the
transferability of interests in the oil and gas properties;
(v) easements, rights-of-way, servitudes, exceptions, encroachments,
reservations, restrictions, covenants, conditions or limitations which do not in
the aggregate materially interfere with or impair the operation, value or use of
the oil and gas properties affected thereby for the purposes for which they have
been used by the Vaalco Consolidated Group in the ordinary course of its
business;
(vi) rights reserved to, or vested in, or any obligations or duties
affecting any of the oil and gas properties, to any public or governmental or
regulatory body, agency, department, commission, board, bureau or other
authority or instrumentality by the terms of any permit;
(vii) present or future zoning laws and ordinances;
(viii) third party interests and division orders and sales contracts
entered into in the ordinary course of business containing such terms and
provisions as are typical and customary for the oil and gas industry covering
oil, gas or associated liquid or gaseous hydrocarbons, reversionary interests,
similar burdens and all contractually binding arrangements to which the oil and
gas properties are subject which do not in the aggregate materially interfere or
impair the operation, value or use of any of the oil and gas properties for the
purposes for which they have been used by the Vaalco Consolidated Group in the
ordinary course of its business;
(ix) all other liens, charges, encumbrances, contracts, agreements,
instruments, obligations, defects and irregularities affecting the assets of the
Vaalco Consolidated Group which individually or in the aggregate are not such as
to interfere materially with the operation, value or use of any of the assets of
the Vaalco Consolidated Group, do not prevent the Vaalco Consolidated Group from
receiving the proceeds of production from any of the oil and gas properties;
(x) rights reserved to or vested in any municipality or governmental,
statutory or public authority to control or regulate any asset of the Vaalco
Consolidated Group in any manner, and all applicable laws, rules and orders of
governmental authority, which do not in the aggregate materially interfere or
impair the operation, value or use of any of the oil and gas properties for the
purposes for which they have been used by the Vaalco Consolidated Group in the
ordinary course of its business; and
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(xi) typical and customary agreements among owners of oil and gas
interests relating to oil field operations and pipelines which do not in the
aggregate materially interfere or impair the operation, value or use of any of
the oil and gas properties for the purposes for which they have been used by the
Vaalco Consolidated Group in the ordinary course of its business.
(b) Vaalco has delivered to Fund a copy of the reserve report
("Reserve Report") dated as of January 1, 1997, prepared by Netherland, Sewell &
Associates, Inc., independent reserve engineers ("Reserve Engineers") relating
to the oil and gas reserves of the Vaalco Consolidated Group; provided that
Reserves attributable to the properties described on Schedule 4.8(b) have been
sold since the date of such Reserve Report. The factual information underlying
the estimates of the reserves of the Vaalco Consolidated Group, which was
supplied by the Vaalco 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
Vaalco Consolidated Group's 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 Reports were prepared in accordance with
customary industry practices; each of the Reserve Engineers were, as of the date
of any Reserve Report prepared by it, and are, as of the date hereof,
independent petroleum engineers with respect to the Vaalco Consolidated Group;
other than normal production of the reserves and intervening oil and gas price
fluctuations, Vaalco is not as of the date hereof and as of the date of Closing
will not be, aware of any facts or circumstances that would result in a
materially adverse change in the reserves in the aggregate, or the aggregate
present value of future net cash flows therefrom, as described in the Reserve
Reports; 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 Act;
SECTION 4.9 INVESTMENT COMPANY. Neither Vaalco or any other member of the
Vaalco Consolidated Group is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 4.10 PUBLIC UTILITY COMPANY. Neither Vaalco or any other member of
the Vaalco Consolidated Group is a "public utility," a "holding company" or a
subsidiary or "affiliate" of a public utility within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
SECTION 4.11 ENVIRONMENTAL AND SAFETY MATTERS. Except as set forth on
Schedule 4.11 hereto and except for such of the following as would not,
individually or in the aggregate, have a Material Adverse Effect with respect to
the Vaalco Consolidated Group: (i) each member of the Vaalco Consolidated Group
is in compliance with all applicable Environmental Laws; (ii) neither Vaalco nor
any other member of the Vaalco Consolidated Group has received a notice, report
or information regarding any liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), or any corrective, investigatory or remedial
obligations, arising under applicable Environmental Laws with respect to its
past or present operations or properties; (iii) Vaalco or another member of
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the Vaalco Consolidated Group has obtained, and is and has been in compliance
with all terms and conditions of, all permits, licenses and other authorizations
required pursuant to Environmental Laws for its occupation of the real property
owned by the Vaalco Consolidated Group ("Owned Property") the property leased by
the Vaalco Consolidated Group ("Leased Property") and the other assets and
operations of the Vaalco Consolidated Group and the conduct of their business;
(iv) the transactions contemplated by this Agreement do not impose any
obligations under Environmental Laws for the site investigation or cleanup or
notification to or consent of any governmental agencies or third parties; and
(v) no member of the Vaalco Consolidated Group has any contingent liability
which is material to the Vaalco Consolidated Group as a whole in connection with
the release of any Hazardous Materials into the environment in violation of any
Environmental Law. Vaalco has made available to the Fund true, complete and
correct copies of all environmental reports, analyses, tests or monitoring in
the possession of the Vaalco during the past two years pertaining to any Owned
Property or Leased Property. As used in this Agreement, "ENVIRONMENTAL LAWS"
shall mean all material federal, foreign, state or local statutes, laws, codes,
rules, regulations, ordinances, orders, permits, licenses or requirements
relating to public or employee health and safety, including without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. ss. 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
ss. 6901 et seq., the Emergency Planning and Community Right to Know Act, 42
U.S.C. ss. 11001 et seq., the Clean Air Act, 42 U.S.C. ss. 7401 et seq., the
Federal Water Pollution Control Act, 33 U.S.C. ss. 1251 et seq., the Toxic
Substances Control Act, 15 U.S.C. ss. 2601 et seq., the Safe Drinking Water Act,
42 U.S.C. ss. 300F et seq., and the Occupational Safety and Health Act, 29
U.S.C. ss. 651 et seq. As used in this Agreement, "Hazardous Materials" means
those substances which are regulated by or form the basis of liability under
Environmental Laws.
SECTION 4.12 TAX MATTERS.
(a) Each of the following is true with respect to each member of the
Vaalco Consolidated Group to the extent applicable to such member:
(i) all Returns have been or will be timely filed by each
member of the Vaalco Consolidated Group when due in accordance with all
applicable laws; all Taxes shown on the Returns have been or will be
timely paid when due; the 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; the Returns are not
subject to penalties under Section 6662 of the Code (or any corresponding
provision of state, local or foreign tax law);
(ii) except as set forth on Schedule 4.12(a)(ii), each member
of the Vaalco Consolidated Group has paid all Taxes required to be paid by
it (whether or not shown on a Return) or for which it 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
member 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
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due, or accrued but not yet due, relating to its income, properties,
transactions or operations for any Pre-Closing Period as reflected on its
books (including, without limitation, the Vaalco's Latest Balance Sheet)
are adequate to cover such Taxes;
(iii) there are no agreements or consents currently in effect
for the extension or waiver of the time (A) to file any Return or (B) for
assessment or collection of any taxes relating to the income, properties
or operations of any member of the Vaalco Consolidated Group for any
Pre-Closing Period, and no member the Vaalco Consolidated Group has been
requested to enter into any such agreement or consent;
(iv) there are no Liens for Taxes (other than for current
Taxes not yet due and payable) upon the assets of any member of the Vaalco
Consolidated Group; and
(v) to the knowledge of Vaalco, each member of the Vaalco
Consolidated Group has complied in all material respects with all
applicable tax laws.
SECTION 4.13 LITIGATION. Except as disclosed on Schedule 4.13, there are
no actions, suits, proceedings, arbitrations or investigations pending or, to
the knowledge of Vaalco, threatened before any court, any governmental agency or
instrumentality or any arbitration panel, against or affecting any member of the
Vaalco Consolidated Group. To the knowledge of Vaalco, no facts or circumstances
exist that would be likely to result in the filing of any such action that would
have a Material Adverse Effect on Vaalco. Except as disclosed on Schedule 4.13,
no member of the Vaalco Consolidated Group is subject to any currently pending
judgment, order or decree entered in any lawsuit or proceeding.
SECTION 4.14 BROKER'S AND FINDER'S FEE. No agent, broker, Person or firm
acting on behalf of Vaalco is or will be entitled to any commission or broker's
or finder's fee from any member of the Vaalco Consolidated Group in connection
with any of the transactions contemplated herein.
SECTION 4.15 ABSENCE OF SENSITIVE PAYMENTS. No member of the Vaalco
Consolidated Group or any Affiliate thereof or any officer or director of any of
them acting alone or together, has performed any of the following acts: (i) the
making of any contribution, payment, remuneration, gift or other form of
economic benefit (a "Payment") to or for the private use of any governmental
official, employee or agent where the Payment or the purpose of the Payment was
illegal under the laws of the United States or the jurisdiction in which such
payment was made, (ii) the establishment or maintenance of any unrecorded fund,
asset or liability for any purpose or the making of any false or artificial
entries on its books, (iii) the making of any Payment or the receipt of any
Payment with the intention or understanding that any part of the Payment was to
be used for any purpose other than that described in the documents supporting
the Payment, or (iv) the giving of any Payment to, or the receipt of any Payment
from, any person who was or could have been in a position to help or hinder the
business of the Vaalco Consolidated Group (or assist any member of the Vaalco
Consolidated Group in connection with any actual or proposed transaction) which
(A) would reasonably have been expected to subject any member of the Vaalco
Consolidated Group to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (B) if not given in the past, would have
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had a Material Adverse Effect on the Vaalco Consolidated Group or (C) if not
continued in the future, would have a Material Adverse Effect on the Vaalco
Consolidated Group.
SECTION 4.16 COMPLIANCE WITH LAW. Except as set forth on Schedule 4.16
hereto, no member of the Vaalco Consolidated Group is in violation of any
statute, law, ordinance, regulation, rule or order of any foreign, United States
federal, or state or local Governmental Authority or any judgment, decree or
order of any court, except where any such violation would not, individually or
in the aggregate, have a Material Adverse Effect on the Vaalco Consolidated
Group. Except as set forth on Schedule 4.16, each member of the Vaalco
Consolidated Group has all permits, approvals, licenses and franchises from
Governmental Authorities required to conduct its business as now being
conducted, except for such permits, approvals, licenses and franchises the
absence of which would not, individually or in the aggregate, have a Material
Adverse Effect on the Vaalco Consolidated Group.
SECTION 4.17 CONTRACTS. (a) Schedule 4.17 sets forth, as of the date
hereof, a list of all of the following material contracts and other agreements
to which any member of the Vaalco Consolidated Group is a party or by which any
of them or any material portion of their properties or assets are bound or
subject (other than those set forth on any other Schedule): (i) contracts,
severance agreements and other agreements with any current or former officer,
director, employee, consultant, agent or other representative; (ii) contracts
and other agreements with any labor union or association representing any
employee of the Vaalco Consolidated Group; (iii) contracts, agreements or other
agreements relating to the Vaalco Consolidated Group between any member of the
Vaalco Consolidated Group, on the one hand, and any stockholder or any of his,
her or its Affiliates on the other hand; (iv) joint venture agreements; (v)
contracts and other agreements under which any member of the Vaalco Consolidated
Group agrees to indemnify any party; (vi) contracts and other agreements
relating to the borrowing of money; or (vii) any other material contract or
other agreement whether or not made in the ordinary course of business. There
have been delivered or made available to the Fund true and complete copies of
all such contracts and other agreements set forth on Schedule 4.17.
(b) All contracts, agreements and understandings set forth on
Schedule 4.17 are valid and binding and are in full force and effect and
enforceable in accordance with their respective terms other than contracts,
agreements or understandings which are by their terms no longer in force or
effect. Except as set forth on Schedule 4.17 (or on another Schedule), (i) no
approval or consent of, or notice to, any Person is needed in order that such
contract, agreement or understanding shall continue in full force and effect in
accordance with its terms without penalty, acceleration or rights of early
termination following the consummation of the transactions contemplated by this
Agreement, and (ii) no member of the Vaalco Consolidated Group is in violation
or breach of or default under any such contract, agreement or understanding nor
to the knowledge of Vaalco is any other party to any such contract, agreement or
understanding.
SECTION 4.18 EMPLOYMENT PLANS/EMPLOYMENT AGREEMENTS
(a) Schedule 4.18 contains a true and complete list of each
"employee benefit plan" (within the meaning of section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), including, without
limitation, multiemployer plans within the meaning of ERISA section 3(37)),
stock purchase, stock option, severance, employment, change-in-control, fringe
benefit, welfare benefit,
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collective bargaining, bonus, incentive, deferred compensation and all other
employee benefit plans, agreements, programs, policies or other arrangements,
whether or not subject to ERISA (including any funding mechanism therefor now in
effect or required in the future as a result of the transaction contemplated by
this Agreement or otherwise), whether formal or informal, oral or written,
legally binding or not, under which any employee or former employee of a member
of the Vaalco Consolidated Group has any present or future right to benefits or
under which a member of the Vaalco Consolidated Group has any present or future
liability. All such plans, agreements, programs, policies and arrangements shall
be collectively referred to as the "Vaalco Plans".
(b) With respect to each Vaalco Plan, Vaalco has delivered to the
Fund a current, accurate and complete copy (or, to the extent no such copy
exists, an accurate description) thereof and, to the extent applicable: (i) any
related trust agreement or other funding instrument; (ii) the most recent
determination letter, if applicable; (iii) any summary plan description and
other written communications (or a description of any oral communications) by
any member of the Vaalco Consolidated Group to its employees concerning the
extent of the benefits provided under a Vaalco Plan; and (iv) for the three most
recent ears (A) the Form 5500 and attached schedules, (B) audited financial
statements, and (C) attorney's response to an auditor's request for information.
(c) (i) Each Vaalco Plan has been established and administered in
all material respects in accordance with its terms, and in compliance with the
applicable provisions of ERISA, the Code and other applicable laws, rules and
regulations; (ii) each Vaalco Plan which is intended to be qualified within the
meaning of Code section 401(a) is so qualified and has received a favorable
determination letter as to its qualification, and to the knowledge of Vaalco
nothing has occurred, whether by action or failure to act, that could reasonably
be expected to cause the loss of such qualification; (iii) for each Vaalco Plan
that is a "welfare plan" within the meaning of ERISA section 3(1), no member of
the Vaalco Consolidated Group has or will have any liability or obligation under
any plan which provides medical or death benefits with respect to current or
former employees of a member of the Vaalco Consolidated Group beyond their
termination of employment (other than coverage mandated by law); (iv) to the
knowledge of Vaalco no event has occurred and no condition exists that would
subject any member of Vaalco Consolidated Group, either directly or by reason of
their affiliation with any member of their "Controlled Group" (defined as any
organization which is a member of a controlled group of organizations within the
meaning of Code sections 414(b), (c), (m) or (o)), to any tax, fine, lien,
penalty or other liability imposed by ERISA, the Code or other applicable laws,
rules and regulations; (v) for each Vaalco Plan with respect to which a Form
5500 has been filed, no material change has occurred with respect to the matters
covered by the most recent Form since the date thereof; and (vi) to the best
knowledge of Vaalco, no non-exempt "prohibited transaction" (as such term is
defined in ERISA section 406 and Code section 4975) has occurred with respect to
any Vaalco Plan which has resulted to or could reasonably be expected to result
in a Material Adverse Effect.
(d) None of the Vaalco Plans is subject to Title IV of ERISA or is a
multiemployer plan within the meaning of Section 4001(a)(3) of ERISA.
(e) With respect to any Vaalco Plan, (i) no actions, suits or claims
(other than routine claims for benefits in the ordinary course) are pending or,
to the best knowledge of Vaalco, threatened, which have resulted or could
reasonably be expected to
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result in a Material Adverse Effect and (ii) to the best knowledge of Vaalco, no
facts or circumstances exist that could give rise to any such actions, suits or
claims.
(f) No Vaalco Plan exists that could result in the payment to any
present or former employee of a member of the Vaalco Consolidated Group or any
money or other property or accelerate or provide any other rights or benefits to
any present or former employee of a member of the Vaalco Consolidated Group as a
result of the transaction contemplated by this Agreement, whether or not such
payment would constitute a parachute payment within the meaning of Code Section
280G.
SECTION 4.19 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the
Vaalco Latest Balance Sheet, each member of the Vaalco Consolidated Group has
conducted its business only in the ordinary course, and has not:
(a) amended its certificate of incorporation, bylaws or similar
organizational documents;
(b) merged or consolidated with another entity (other than a
subsidiary) or acquired or agreed to acquire any business or any corporation,
partnership or other business organization, or sold, leased, transferred or
otherwise disposed of any material portion of its assets except for fair value
in the ordinary course of business;
(c) suffered any damage, destruction or loss (whether or not covered
by insurance) which has had or could have a Material Adverse Effect on the
Vaalco Consolidated Group;
(d) suffered the termination, suspension or revocation of any
license or permit necessary for the operation of its business;
(e) entered into any transaction other than on an arm's-length
basis;
(f) declared or paid any dividend or made any distribution with
respect to any of its equity interests, or redeemed, purchased or otherwise
acquired any of its equity interests, or issued, sold or granted any equity
interests or any option, warrant or other right to purchase or acquire any such
interest; or
(g) agreed, whether or not in writing, to do any of the foregoing.
SECTION 4.20 INVESTMENT EXPERIENCE. Vaalco is an "accredited
investor" as defined in Rule 501(a) of the Securities Act.
SECTION 4.21 PURCHASE FOR OWN ACCOUNT. The Company Shares to be acquired
by Vaalco pursuant to this Agreement are being acquired for its own account and
with no intention of distributing or reselling the Company Shares or any part
thereof in any transaction that would be violation of the securities laws of the
United States of America, or any state, without prejudice, however, to the
rights of Vaalco at all times to sell or otherwise dispose of all or any part of
the Company Shares under an effective registration statement under the
Securities Act, or under an exemption from such registration available under the
Securities Act, and subject, nevertheless, to the disposition of the Vaalco's
property being at all times within its control. If Vaalco should in the future
decide to dispose of any of the Company Shares, Vaalco understands and agrees
that it may do so
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only in compliance with the Securities Act and applicable state securities laws,
as then in effect, and that stop-transfer instructions to that effect, where
applicable, will be in effect with respect to the Company Shares. Vaalco agrees
to the imprinting, so long as required by law, of a legend on the Company Shares
as stated in Section 2.2 hereof.
SECTION 4.22 SETTLEMENT PAYMENTS. Schedule 4.22 sets forth all amounts
payable by any member of the Vaalco Consolidated Group to any Person in
settlement of or otherwise in connection with any and all claims, actions,
disputes or arbitration proceedings relating in any manner to Service Contract
14 in the Philippines including, without limitation, those claims and disputes
relating to such Service Contract 14 described in the Quarterly Report on Form
10-QSB filed by Vaalco with the SEC on November 14, 1997.
SECTION 4.23 VAALCO'S ASSETS. The assets of Vaalco and of its 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 4.23, 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 ("HSR Act").
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF FUND
The Fund represents and warrant to Vaalco, as of the date hereof that,
except as set forth in the Schedules numbered to correspond to the applicable
representation or warranty:
SECTION 5.1 ORGANIZATION. The Company is duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
corporate power and authority to carry on its business as now being conducted
and to own its properties. The Company is duly qualified to do business and is
in good standing in each state and foreign jurisdiction in which the character
or location of the properties owned or leased by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect on the Company.
SECTION 5.2 AFFILIATED ENTITIES. The Company has no subsidiaries. Except
for the Hunt Interest (as defined herein), the Company does not, directly or
indirectly, own of record or beneficially, or have the right or obligation to
acquire, any outstanding securities or other interest in any corporation,
partnership, joint venture or other entity.
SECTION 5.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists exclusively
of 1,000 shares of common stock, of which only the Company Shares are
outstanding as of the date hereof. All of such Company shares have been validly
issued, are fully paid and nonassessable and were issued free of preemptive
rights, in compliance with any rights of first refusal, and in compliance with
all legal requirements. No share of capital stock of Company has been, or may be
required to be, reacquired by Company for any reason or is, or may be required
to be, issued by Company for any reason, including,
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without limitation, by reason of any option, warrant, security or right
convertible into or exchangeable for such shares, or any agreement to issue any
of the foregoing.
(b) As of the Closing, the Fund shall own, free and clear of any
Liens, the Company Shares and, upon delivery of and payment for such Company
Shares as herein provided, the Fund will convey to Vaalco good and valid title
thereto, free and clear of any Liens.
SECTION 5.4 SELLER STATUS. The Fund is a limited partnership, duly
organized and existing under the laws of the state of Delaware. The Fund has the
power and authority to own and operate its properties and to conduct its
business as now conducted, or proposed to be conducted.
SECTION 5.5 AUTHORITY; ENFORCEABLE AGREEMENTS.
(a) Each of Fund and the Company has the requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
described herein. The execution and delivery of this Agreement by the Company
and Fund and the consummation by the Company and Fund of the transactions
described herein have been duly authorized by all necessary corporate action on
the part of the Company and Fund.
(b) This Agreement has been duly executed and delivered by the
Company and Fund, and (assuming due execution and delivery by the other parties
thereto) constitutes a valid and binding obligation of Fund and the Company,
enforceable against the Company and the Fund, as the case may be, in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
and general principles of equity. The other agreements entered, or to be
entered, into by the Company and Fund in connection with this Agreement have
been, or will be, duly executed and delivered by the Company and Fund, and
(assuming due execution and delivery by the other parties thereto) constitute,
or will constitute, valid and binding obligations of the Company and Fund,
enforceable against the Company and the Fund, as the case may be, in accordance
with their terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
and general principles of equity.
SECTION 5.6 NO CONFLICTS OR CONSENTS.
(a) Neither the execution, delivery or performance of this Agreement
by Fund or the Company nor the consummation of the transactions contemplated
hereby will (i) violate, conflict with, or result in a breach of any provision
of, constitute a default (or an event that, with notice or lapse of time or
both, would constitute a default) under, result in the termination of, or
accelerate the performance required by, or result in the creation of any adverse
claim against any of the properties or assets of the Company under, (A) the
certificate of incorporation or bylaws of the Company, or (B) any note, bond,
mortgage, indenture, deed of trust, lease, license, agreement, concession,
production sharing agreement or other instrument or obligation to which the
Company, is a party, or by which the Company or any of its assets are bound, or
(ii) violate any order, writ, injunction, decree, judgment, statute, rule or
regulation of any Governmental Authority to which the Company is subject or by
which the Company or any of its assets of the foregoing are bound.
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(b) Except with respect to filings which may be required under HSR
Act and the consent of Hunt (as defined herein) to the transactions contemplated
under this Agreement, no consent, approval, order, permit or authorization of,
or registration, declaration or filing with, any Person or of any Governmental
Authority is required for the execution, delivery and performance by the Company
and Fund of this Agreement and the covenants and transactions contemplated
hereby or for the execution, delivery and performance by the Company and Fund of
any other agreements entered, or to be entered, into by the Company or Fund in
connection with this Agreement.
SECTION 5.7 CORPORATE DOCUMENTS, STOCKHOLDER AGREEMENTS AND BOARD OF
DIRECTORS. Fund has delivered to Vaalco true and complete copies of the
Company's certificate of incorporation and bylaws, as amended or restated
through the date of this Agreement. The minute books of the Company contain
reasonably complete and accurate records of all corporate actions of the equity
owners of the Company and of the boards of directors of the Company, including
committees of such board. The stock transfer records of the Company contain
complete and accurate records of all issuances and redemptions of stock by
Company. Except for subscription agreements listed in Schedule 5.7, neither the
Company nor any of its Affiliates is a party to any agreement with respect to
the capital stock of the Company other than this Agreement.
SECTION 5.8 FINANCIAL STATEMENTS; LIABILITIES.
(a) The Company Financial Statements attached hereto as Schedule 5.8
have been audited by certified public accountants in accordance with generally
accepted auditing standards, have been prepared in accordance with United States
generally accepted accounting principles and, except as disclosed therein,
applied on a basis consistent with prior periods, and present fairly the
financial position of the Company at such dates and the results of operations
and cash flows for the periods then ended. The Company Interim Financial
Statements reflect all adjustments (consisting only of normal recurring
adjustments) that are necessary for a fair statement of the results for the
interim periods presented therein. There has not been a Material Adverse Change
in the financial condition of the Company since December 31, 1997.
(b) The Company Latest Balance Sheet includes appropriate reserves
for all Taxes and other liabilities incurred as of such date but not yet
payable.
(c) Since the date of the Company Latest Balance Sheet, there has
been no change that has had or is likely to have a Material Adverse Effect on
the Company.
SECTION 5.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of
the Company Latest Balance Sheet, the Company has conducted its business only in
the ordinary course, and has not:
(a) amended its certificate of incorporation, bylaws or similar
organizational documents;
(b) merged or consolidated with another entity (other than a
subsidiary) or acquired or agreed to acquire any business or any corporation,
partnership or other business organization, or sold, leased, transferred or
otherwise disposed of any material portion of its assets except for fair value
in the ordinary course of business;
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(c) suffered any damage, destruction or loss (whether or not covered
by insurance) which has had or could have a Material Adverse Effect on the
Company;
(d) suffered the termination, suspension or revocation of any
license or permit necessary for the operation of its business;
(e) entered into any transaction other than on an arm's-length
basis;
(f) declared or paid any dividend or made any distribution with
respect to any of its equity interests, or redeemed, purchased or otherwise
acquired any of its equity interests, or issued, sold or granted any equity
interests or any option, warrant or other right to purchase or acquire any such
interest; or
(g) agreed, whether or not in writing, to do any of the foregoing.
SECTION 5.10 INVESTMENT EXPERIENCE. The Fund is an "accredited
investor" as defined in Rule 501(a) of the Securities Act.
SECTION 5.11 PURCHASE FOR OWN ACCOUNT. The Vaalco Shares to be acquired by
the Fund pursuant to this Agreement are being acquired for its own account and
with no intention of distributing or reselling the Vaalco Shares or any part
thereof in any transaction that would be in violation of the securities laws of
the United States of America, or any state, without prejudice, however, to the
rights of the Fund at all times to sell or otherwise dispose of all or any part
of the Vaalco Shares under an effective registration statement under the
Securities Act, or under an exemption from such registration available under the
Securities Act, and subject, nevertheless, to the disposition of the Fund's
property being at all times within its control. If the Fund should in the future
decide to dispose of any of the Vaalco Shares, the Fund understands and agrees
that it may do so only in compliance with the Securities Act and applicable
state securities laws, as then in effect, and that stop-transfer instructions to
that effect, where applicable, will be in effect with respect to the Vaalco
Shares. The Fund agrees to the imprinting, so long as required by law, of a
legend on the Vaalco Shares as stated in Section 2.2 hereof.
SECTION 5.12 HUNT OVERSEAS EXPLORATION COMPANY, L.P.
(a) The Company owns a limited partner interest ("Hunt Interest") in
Hunt Overseas Exploration Company, L.P. ("Hunt") free and clear of any Lien.
Subject to the provisions of the Agreement of Partnership, the Hunt Interest
entitles the Company to a 7.5% interest in the income, gain and revenue of Hunt.
Hunt is a limited partnership, duly organized, existing and in good standing
under the laws of the state of Delaware. The Company has delivered to Vaalco a
copy of the Agreement of Partnership, and all amendments thereto, for Hunt. The
sale and transfer of the Company Shares does not violate the terms and
provisions of the Agreement of Partnership of Hunt.
(b) Except for the Agreement of Partnership for Hunt and the
Subscription Agreement for Limited Partner Interest in Hunt Overseas Exploration
Company, L.P., dated as of September 13, 1995, executed by the Company and
accepted by Hunt Overseas Operating Company, a Delaware corporation ("HOOC"),
and Hunt pursuant to a Letter, dated as of September 13, 1995 from HOOC (for
itself and as
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managing partner of Hunt) to the Company, the Company has no obligation,
liability or responsibility with respect to Hunt.
SECTION 5.13 EMPLOYEES. The Company does not have and has never had
any employees.
SECTION 5.14 LITIGATION. Except as listed on Schedule 5.14, there are no
actions, suits, proceedings, arbitrations or investigations pending or, to the
knowledge of the Company, threatened, before any court, any governmental agency
or instrumentality or any arbitration panel, against or affecting the Company,
and to the knowledge of the Company no facts or circumstances exist that would
be likely to result in the filing of any such action that would have a Material
Adverse Effect on the Company. The Company is not subject to any currently
pending judgment, order or decree entered in any lawsuit or proceeding.
SECTION 5.15 CONTRACTS. (a) Schedule 5.15 sets forth, as of the date
hereof, a list of all of the following material contracts and other agreements
to which the Company is a party or by which it or any material portion of its
properties or assets are bound or subject (other than those set forth on any
other Schedule): (i) contracts, severance agreements and other agreements with
any current or former officer, director, employee, consultant, agent or other
representative; (ii) contracts and other agreements with any labor union or
association representing any employee of the Company; (iii) contracts,
agreements or other agreements relating to the Company between the Company, on
the one hand, and any stockholder or any of his, her or its Affiliates on the
other hand; (iv) joint venture agreements; (v) contracts and other agreements
under which the Company agrees to indemnify any party; (vi) contracts and other
agreements relating to the borrowing of money; or (vii) any other material
contract or other agreement whether or not made in the ordinary course of
business. There have been delivered or made available to Vaalco true and
complete copies of all such contracts and other agreements set forth on Schedule
5.15.
(b) All contracts, agreements and understandings set forth on
Schedule 5.15 are valid and binding and are in full force and effect and
enforceable in accordance with their respective terms other than contracts,
agreements or understandings which are by their terms no longer in force or
effect. Except as set forth on Schedule 5.15 (or on another Schedule), (i) no
approval or consent of, or notice to, any Person is needed in order that such
contract, agreement or understanding shall continue in full force and effect in
accordance with its terms without penalty, acceleration or rights of early
termination following the consummation of the transactions contemplated by this
Agreement, and (ii) the Company is not in violation or breach of or default
under any such contract, agreement or understanding nor to the knowledge of the
Fund is any other party to any such contract, agreement or understanding.
SECTION 5.16 INVESTMENT COMPANY. The Company is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
SECTION 5.17 PUBLIC UTILITY COMPANY. The Company is not a "public
utility," a "holding company" or a subsidiary or "affiliate" of a public utility
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
SECTION 5.18 ENVIRONMENTAL AND SAFETY MATTERS. Except as set forth on
Schedule 5.18 hereto and except for such of the following as would not,
individually or in the
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aggregate, have a Material Adverse Effect with respect to the Company: (i) the
Company is in compliance with all applicable Environmental Laws; (ii) the
Company has not received a notice, report or information regarding any
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise),
or any corrective, investigatory or remedial obligations, arising under
applicable Environmental Laws with respect to its past or present operations or
properties; (iii) the Company has obtained, and is and have been in compliance
with all terms and conditions of, all permits, licenses and other authorizations
required pursuant to Environmental Laws for its occupation of the real property
owned by the Company ("Company Owned Property") the property leased by the
Company ("Company Leased Property") and the other assets and operations of the
Company and the conduct of its business; (iv) the transactions contemplated by
this Agreement do not impose any obligations under Environmental Laws for the
site investigation or cleanup or notification to or consent of any governmental
agencies or third parties; and (v) the Company does not have any contingent
liability which is material to the Company in connection with the release of any
Hazardous Materials into the environment in violation of any Environmental Law.
The Company has made available to Vaalco true, complete and correct copies of
all environmental reports, analyses, tests or monitoring in the possession of
the Company during the past two years pertaining to any Company Owned Property
or Company Leased Property.
SECTION 5.19 TAX MATTERS.
(a) Each of the following is true with respect to the Company to the
extent applicable:
(i) all Returns have been or will be timely filed by the
Company when due in accordance with all applicable laws; all Taxes shown
on the Returns have been or will be timely paid when due; the 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; the Returns are not subject to penalties under Section 6662 of
the Code (or any corresponding provision of state, local or foreign tax
law);
(ii) except as set forth on Schedule 5.19(a)(ii), the Company
has paid all Taxes required to be paid by it (whether or not shown on a
Return) or for which it 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 member 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 its income, properties, transactions
or operations for any Pre-Closing Period as reflected on its books
(including, without limitation, the Company's Latest Balance Sheet) are
adequate to cover such Taxes;
(iii) there are no agreements or consents currently in effect
for the extension or waiver of the time (A) to file any Return or (B) for
assessment or collection of any taxes relating to the income, properties
or
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operations of the Company for any Pre-Closing Period, and the Company has
not been requested to enter into any such agreement or consent;
(iv) there are no Liens for Taxes (other than for current
Taxes not yet due and payable) upon the assets of the Company; and
(v) to the knowledge of the Fund, the Company has complied in
all material respects with all applicable tax laws.
SECTION 5.20 BROKER'S AND FINDER'S FEE. No agent, broker, Person or firm
acting on behalf of the Fund or Company is or will be entitled to any commission
or broker's or finder's fee from the Company in connection with any of the
transactions contemplated herein.
SECTION 5.21 ABSENCE OF SENSITIVE PAYMENTS. Neither the Company nor any
Affiliate thereof nor any officer or director of any of them acting alone or
together, has performed any of the following acts: (i) the making of any Payment
to or for the private use of any governmental official, employee or agent where
the Payment or the purpose of the Payment was illegal under the laws of the
United States or the jurisdiction in which such payment was made, (ii) the
establishment or maintenance of any unrecorded fund, asset or liability for any
purpose or the making of any false or artificial entries on its books, (iii) the
making of any Payment or the receipt of any Payment with the intention or
understanding that any part of the Payment was to be used for any purpose other
than that described in the documents supporting the Payment, or (iv) the giving
of any Payment to, or the receipt of any Payment from, any person who was or
could have been in a position to help or hinder the business of the Company (or
assist the Company in connection with any actual or proposed transaction) which
(A) would reasonably have been expected to subject the Company to any damage or
penalty in any civil, criminal or governmental litigation or proceeding, (B) if
not given in the past, would have had a Material Adverse Effect on the Company
or (C) if not continued in the future, would have a Material Adverse Effect on
the Company.
SECTION 5.22 COMPLIANCE WITH LAW. Except as set forth on Schedule 5.22
hereto, the Company is not in violation of any statute, law, ordinance,
regulation, rule or order of any foreign, United States federal, or state or
local Governmental Authority or any judgment, decree or order of any court,
except where any such violation would not, individually or in the aggregate,
have a Material Adverse Effect on the Company. Except as set forth on Schedule
5.22, the Company has all permits, approvals, licenses and franchises from
Governmental Authorities required to conduct its business as now being
conducted, except for such permits, approvals, licenses and franchises the
absence of which would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
SECTION 5.23 EMPLOYMENT PLANS/EMPLOYMENT AGREEMENTS.
(a) Schedule 5.23 contains a true and complete list of each
"employee benefit plan" (within the meaning of section 3(3) of ERISA, including,
without limitation, multiemployer plans within the meaning of ERISA section
3.(37)), stock purchase, stock option, severance, employment, change-in-control,
fringe benefit, welfare benefit, collective bargaining, bonus, incentive,
deferred compensation and all other employee benefit plans, agreements,
programs, policies or other arrangements, whether or not
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subject to ERISA (including any funding mechanism therefor now in effect or
required in the future as a result of the transaction contemplated by this
Agreement or otherwise), whether formal or informal, oral or written, legally
binding or not, under which any employee or former employee of the Company has
any present or future right to benefits or under which the Company has any
present or future liability. All such plans, agreements, programs, policies and
arrangements shall be collectively referred to as the "Company Plans."
(b) With respect to each Company Plan, the Company has delivered to
Vaalco a current, accurate and complete copy (or, to the extent no such copy
exists, an accurate description) thereof and, to the extent applicable: (i) any
related trust agreement or other funding instrument; (ii) the most recent
determination letter, if applicable; (iii) any summary plan description and
other written communications (or a description of any oral communications) by
the Company to its employees concerning the extent of the benefits provided
under a Company Plan; and (iv) for the three most recent ears (A) the Form 5500
and attached schedules, (B) audited financial statements, (c) actuarial
valuation reports and (D) attorney's response to an auditor's request for
information.
(c) (i) Each Company Plan has been established and administered in
all material respects in accordance with its terms, and in compliance with the
applicable provisions of ERISA, the Code and other applicable laws, rules and
regulations; (ii) each Company Plan which is intended to be qualified within the
meaning of Code section 401(a) is so qualified and has received a favorable
determination letter as to its qualification, and nothing has occurred, whether
by action or failure to act, that could reasonably be expected to cause the loss
of such qualification; (iii) for each Company Plan that is a "welfare plan"
within the meaning of ERISA section 3(1), the Company has no or will not have
any liability or obligation under any plan which provides medical or death
benefits with respect to current or former employees of the Company beyond their
termination of employment (other than coverage mandated by law); (iv) to the
knowledge of the Company no event has occurred and no condition exists that
would subject the Company, either directly or by reason of their affiliation
with any member of their "Controlled Group" (defined as any organization which
is a member of a controlled group of organizations within the meaning of Code
sections 414(b), (c), (m) or (o)), to any tax, fine, lien, penalty or other
liability imposed by ERISA, the Code or other applicable laws, rules and
regulations; (v) for each Company Plan with respect to which a Form 5500 has
been filed, no material change has occurred with respect to the matters covered
by the most recent Form since the date thereof; and (vi) to the knowledge of the
Company no "reportable event" (as such term is defined in ERISA section 4043),
"prohibited transaction" (as such term is defined in ERISA section 406 and Code
section 4975) or "accumulated funding deficiency" (as such term is defined in
ERISA section 302 and Code Section 412 (whether or not waived)) has occurred
with respect to any Company Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect.
(d) None of the Company Plans is subject to Title IV of ERISA or is
a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA.
(e) With respect to any Company Plan, (i) no actions, suits or
claims (other than routine claims for benefits in the ordinary course) are
pending or, to the best knowledge of the Company, threatened which have resulted
or could reasonably be expected to result in a Material Adverse Effect, and (ii)
to the best knowledge of the
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Company, no facts or circumstances exist that could give rise to any such
actions, suits or claims.
(f) No Company Plan exists that could result in the payment to any
present or former employee of the Company or any money or other property or
accelerate or provide any other rights or benefits to any present or former
employee of the Company as a result of the transaction contemplated by this
Agreement, whether or not such payment would constitute a parachute payment
within the meaning of Code Section 280G.
SECTION 5.24 HUNT REPRESENTATIONS. Except as expressly set forth in
Section 5.12, the Fund and the Company make no representation or warranty,
either directly or indirectly or express or implied, as to any matters
whatsoever with respect to Hunt or Hunt's operations and assets.
ARTICLE 6. COVENANTS
SECTION 6.1 COOPERATION AND BEST EFFORTS. Each party shall cooperate with
the other and use its reasonable efforts to (i) receive all necessary and
appropriate consents of third parties to the transactions contemplated
hereunder, (ii) satisfy all requirements prescribed by law for, and all
conditions set forth in this Agreement to, the consummation of the transactions
provided from here; PROVIDED, that no party shall be required to pay any amount
of money in connection with its or any other parties obtaining any consent
pursuant to clause (i) of this Section 6.1.
SECTION 6.2 CONDUCT OF BUSINESS BY BOTH PARTIES PRIOR TO THE CLOSING DATE.
During the period from the date of this Agreement to the Closing, the Company
and Vaalco shall each use its reasonable best efforts to preserve the goodwill
of suppliers, general partners, customers and others having business relations
with them and to do nothing knowingly to impair their ability to keep and
preserve their businesses as it exists on the date of this Agreement. Without
limiting the generality of the foregoing, during the period from the date of
this Agreement to the Closing each of the Company and Vaalco shall not, without
the prior written consent of the other:
(a) declare, set aside, increase or pay any dividend (including any
stock dividends), or declare or make any distribution on, or directly or
indirectly combine, redeem, reclassify, purchase, or otherwise acquire, any
shares of its capital stock or authorize the creation or issuance of, or issue,
deliver or sell any additional shares of its capital stock or any securities or
obligations convertible into or exchangeable for its capital stock or effect any
stock split or reverse stock split or other recapitalization.
(b) amend its certificate of incorporation or by-laws otherwise than
as contemplated by this Agreement;
(c) pledge or otherwise encumber any shares of its capital stock,
any other voting securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, or any other voting securities
or convertible securities;
(d) commit or omit to do any act which act or omission would cause a
breach of any covenant contained in this Agreement or would cause any
representation or warranty contained in this Agreement to become untrue, as if
each such representation and warranty were continuously made from and after the
date hereof;
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(e) violate any applicable law, statute, rule, governmental
regulation or order;
(f) fail to maintain its books, accounts and records in the usual
manner on a basis consistent with that heretofore employed;
(g) fail to pay, or to make adequate provision in all material
respects for the payment of, all Taxes, interest payments and penalties due and
payable (for all periods up to the date of Closing, including that portion of
its fiscal year to and including the date of Closing) to any city, parish,
county, state, the United States, foreign or any other taxing authority, except
those being contested in good faith by appropriate proceedings and for which
sufficient reserves have been established, or make any elections with respect to
taxes;
(h) make any material Tax election that is inconsistent with any
corresponding election made on a prior return or settle or compromise any income
Tax liability for an amount materially in excess of the liability therefor that
is reflected on the Vaalco Financial Statements or the Company Financial
Statements, as the case may be;
(i) authorize any of, or agree or commit to do any of, the
foregoing actions;
(j) (i) increase the compensation or fringe benefits of any present
or former director, officer or employee of any member of the Vaalco Consolidated
Group (except for increases in salary or wages in the ordinary course of
business consistent with past practice), (ii) grant any severance or termination
pay to any present or former director, officer or employee of any member of the
Vaalco Consolidated Group, (iii) loan or advance any money or other property to
any present or former director, officer or employee of any member of the Vaalco
Consolidated Group or (iv) establish, adopt, enter into, amend or terminate any
Vaalco Plan or any plan, agreement, program, policy, trust, fund or other
arrangement that would be a Vaalco Plan if it were in existence as of the date
of this Agreement; or
(k) consent to an amendment to the Hunt Partnership Agreement.
SECTION 6.3 PRESS RELEASES. Fund and Vaalco will consult with each other
before issuing, and provide each other the opportunity to review and comment
upon, any press releases or other public statements with respect to any
transactions described in this Agreement, and shall not issue any such press
releases or make any such public statement prior to such consultation, except as
may be required by applicable law, court process or by obligations pursuant to
an agreement pursuant to which the Vaalco stock is listed or approved for
trading.
SECTION 6.4 ACCESS TO INFORMATION AND CONFIDENTIALITY.
(a) Prior to the Closing Date, Vaalco shall afford to the Fund, and
the Company shall afford to Vaalco and to the officers, employees, accountants,
counsel, financial advisors and other representatives of such other party,
reasonable access during normal business hours to their respective premises,
books and records and will furnish to the other party (i) a copy of each report,
schedule, registration statement and other
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documents filed by it during such period pursuant to the requirements of federal
or state securities laws, and (ii) such other information with respect to its
business and properties as such other party reasonably requests. The Company
agrees to provide Vaalco prompt notice of any proposed amendment to the
partnership agreement of Hunt upon becoming aware of such amendment.
(b) Each of Vaalco and the Fund will, and will cause its officers,
directors, employees, agents and representatives to, (i) hold in confidence,
unless compelled to disclose by judicial or administrative process, or, in the
opinion of its counsel, by other requirements of law, all nonpublic information
concerning the other party furnished in connection with the transactions
contemplated by this Agreement until such time as such information becomes
publicly available (otherwise than through the wrongful act of such person),
(ii) not release or disclose such information to any other person, except in
connection with this Agreement to its auditors, attorneys, financial advisors,
other consultants and advisors, and (iii) not use such information for any
competitive or other purpose other than with respect to its consideration and
evaluation of the transactions contemplated by this Agreement. In the event of
termination of this Agreement for any reason, Vaalco and the Fund will promptly
return or destroy all documents containing nonpublic information so obtained
from the other party and any copies made of such documents and any summaries,
analyses or compilations made therefrom.
SECTION 6.5 HUNT ARRANGEMENTS. Immediately prior to the Closing, the
Company shall enter into the following agreements and instruments, each of which
shall be satisfactory to Vaalco and the Fund: (i) a letter of credit arrangement
in favor of Hunt in the amount of approximately $13.6 million (or such lesser
amount as is equal to the Company's unfunded Committed Capital Contributions (as
defined in the Agreement of Partnership of Hunt) as of the Closing Date) to
provide for the funding after the Closing of the Company's commitment to Hunt
with respect to the Hunt Interest, (ii) a letter of credit reimbursement and
cash collateral agreement with the issuer of such letter of credit, which
agreement shall provide for the reimbursement of such issuer for the amount of
all drawings under such letter of credit from the cash collateral account
established pursuant to such agreement, (iii) an agreement with Hunt, pursuant
to which (x) Hunt releases the Fund and Brown Brothers Harriman & Co., a
Delaware limited partnership ("BBH&Co."), from all obligations and liabilities
under any agreements entered into by them in connection with the Hunt Interest,
(y) Hunt consents to the arrangements described in this Section 6.5 and (z) Hunt
agrees that proceeds of the aforesaid letter of credit will be used as provided
in the Agreement of Partnership for Hunt, or in the case the entire letter of
credit is drawn pursuant to the terms thereof, invested as agreed by the
parties; PROVIDED, that Vaalco shall bear all reasonable fees, costs and
expenses incurred by any party to this Agreement in connection with the issuance
of the letter of credit and letter of credit reimbursement and cash collateral
agreement entered into pursuant to this Section 6.5. The aforesaid agreements
and arrangements will be in form an substance satisfactory to the Company, Hunt
and Vaalco.
SECTION 6.6 FINANCIAL STATEMENTS. Vaalco shall deliver to the Holders,
in form and substance reasonably satisfactory to the Majority Holders:
(a) as soon as available, but not later than one hundred days after
the end of each fiscal year of Vaalco, a copy of the audited consolidated
balance sheet of Vaalco and its subsidiaries as of the end of such year and the
related consolidated statements of
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income and cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous year, all in reasonable detail and
accompanied by a management summary and analysis of the operations of Vaalco and
its subsidiaries for such fiscal year and by the opinion of Deloitte & Touche
(or any successor thereto) or another nationally recognized independent public
accounting firm which report shall state that such consolidated financial
statements present fairly the financial position for the periods indicated in
conformity with generally accepted accounting principles applied on a basis
consistent, except as otherwise stated therein, with prior years; PROVIDED,
HOWEVER, that the delivery of a copy of Vaalco's Annual Report on Form 10-K or
10-KSB filed pursuant to the Exchange Act shall satisfy the requirements of this
Section 6.6(a);
(b) as soon as available and, in any event, within 45 days of each
of the first three fiscal quarters of each year the unaudited consolidated
balance sheet of Vaalco and its subsidiaries, and the related consolidated
statements of income and cash flow for such quarter and for the period
commencing on the first day of the fiscal year and ending on the last day of
such quarter, all certified by an appropriate officer of Vaalco; PROVIDED,
HOWEVER, that the delivery of a copy of Vaalco's Quarterly Report filed pursuant
to the Exchange Act shall satisfy the requirements of this Section 6.6(b);
(c) as soon as available, and in any event, within 30 days of the
end of each fiscal month, internally prepared monthly financial reports in form
and substance reasonably satisfactory in the Fund; PROVIDED, HOWEVER, that
Vaalco shall not be required to provide such monthly reports if Vaalco files
reports pursuant to the Exchange Act;
(d) budgets, documentation of material financial transactions,
projections, operating reports, acquisition analyses, presentations to banks,
financial institutions or potential investors, consultants' reports and such
other financial and operating data of Vaalco and its subsidiaries as the Fund
reasonably may request (any such information to be subject to the provisions of
Section 6.13(b));
(e) at any time when it is not subject to Section 13 or 15(d) of the
Exchange Act, upon request, to the Fund and prospective purchasers of Vaalco
Shares or Common Stock issued upon conversion of the Preferred Shares,
information of the type that would satisfy the requirement of subsection
(d)(4)(i) of Rule 144A (or any similar successor provision) under the Securities
Act; and
(f) except as otherwise provided in Section 6.6(a) and (b), promptly
after the same are filed, copies of all reports, statements and other documents
filed with the Commission.
SECTION 6.7 CERTIFICATES; OTHER INFORMATION. Vaalco shall furnish to the
Fund concurrently with the delivery of the financial statements referred to in
Section 6.6(a) above, a certificate of Vaalco's Chief Financial Officer stating
that, to the best of such officer's knowledge, there exists no default under or
breach of Sections 6.6 through 6.14 and Article 7, except as specified in such
certificates.
SECTION 6.8 PRESERVATION OF CORPORATE EXISTENCE AND LEGALLY AVAILABLE
FUNDS. Vaalco shall, and shall cause each of its subsidiaries to:
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(a) preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its jurisdiction of incorporation
or organization except as permitted by Section 7.1; and
(b) preserve and maintain in full force and effect all material
rights, privileges, qualifications, licenses and franchises necessary in the
normal conduct of its business.
SECTION 6.9 COMPLIANCE WITH ORGANIZATIONAL DOCUMENTS. The Company shall
comply, and shall cause each Subsidiary to comply, in all material respects with
its certificate of incorporation and by-laws or other organizational or
governing documents.
SECTION 6.10 COMPLIANCE WITH LAWS. Vaalco shall comply, and shall cause
each subsidiary to comply, in all material respects with all Requirements of Law
and with the directions of any Governmental Authority having jurisdiction over
it or its business, except if such failure to comply would not have a Material
Adverse Effect on the condition of Vaalco.
SECTION 6.11 NOTICES. Upon knowledge of the Chief Executive Officer, the
President or the Chief Financial Officer of Vaalco of the events described
below, Vaalco shall give written notice within 10 days to the Fund upon (a) the
occurrence of any default under, or breach of, any of the provisions of Sections
6.6 through 6.14 or Article 7; and (b) any (i) material default or event of
default under any contractual obligation of Vaalco or any of its subsidiaries,
or (ii) material dispute, litigation, investigation, proceeding or suspension
which may exist at any time between Vaalco or any of its subsidiaries and any
governmental authority. Each notice pursuant to this Section 6.11 shall be
accompanied by a statement by the Chief Executive Officer, President or Chief
Financial Officer of Vaalco setting forth details of the occurrence referred to
therein, specifying the period of existence thereof and stating what action
Vaalco proposes to take with respect thereto.
SECTION 6.12 RESERVATION OF SHARES. Vaalco shall at all times reserve and
keep available out of its authorized Vaalco Common Stock, solely for the purpose
of issue or delivery upon conversion of all outstanding Vaalco Shares as
provided in the Certificate of Designation, such number of shares of Vaalco
Common Stock as shall then be issuable or deliverable upon the exercise of all
outstanding Vaalco Preferred Shares. Such shares of Vaalco Common Stock shall,
when issued or delivered in accordance with the terms of the Vaalco Preferred
Shares, be duly and validly issued and fully paid and non-assessable. Vaalco
shall issue the Vaalco Common Stock into which the Vaalco Preferred Shares are
convertible upon the proper surrender of the Vaalco Preferred Shares in
accordance with the provisions of the Certificate of Designation and shall
otherwise comply with the terms thereof.
SECTION 6.13 INSPECTION.
(a) At any time, and from time to time after the Closing, Vaalco
will permit, and will cause each of its subsidiaries to permit, representatives
of the Fund to visit and inspect any of its properties, to examine its
corporate, financial and operating records and make copies thereof or abstracts
therefrom, and to discuss its affairs, finances and accounts with their
respective directors, officers and independent public accountants, all at such
reasonable times during normal business hours and as often as may be reasonably
requested, upon reasonable advance notice to Vaalco.
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(b) Without limiting any obligations provided under any requirement
of law, the Fund will maintain as confidential any information obtained from
Vaalco (to the extent the Fund is advised by Vaalco that such information is
confidential) pursuant to Section 6.13(a) or 6.6(d) (other than information
which (i) at the time of disclosure or thereafter is generally available to and
known by the public (other than as a result of a disclosure directly or
indirectly by the Fund or any of its representatives), (ii) is available to the
Fund on a non-confidential basis from a source other than Vaalco or its
subsidiaries, provided that such source was not known by the Fund to be bound by
a confidentiality agreement with Vaalco or any of its subsidiaries, or (iii) has
been independently developed by the Fund), and shall not disclose any
information obtained from Vaalco pursuant to Section 6.13(a) or 6.6(d) and
required to be maintained as confidential pursuant hereto, except (i) to BBH&Co.
and their respective advisors, representatives, agents, partners and employees,
(ii) to its advisors, representatives, agents, partners (and their
representatives and advisors) and employees, (iii) to any prospective transferee
of the Vaalco Shares or shares of Common Stock issued upon the conversion of the
Vaalco Shares or of an interest in the Fund or in a successor fund sponsored by
BBH&Co. (iv) as may be required by law (including a court order, subpoena or
other administrative order or process) or applicable regulations to which the
Fund is or becomes subject, (v) in connection with any litigation arising out of
or related to this Agreement, (vi) to the executive officers of Vaalco or any of
its subsidiaries, or (vii) with the consent of Vaalco.
SECTION 6.14 REGISTRATION AND LISTING. If the Vaalco Shares, or any shares
of Common Stock required to be reserved for purposes of conversion of the Vaalco
Preferred Shares as provided in the Certificate of Designation, require
registration with or approval of any governmental authority under any federal or
state or other applicable law before such Vaalco Shares or Common Stock may be
issued or delivered upon conversion of the Vaalco Shares, Vaalco will in good
faith and as expeditiously as possible endeavor to cause such Vaalco Shares or
Common Stock to be duly registered or approved, as the case may be, unless such
registration or approval is required solely because of a breach by a Holder of
the Fund's representation contained in Sections 5.10 or 5.11 or in a any legend
on the certificates representing the Vaalco Shares and the Common Stock issued
upon conversion of the Vaalco Preferred Shares. In the event that, and so long
as, the Common Stock is listed on the New York Stock Exchange ("NYSE") or quoted
or listed on any other national securities exchange or Nasdaq Stock Market
("Nasdaq"), Vaalco will, if permitted by the rules of such system or exchange,
quote or list and keep quoted or listed on such exchange or Nasdaq, upon
official notice of issuance, all Common Stock issuable upon conversion of the
Vaalco Preferred Shares.
SECTION 6.15 RESIGNATIONS. Effective at the Closing, the Fund will cause
each officer and director of the Company to submit their written resignation as
an officer and/or director of the Company.
SECTION 6.16 CONTRIBUTION OF COMPANY DEBT. Immediately prior to Closing,
the Fund shall contribute to the Company all of the outstanding indebtedness of
the Company it holds as of such date, including the Term Notes listed on
Schedule 5.15.
SECTION 6.17 PRIVATE PLACEMENT MEMORANDUM. Vaalco shall deliver to the
Fund the draft private placement memorandum with respect to the sale of Vaalco
Common Stock contemplated by Section 8.3(1) hereof prior to the circulation of
such memorandum
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in connection with such sale, and such memorandum shall be in form and substance
reasonably satisfactory to the Fund.
SECTION 6.18 DIRECTORS AND OFFICERS INSURANCE. Prior to the Closing Vaalco
shall obtain an insurance policy for all directors and officers of Vaalco which
is comparable to that of similarly situated companies and is satisfactory to the
Fund.
ARTICLE 7. NEGATIVE COVENANTS
SECTION 7.1 CONSOLIDATION AND MERGERS. Without the prior consent of the
Majority Holders, Vaalco shall not merge, consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets, merge or
consolidate with or into any other Person except another subsidiary of Vaalco,
except Vaalco may consolidate or merge with or into, or sell all or
substantially all of its assets to, any Person if:
(a) the corporation or partnership formed by such consolidation or
surviving such merger or the Person which acquires all or substantially all of
the assets of Vaalco shall be (after giving effect to such transaction) a
Solvent corporation or partnership organized or formed, as the case may be, and
existing under, the laws of the United States, any state thereof, or the
District of Columbia and shall expressly assume in writing all of the
obligations of Vaalco under this Agreement, the Vaalco Shares, the Certificate
of Designation and the Registration Rights Agreement;
(b) immediately after giving effect to such transaction, no default
under, or breach of, any of the provisions of Sections 6.6 through 6.14 or this
Article 7;
(c) the corporation or partnership formed by or surviving any such
transaction or the Person that acquires all or substantially all of the assets
of Vaalco shall have a Consolidated Net Worth at least equal to the Consolidated
Net Worth of Vaalco immediately prior to such transaction; and
(d) Vaalco shall have furnished to the Holders (i) an opinion of
counsel addressing the matters (other than solvency) set forth in clause (a)
above and (ii) the certificate of the Chief Financial Officer of Vaalco to the
effect that such transaction has been consummated in compliance with the
foregoing requirements; PROVIDED that nothing in this Section 7.1 shall affect
the rights of the Holders under this Agreement, the Vaalco Shares, or the
Registration Rights Agreement.
SECTION 7.2 TRANSACTIONS WITH AFFILIATES. Without the prior consent of the
Majority Holders, Vaalco shall not, and shall not permit any of its subsidiaries
to, enter into any transaction or arrangement with any Affiliate of Vaalco or of
any such subsidiary, except for transactions or arrangements between members of
the Vaalco Consolidated Group.
SECTION 7.3 NO INCONSISTENT AGREEMENTS. Without the prior consent of the
Majority Holders, neither Vaalco nor any of its subsidiaries shall (a) enter
into any loan or other agreement after the date hereof or (b) amend or modify
any then existing loan or other agreement, which by its terms restricts or
prohibits the ability of Vaalco to issue Common Stock upon conversion of the
Vaalco Shares, in each case in accordance with the Certificate of Designation
and this Agreement.
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SECTION 7.4 FISCAL YEAR. Neither Vaalco nor any of its subsidiaries shall
change its fiscal year without the written consent of the Majority Holders.
SECTION 7.5 AMENDMENTS TO CERTIFICATE OF INCORPORATION AND BY-LAWS.
Neither Vaalco nor any of its subsidiaries shall amend its certificate of
incorporation or by-laws in a manner which would adversely effect the Holders in
any material respect, without the written consent of the Majority Holders.
SECTION 7.6 REGISTRATION RIGHTS. Vaalco shall not grant any Person demand
registration rights without the written consent of the Majority Holders. Vaalco
shall not grant any Person piggy-back registration rights that are inconsistent
with the right granted to the Holders pursuant to the Registration Rights
Agreement including, without limitation, any registration rights which would
require a Holder to reduce the number of shares such Holder has requested to
include in a registration statement pursuant to the terms of the Registration
Rights Agreement.
ARTICLE 8. CLOSING CONDITIONS
SECTION 8.1 CONDITIONS APPLICABLE TO ALL. The obligations of each of the
parties hereto to effect the transactions contemplated by this Agreement are
subject to the satisfaction or waiver of the following conditions at or prior to
the Closing:
(a) No action, suit, or proceeding before any court or governmental
or regulatory authority will be pending, no investigation by any governmental or
regulatory authority will have been commenced, and no action, suit or proceeding
by any governmental or regulatory authority will have been threatened, against
Vaalco, Fund or the Company or any of the principals, partners, officers or
directors of any of them, seeking to restrain, prevent or change the
transactions contemplated hereby or questioning the legality or validity of any
such transactions or seeking damages in connection with any such transactions.
(b) If any filing is required under the HSR Act, the applicable
waiting period (and any extension thereof) applicable to the transaction
contemplated by this Agreement under the HSR Act shall have expired or been
earlier terminated.
(c) Vaalco shall have received from Jefferies & Co. an opinion dated
not more than five days before Closing, satisfactory in form and substance to
Vaalco, that the transaction provided for herein is fair to Vaalco and its
stockholders from a financial point of view.
(d) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in securities
generally on the NYSE or on Nasdaq's National Market; (ii) a suspension or
material limitation in trading in Vaalco's securities on over-the-counter
market; (iii) a general moratorium on commercial banking activities declared by
either federal or New York state authorities; or (iv) the outbreak or escalation
of hostilities involving the United States or the declaration by the United
States of a national emergency or war, or any other crisis or change in
political, financial or economic conditions if the effect of any such event
specified in Clause (i) through (iv) in the judgment of the Company or Vaalco
makes it impracticable or inadvisable to proceed with the transaction
contemplated by this Agreement.
- 30 -
<PAGE>
(e) The Fund shall have received (i) from Hunt, a consent with
respect to the transactions contemplated hereunder, including entering into the
letter of credit arrangement contemplated by Section 6.5 hereof and (ii) from
Hunt and HOOC, a release of the Fund and BBH&Co. as of the Closing, from any and
all of the Fund's and BBH&Co.'s obligations to Hunt and HOOC in connection with
the Fund's ownership of the Hunt Interest, including, without limitation, the
obligations of the Fund and BBH&Co. pursuant to (x) that certain Guaranty and
Covenant Agreement, dated as of September 13, 1995, made by the Fund for the
benefit of HOOC and Hunt and (y) that certain Parent Entity Subscription
Agreement for Limited Partnership Interest in Hunt, dated September 13, 1995,
executed by the Fund and delivered to Hunt.
SECTION 8.2 CONDITIONS TO VAALCO'S OBLIGATIONS. The obligations of Vaalco
to effect the transactions contemplated by this Agreement are also subject to
the satisfaction or waiver of the following conditions at or prior to the
Closing:
(a) The representations and warranties of the Fund in this Agreement
or in any certificate delivered to Vaalco pursuant hereto as of the date hereof
will be deemed to have been made again at and as of the date of Closing (without
regard to any Schedule updates furnished by the Fund after the date hereof
unless consented to by Vaalco) and will then be true and correct in all material
respects, except to the extent any such representation or warranty is qualified
by materiality or by reference to the term "Material Adverse Effect" in which
case such representation or warranty shall be true and correct, and the Company
and Fund will have performed and complied in all material respects with all
agreements, covenants and conditions required by this Agreement to be performed
or complied with by Fund or the Company prior to or on the date of Closing.
(b) There shall not have occurred any event or circumstance
resulting in a Material Adverse Effect with respect to the Company from the date
of the Company's Latest Balance Sheet to the Closing.
(c) All governmental and other third-party consents and approvals,
if any, necessary to permit the consummation of the transactions contemplated by
this Agreement, or to permit the continued operation of the business of Vaalco
and the Company in substantially the same manner after the date of Closing as
before, will have been received.
(d) The receipt by Vaalco of a certificate executed by the general
partner of Fund dated the Closing, certifying that the conditions specified in
Section 7.2(a) and (b) hereof have been fulfilled.
(e) Fund will have delivered to Vaalco, each dated as of a date not
earlier than five days prior to the date of Closing to the extent issued by such
jurisdiction, (i) certificates from the appropriate governmental official to the
effect that the Company and the Fund exist, and (ii) certificates as to the tax
status of the Company in its jurisdiction of organization and each jurisdiction
in which the Company is qualified to do business.
(f) Vaalco shall have received from Paul, Weiss, Rifkind, Wharton &
Garrison, counsel to the Company and Fund, an opinion, dated as of the date of
Closing, in form and substance reasonably satisfactory to Vaalco.
- 31 -
<PAGE>
(g) Vaalco shall have received a certificate, dated as of the
Closing and signed by the Secretary or Assistant Secretary of the general
partner of Fund, attaching a good standing certificate from the Delaware
Secretary of State with respect to the Company and the Fund and certifying the
truth and correctness of attached copies of the certificate of incorporation of
the Company, and resolutions of the Board of Directors of the Company and the
general partner of the Fund approving this Agreement and the transactions
contemplated hereby.
(h) All consents, waivers, exemptions, authorizations, or other
actions by, or notices to, or filings with, Governmental Authorities and other
Persons necessary or required in connection with the execution, delivery or
performance by the Fund and the Company or enforcement against the Fund of this
Agreement shall have been obtained and shall be in full force and effect, and
Vaalco shall have been furnished with appropriate evidence thereof.
(i) No amendments to the certificate of incorporation or by-laws of
the Company as in effect on the date hereof shall have been effected.
SECTION 8.3 CONDITIONS TO FUND'S OBLIGATIONS. The obligations of Fund to
effect the transactions contemplated by this Agreement are also subject to the
satisfaction or waiver of the following conditions at or prior to the Closing:
(a) The representations and warranties of Vaalco in this Agreement
or in any certificate delivered to Vaalco pursuant hereto as of the date hereof
will be deemed to have been made again at and as of the date of Closing (without
regard to any Schedule updates furnished by Vaalco after the date hereof unless
consented to by Fund) and will then be true and correct in all material
respects, except to the extent any such representation or warranty is qualified
by materiality or by reference to the term "Material Adverse Effect" in which
case such representation or warranty shall be true and correct, and Vaalco will
have performed and complied in all material respects with all agreements,
covenants and conditions required by this Agreement to be performed or complied
with by Vaalco prior to or on the Closing.
(b) There shall not have occurred any event or circumstance
resulting in a Material Adverse Effect with respect to Vaalco from the date of
the Vaalco's Audited Financial Statements to the date of Closing other than as
described on a schedule to this Agreement.
(c) All governmental and other third-party consents and approvals,
if any, necessary to permit the consummation of the transactions contemplated by
this Agreement will have been received.
(d) The receipt by Fund of a certificate executed by the Chief
Executive Officer of Vaalco dated the date of Closing, certifying that the
conditions specified in Section 8.3(a) and (b) hereof have been fulfilled.
(e) Vaalco will have delivered to Fund, each dated as of a date not
earlier than five days prior to the date of Closing, a certificate from the
state of Delaware to the effect that Vaalco is in good standing in such
jurisdiction and listing all charter documents of Vaalco, and certificates as to
the tax status of Vaalco in its jurisdiction of organization and each
jurisdiction in which Vaalco is qualified to do business.
- 32 -
<PAGE>
(f) The receipt by Fund of opinions from (i) Butler & Binion,
L.L.P., U.S counsel to Vaalco, and (ii) counsel to Vaalco in the Philippines,
India and Gabon, dated as of the date of Closing, and in form and substance
reasonably satisfactory to the Fund.
(g) Vaalco's Board of Directors shall have taken such action as is
necessary to appoint three additional members named by Fund to the Vaalco's
Board of Directors, one to each class of directors, such appointment to be
effective on the Closing Date and shall have adopted the amendments to the
by-laws set forth in Exhibit C.
(h) The Fund shall have received a certificate, dated the Closing
and signed by the Secretary or Assistant Secretary of Vaalco, attaching a good
standing certificate from the Delaware Secretary of State with respect to Vaalco
and certifying the truth and correctness of attached copies of the certificate
of incorporation and by-laws of Vaalco, and resolutions of the Board of
Directors of Vaalco approving this Agreement and the transactions contemplated
hereby.
(i) The Certificate of Designation shall have been duly filed by
Vaalco with the Secretary of State of the State of Delaware. The certificate of
incorporation and by-laws of Vaalco shall be in the form attached as Exhibit E.
(j) All consents, waivers, exemptions, authorizations, or other
actions by, or notices to, or filings with, Governmental Authorities and other
Persons necessary or required in connection with the execution, delivery or
performance by Vaalco or enforcement against Vaalco of this Agreement, the
Vaalco Shares, the Certificate of Designation and the Registration Rights
Agreement shall have been obtained and shall be in full force and effect, and
the Fund shall have been furnished with appropriate evidence thereof.
(k) Except for the Certificate of Designation and the amendments to
by-laws set forth on Exhibit C, no amendments to the certificate of
incorporation or by-laws of Vaalco as in effect on the date hereof shall have
been effected.
(l) Vaalco shall have arranged for the sale of Vaalco Common Stock
simultaneously with (or prior to) the closing for an aggregate consideration in
an amount not less than $5,000,000, with the closing of such sale to occur on
the same date as (or prior to) the Closing and the proceeds of such sale to be
transferred to Vaalco simultaneously with the closing of such sale; PROVIDED,
that the sum of (x) the placement agent fees incurred in connection with such
sale and (y) the amounts payable by Vaalco in respect of any and all related
costs and expenses with respect to such sale (including, without limitation, the
disbursements of the placement agent and all legal, accounting and printing
expenses required to be paid by Vaalco) shall in no event be in excess of $1.1
million. The price per share (net of the placement agent fee) of the Vaalco
Common Stock sold in connection with the fulfillment of the closing condition
set forth in the foregoing sentence shall be referred to herein as the
"Placement Price."
(m) The employment agreements between Vaalco and the employees of
Vaalco listed on Schedule 8.3(m) hereto shall be in full force and effect and
the terms of such contracts shall be satisfactory to the Fund and such
agreements shall have been amended, in a manner satisfactory to the Fund, to
terminate on August 1, 1998.
- 33 -
<PAGE>
(n) Vaalco, Robert S. Schneeflock, Jr. and Paramount Petroleum
Company shall have executed the agreements described in Exhibit D, on terms
reasonably satisfactory to the Fund.
(o) Vaalco shall have duly executed and delivered to the Fund the
Registration Rights Agreement.
(p) Coopers & Lybrand shall have completed a financial review of
Vaalco's Philippine subsidiary which shall be in form and substance satisfactory
to the Fund.
(q) Vaalco shall have delivered to the Fund 1998 monthly budget
projections for the business operations of Vaalco reasonably acceptable to the
Fund.
(r) The Fund shall have received such opinions as the Fund may
require from its own counsel, including the Fund's counsel in India, the
Phillippines and Gabon, in connection with Vaalco's business and operations and
such opinions shall be in form and substance satisfactory to the Fund.
(s) The Fund shall have received satisfactory evidence or
confirmation from Vaalco regarding such matters as it shall require with respect
to the business and operations of Vaalco Gabon (Etame) Inc. ("Vaalco Etame"),
and Vaalco Energy (Gabon) Inc. ("Vaalco Gabon"), including, without limitation,
(i) Vaalco Etame's and Vaalco Gabon's participation interest in the Production
Sharing Contract, dated July 7, 1995, by and among the Republic of Gabon
("Gabon"), Vaalco Etame, Vaalco Gabon and the other parties signatory thereto
and (ii) Vaalco Etame's and Vaalco Gabon's receipt of all necessary governmental
consents, authorizations, approvals, declarations and registrations which allow
them to own such participation interest and to operate and conduct their
business in Gabon.
SECTION 8.4 WAIVER OF CONDITIONS. Any condition to a party's
obligations hereunder may be waived by that party in writing.
SECTION 8.5 VAALCO DELIVERIES. At the Closing, Vaalco shall deliver:
(a) Certificates representing the Vaalco Shares registered in the
name of the Fund.
(b) The certificate contemplated by Section 8.3(d).
(c) The opinion of Butler & Binion, L.L.P. and other counsel
contemplated by Section 8.3(f).
SECTION 8.6 FUND DELIVERIES. At the Closing, Fund shall deliver:
(a) A certificate or certificates representing the Company Shares
duly endorsed for transfer to Vaalco or accompanied by a stock power duly
executed for transfer to Vaalco;
(b) The certificate contemplated by Section 8.2(d);
- 34 -
<PAGE>
(c) The opinion of Paul, Weiss, Rifkind, Wharton & Garrison
contemplated by Section 8.2(b).
(d) All books and records and ledgers of the Company;
(e) The resignations contemplated by Section 6.15.
ARTICLE 9. TERMINATION
SECTION 9.1 TERMINATION OF AGREEMENT. This Agreement may be
terminated only as provided below:
(a) The Fund, the Company and Vaalco may terminate this Agreement by
mutual written consent at any time prior to Closing;
(b) The Fund, the Company and Vaalco may terminate this agreement
(i) if a court of competent jurisdiction or other Governmental Authority shall
have issued an order, judgment, injunction or decree (collectively an "Order")
or taken any other action permanently restraining, enjoining or otherwise
prohibiting the transaction contemplated hereunder and such Order or other
action shall have become final and nonappealable or (ii) if the closing shall
not have occurred on or before March 31, 1998;
SECTION 9.2 PROCEDURE FOR AND EFFECT OF TERMINATION. In the event that
this Agreement is terminated by the Fund or the Company, on the one hand, or by
Vaalco, on the other hand, pursuant to Section 9.1(b) hereof, written notice of
such termination and abandonment shall forthwith be given to the other parties
and this Agreement shall terminate without any further action. If this Agreement
is terminated as provided herein, no party hereto shall have any liability or
further obligation to any other party under the terms of this Agreement except
that the provisions of Section 6.3, 6.4(b), 9.3, this Section 9.2 and Article 10
shall survive the termination of this Agreement.
SECTION 9.3 SOLE REMEDY; WAIVER. Each of the Fund, the Company and Vaalco
hereby agree that the sole remedy for the breach of any representation,
warranty, covenant or agreement contained in this Agreement, the failure of any
of the conditions contained in Section 8 hereof to be fulfilled or the
termination of this Agreement for any other reason whatsoever shall be to not
close the transactions contemplated under this Agreement. In furtherance of the
foregoing, each of the Fund, the Company and Vaalco hereby waive, as of the date
hereof, to the fullest extent permitted under applicable law, any and all
rights, claims and causes of action (other than tort claims of, or causes of
action arising from, fraudulent misrepresentation or deceit) it may have against
the Fund, the Company and Vaalco, respectively, relating to the subject matter
of this Agreement and the other agreements contemplated hereby arising under or
based upon any federal, state, local or foreign statute, law, ordinance, rule or
regulation or otherwise.
ARTICLE 10. MISCELLANEOUS
SECTION 10.1 NOTICES. All notices hereunder must be in writing and will be
deemed to have been duly given upon receipt of hand delivery; certified or
registered mail, return receipt requested; or telecopy transmission with
confirmation of receipt:
- 35 -
<PAGE>
(a) If to Vaalco: Vaalco Energy, Inc.
4600 Post Oak Place, Suite 309
Houston, Texas 77027
Attn: Robert L. Gerry III,
Chief Executive Officer
(b) If to Fund: c/o Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
Attn: Walter W. Grist
Such names and addresses may be changed by written notice to each person listed
above.
SECTION 10.2 GOVERNING LAW. This Agreement shall be governed by, construed
and interpreted in accordance with the laws of the State of New York, regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws thereof. The Fund, the Company and Vaalco agree that the courts of the
State of New York located in New York City and the courts of the United States
of America for the Southern District of New York shall have exclusive
jurisdiction in any legal action or proceedings with respect to this Agreement
and any transaction contemplated hereby.
SECTION 10.3 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which will be deemed an original but all of which together will
constitute one and the same instrument.
SECTION 10.4 INTERPRETATION; SCHEDULES.
(a) When a reference is made in this Agreement to a Section, Exhibit
or Schedule, such reference shall be to a Section of, or an Exhibit or Schedule
to, this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
(b) The information set forth in the Schedules to this Agreement is
qualified in its entirety by reference to the specific provisions of this
Agreement, and is not intended to constitute, and shall not be construed as
constituting, separate representations or warranties of the party to which such
Schedules relate except as and to the extent provided in this Agreement.
Inclusion of information in the Schedules shall not be construed as an admission
that such information is material for purposes of the specific provisions of
this Agreement to which such information relates. Information included in the
Schedules that is not required to be so included under the specific provisions
of this Agreement shall be deemed to be included for informational purposes only
and information of a similar nature need not be included, at the discretion of
the party providing such information. Any information disclosed by a party in
any Schedule shall be deemed to be disclosed in all the Schedules of such party
and for all purposes under this Agreement to the extent the specific provisions
of this Agreement require such disclosure.
- 36 -
<PAGE>
SECTION 10.5 ENTIRE AGREEMENT; SEVERABILITY.
(a) This Agreement, including the Exhibits and Schedules hereto,
embodies the entire agreement and understanding of the parties hereto in respect
of the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings (whether written or oral) between the parties with
respect to such subject matter.
(b) If any provision of this Agreement is determined to be invalid
or unenforceable, in whole or in part, it is the parties' intention that such
determination will not be held to affect the validity or enforceability of any
other provision of this Agreement, which provisions will otherwise remain in
full force and effect.
SECTION 10.6 AMENDMENT AND MODIFICATION. This Agreement may be
amended or modified only by written agreement of the parties hereto.
SECTION 10.7 BINDING EFFECT; BENEFITS. This Agreement will inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, express or implied,
is intended to confer on any Person other than the parties hereto and their
respective successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
SECTION 10.8 ASSIGNABILITY. This Agreement is not assignable by any
party hereto without the prior written consent of the other parties.
SECTION 10.9 EXPENSES. Each of the parties hereto shall pay all of its own
expenses relating to the transactions contemplated by this Agreement, including
without limitation the fees and expenses of its own financial, legal and tax
advisors.
SECTION 10.10 GENDER AND CERTAIN DEFINITIONS. All words used herein,
regardless of the number and gender specifically used, shall be deemed and
construed to include any other number, singular or plural, and any other gender,
masculine, feminine or neuter, as the context requires.
SECTION 10.11 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; REMEDIES. The
representations and warranties in this Agreement or in any instrument delivered
pursuant hereto shall not survive the Closing hereunder.
SECTION 10.12 WAIVER OF JURY TRIAL. EACH OF THE FUND, THE COMPANY AND
VAALCO ACKNOWLEDGES THE TIME AND EXPENSE REQUIRED FOR A BENCH TRIAL AND HEREBY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO JURY TRIAL
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
- 37 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first written above.
VAALCO ENERGY, INC.
By:/S/ ROBERT L. GERRY III
-----------------------
Robert L. Gerry III,
Chief Executive Officer
THE 1818 FUND II, L.P.
By: Brown Brothers Harriman & Co.,
general partner
By:/s/ T. Michael Long
-------------------
Name: T. Michael Long
Title: Partner
1818 OIL CORP.
By:/s/ T. Michael Long
-------------------
Name: T. Michael Long
Title: Vice President
- 38 -
FIRST AMENDMENT
TO
STOCK ACQUISITION AGREEMENT
AND
PLAN OF REORGANIZATION
WHEREAS, VAALCO Energy, Inc. ("Vaalco"), The 1818 Fund II, L.P. (the
"Fund") and 1818 Oil Corp. (the "Company") have entered into a Stock Acquisition
Agreement and Plan of Reorganization dated as of February 17, 1998 (the
"Agreement"); and
WHEREAS, the parties to the Agreement desire to amend the Agreement
in certain respects as further set forth below;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. The first sentence of Section 2.1 of the Agreement shall be revised
to read:
"Subject to the terms and conditions herein set forth, (i) Vaalco
agrees that it will acquire, and the Fund agrees to transfer to
Vaalco, 229 shares of the common stock, $.01 par value (the "Company
Shares"), of the Company, and (ii) the Fund agrees to acquire shares
(the "Vaalco Common Shares") of common stock of Vaalco, $0.10 par
value ("Vaalco Common Stock") in an aggregate amount of $7,000,000."
2. The first sentence of Section 8.3(1) of the Agreement shall be
revised to read:
"Vaalco shall have arranged for the sale of Vaalco Common Stock
simultaneously with (or prior to) the Closing for an aggregate
consideration in an amount not less than $2,200,000, with the
closing of such sale to occur on the same date as (or prior to) the
Closing and the proceeds of such sale to be transferred to Vaalco
simultaneously with the closing at such sale; provided, that the sum
of (x) the placement agent fees incurred in connection with such
sale and (y) the amounts payable to Vaalco in respect of any and all
related costs and expenses with respect to such sale (including
without limitation, the disbursements of the placement agent and all
legal, accounting and printing expenses required to be paid by
Vaalco) shall in no event be in excess of $1.1 million."
<PAGE>
2
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
VAALCO ENERGY, INC.
By:/s/ Robert L. Gerry III
-----------------------
Robert L. Gerry III
Chief Executive Officer
THE 1818 FUND II, L.P.
By: Brown Brothers Harriman & Co.
general partner
By:/s/ T. Michael Long
-------------------
1818 OIL CORP.
By:/s/ T. Michael Long
-------------------
================================================================================
REGISTRATION RIGHTS AGREEMENT
between
VAALCO ENERGY, INC.
and
THE 1818 FUND II, L.P.
---------------------------------------
Dated April 21, 1998
---------------------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
1. Background............................................................... 1
2. Registration Under Securities Act, etc................................... 1
2.1 Registration on Request............................................. 1
2.2 Incidental Registration............................................. 3
2.3 Registration Procedures............................................. 4
2.4 Underwritten Offerings.............................................. 7
2.5 Preparation; Reasonable Investigation............................... 9
2.6 Limitations, Conditions and Qualifications to Obligations under
Registration Covenants.............................................. 9
2.7 Indemnification..................................................... 9
3. Definitions.............................................................. 12
4. Rule 144 and Rule 144A................................................... 14
5. Amendments and Waivers................................................... 14
6. Nominees for Beneficial Owners........................................... 15
7. Notices.................................................................. 15
8. Assignment............................................................... 15
9. Calculation of Percentage Interests in Registrable Securities............ 16
10. No Inconsistent Agreements............................................... 16
11. Remedies................................................................. 16
12. Certain Distributions.................................................... 16
13. Severability............................................................. 16
14. Entire Agreement......................................................... 17
15. Headings................................................................. 17
16. GOVERNING LAW............................................................ 17
17. Counterparts............................................................. 17
i
<PAGE>
REGISTRATION RIGHTS AGREEMENT, dated April 21, 1998, between VAALCO
ENERGY, INC., a Delaware corporation (the "Company"), and THE 1818 FUND II,
L.P., a Delaware limited partnership (the "Purchaser").
1. Background. Pursuant to a Stock Acquisition Agreement and Plan of
Reorganization, dated February 17, 1998 (the "Purchase Agreement"), among the
Company, the Purchaser and 1818 Oil Corp., a Delaware corporation, the Purchaser
has agreed to purchase from the Company, and the Company has agreed to issue to
the Purchaser (i) an aggregate of 10,000 shares of preferred stock, par value
$25.00 per share (the "Preferred Stock"), of the Company and (ii) an aggregate
of 3,763,441 shares of common stock, par value $.01 per share (the "Common
Stock"), of the Company. Capitalized terms used herein but not otherwise defined
shall have the meanings given them in Section 3.
2. Registration Under Securities Act, etc.
2.1 Registration on Request.
(a) Request. At any time, or from time to time, one
or more holders (the "Initiating Holders") of not less than 20% of the Purchaser
Stock may, upon written request, require the Company to effect the registration
under the Securities Act of any Registrable Securities held by such Initiating
Holders. The Company promptly will give written notice of such requested
registration to all other holders of Registrable Securities who may join in such
registration, and thereupon the Company will use its best efforts to effect, at
the earliest possible date, the registration under the Securities Act
(i) the Registrable Securities that the
Company has been so requested to register by such Initiating Holders,
and
(ii) all other Registrable Securities that
the Company has been requested to register by the holders thereof (such
holders together with the Initiating Holders hereinafter are referred
to as the "Selling Holders") by written request given to the Company
within 30 days after the giving of such written notice by the Company,
all to the extent requisite to permit the disposition of the
Registrable Securities so to be registered.
(b) Registration of Other Securities. Whenever the
Company shall effect a registration pursuant to this Section 2.1, no securities
other than Registrable Securities shall be included among the securities covered
by such registration unless (subject to Section 2.1(f)) the Selling Holders of
not less than 51% of all Registrable Securities to be covered by such
registration shall have consented in writing to the inclusion of such other
securities.
<PAGE>
2
(c) Registration Statement Form. Registrations under
this Section 2.1 shall be on such appropriate registration form of the
Commission as shall be reasonably selected by the Company.
(d) Effective Registration Statement. A registration
requested pursuant to this Section 2.1 shall not be deemed to have been effected
(i) unless a registration statement with respect thereto has become effective
and remained effective in compliance with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities covered by such
registration statement until the earlier of (x) such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in such
registration statement and (y) 180 days after the effective date of such
registration statement, except with respect to any registration statement filed
pursuant to Rule 415 under the Securities Act, in which case the Company shall
use its best efforts to keep such registration statement effective until such
time as all of the Registrable Securities cease to be Registrable Securities,
(ii) if after it has become effective, such registration is interfered with by
any stop order, injunction or other order or requirement of the Commission or
other governmental agency or court for any reason not attributable to the
Selling Holders and has not thereafter become effective, or (iii) if the
conditions to closing specified in the underwriting agreement, if any, entered
into in connection with such registration are not satisfied or waived, other
than solely by reason of a failure on the part of the Selling Holders.
(e) Selection of Underwriters. The underwriter or
underwriters of each underwritten offering of the Registrable Securities so to
be registered shall be selected by the Selling Holders of more than 50% of the
Registrable Securities to be included in such registration and shall be
reasonably acceptable to the Company.
(f) Priority in Requested Registration. If the
managing underwriter of any underwritten offering shall advise the Company in
writing (and the Company shall so advise each Selling Holder of Registrable
Securities requesting registration of such advice) that, in its opinion, the
number of securities requested to be included in such registration exceeds the
number that can be sold in such offering within a price range acceptable to the
Selling Holders of 66-2/3% of the Registrable Securities requested to be
included in such registration, the Company, except as provided in the following
sentence, will include in such registration, to the extent of the number and
type that the Company is so advised can be sold in such offering, Registrable
Securities requested to be included in such registration, pro rata among the
Selling Holders requesting such registration on the basis of the estimated gross
proceeds from the sale thereof. If the total number of Registrable Securities
requested to be included in such registration cannot be included as provided in
the preceding sentence, holders of Registrable Securities requesting
registration thereof pursuant to Section 2.1, representing not less than 33-1/3%
of the Registrable Securities with respect to which registration has been
requested and
<PAGE>
3
constituting not less than 66-2/3% of the Initiating Holders, shall have the
right to withdraw the request for registration by giving written notice to the
Company within 20 days after receipt of such notice by the Company and, in the
event of such withdrawal, such request shall not be counted for purposes of the
requests for registration to which holders of Registrable Securities are
entitled pursuant to Section 2.1 hereof. In connection with any such
registration to which this Section 2.1(f) is applicable, no securities other
than Registrable Securities shall be covered by such registration.
(g) Limitations on Registration on Request.
Notwithstanding anything in this Section 2.1 to the contrary, in no event will
the Company be required to effect, in the aggregate, more than three
registrations pursuant to this Section 2.1.
(h) Expenses. The Company will pay all Registration
Expenses in connection with any registration requested pursuant to this Section
2.1.
2.2 Incidental Registration.
(a) Right to Include Registrable Securities. If the
Company at any time proposes to register any shares of Common Stock or any
securities convertible into Common Stock under the Securities Act by
registration on any form other than Forms S-4 or S-8, whether or not for sale
for its own account, it will each such time give prompt written notice to all
registered holders of Registrable Securities of its intention to do so and of
such holders' rights under this Section 2.2. Upon the written request of any
such holder (a "Requesting Holder") made as promptly as practicable and in any
event within 15 days after the receipt of any such notice, the Company will use
its best efforts to effect the registration under the Securities Act of all
Registrable Securities that the Company has been so requested to register by the
Requesting Holders thereof; provided, however, that prior to the effective date
of the registration statement filed in connection with such registration,
immediately upon notification to the Company from the managing underwriter of
the price at which such securities are to be sold, if such price is below the
price that any Requesting Holder shall have indicated to be acceptable to such
Requesting Holder, the Company shall so advise such Requesting Holder of such
price, and such Requesting Holder shall then have the right to withdraw its
request to have its Registrable Securities included in such registration
statement; provided further, that if, at any time after giving written notice of
its intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each Requesting Holder of Registrable Securities and (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from any obligation of the Company to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any holder
or holders of
<PAGE>
4
Registrable Securities entitled to do so to cause such registration to be
effected as a registration under Section 2.1, and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities, for the same period as the delay in registering such
other securities. Notwithstanding anything contained in this Section 2.2(a), the
Company shall not, if any Requesting Holder shall have requested the
registration of shares of Common Stock issuable upon conversion of any Preferred
Stock, consummate the sale of the securities included in the registration until
such time as any applicable waiting period under the Hart-Scott- Rodino Act
shall have expired or early termination thereunder shall have been granted if
such Requesting Holder notifies the Company that it is required to make a filing
under the Hart-Scott-Rodino Act before it may convert its Preferred Stock. No
registration effected under this Section 2.2 shall relieve the Company of its
obligation to effect any registration upon request under Section 2.1.
(b) Priority in Incidental Registrations. If the
managing underwriter of any underwritten offering shall inform the Company by
letter of its opinion that the number or type of Registrable Securities
requested to be included in such registration would materially adversely affect
such offering, and the Company has so advised the Requesting Holders in writing,
then the Company will include in such registration, to the extent of the number
and type that the Company is so advised can be sold in (or during the time of)
such offering, first, all securities proposed by the Company to be sold for its
own account and second, all other securities proposed to be registered pro rata
on the basis of the estimated proceeds from the sale thereof.
(c) Expenses. The Company will pay all Registration
Expenses in connection with any registration effected pursuant to this Section
2.2.
2.3 Registration Procedures. If and whenever the Company is
required to effect the registration of any Registrable Securities under the
Securities Act as provided in Sections 2.1 and 2.2, the Company will, as
expeditiously as possible:
(i) prepare and (within 90 days after the end of the
period within which requests for registration may be given to the
Company or in any event as soon thereafter as practicable) file with
the Commission the requisite registration statement to effect such
registration and thereafter use its best efforts to cause such
registration statement to become effective; provided, however, that the
Company may discontinue any registration of its securities that are not
Registrable Securities (and, under the circumstances specified in
Sections 2.2(a) or 2.6, if applicable, its securities that are
Registrable Securities) at any time prior to the effective date of the
registration statement relating thereto;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus
<PAGE>
5
used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of
the Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement until the earlier of
(a) such time as all of such Registrable Securities have been disposed
of in accordance with the intended methods of disposition by the seller
or sellers thereof set forth in such registration statement and (b) 180
days after the effective date of such registration statement, except
with respect to any registration statement filed pursuant to Rule 415
under the Securities Act if the Company is eligible to file a
registration statement on Form S-3, in which case the Company shall use
its best efforts to keep the registration statement effective and
updated, from the date such registration statement is declared
effective until such time as all of the Registrable Securities cease to
be Registerable Securities;
(iii) furnish to each seller of Registrable
Securities covered by such registration statement, such number of
conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits),
such number of copies of the prospectus contained in such registration
statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities
Act, and such other documents, as such seller may reasonably request;
(iv) use its best efforts (x) to register or qualify
all Registrable Securities and other securities covered by such
registration statement under such other securities or blue sky laws of
such States of the United States of America where an exemption is not
available and as the sellers of Registrable Securities covered by such
registration statement shall reasonably request, (y) to keep such
registration or qualification in effect for so long as such
registration statement remains in effect and (z) to take any other
action that may be reasonably necessary or advisable to enable such
sellers to consummate the disposition in such jurisdictions of the
securities to be sold by such sellers, except that the Company shall
not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would
not but for the requirements of this subdivision (iv) be obligated to
be so qualified or to consent to general service of process in any such
jurisdiction;
(v) use its best efforts to cause all Registrable
Securities covered by such registration statement to be registered with
or approved by such other federal or state governmental agencies or
authorities as may be necessary in the opinion of counsel to the
Company and counsel to the seller or sellers of Registrable Securities
to enable the seller or sellers thereof to consummate the disposition
of such Registrable Securities;
<PAGE>
6
(vi) in the case of an underwritten or "best efforts"
offering, furnish at the effective date of such registration statement
to each seller of Registrable Securities, and each such seller's
underwriters, if any, a signed counterpart of:
(x) an opinion of counsel for the Company,
dated the effective date of such registration statement and,
if applicable, the date of the closing under the underwriting
agreement, and
(y) a "comfort" letter signed by the
independent public accountants who have certified the
Company's financial statements included or incorporated by
reference in such registration statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in
the case of the accountants' comfort letter, with respect to events
subsequent to the date of such financial statements, as are customarily
covered in opinions of issuer's counsel and in accountants' comfort
letters delivered to the underwriters in underwritten public offerings
of securities and, in the case of the accountants' comfort letter, such
other financial matters, and, in the case of the legal opinion, such
other legal matters, as the underwriters may reasonably request;
(vii) cause representatives of the Company to
participate in any "road show" or "road shows" reasonably requested by
any underwriter of an underwritten or "best efforts" offering of any
Registrable Securities;
(viii) notify each seller of Registrable Securities
covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
upon discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading, in the light of the
circumstances under which they were made, and at the request of any
such seller promptly prepare and furnish to it a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include 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
the light of the circumstances under which they were made;
(ix) otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and make
available to its
<PAGE>
7
security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve
months, but not more than eighteen months, beginning with the
first full calendar month after the effective date of such
registration statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the Securities Act and Rule
158 promulgated thereunder, and promptly furnish to each such
seller of Registrable Securities a copy of any amendment or
supplement to such registration statement or prospectus;
(x) provide and cause to be maintained a transfer
agent and registrar (which, in each case, may be the Company)
for all Registrable Securities covered by such registration
statement from and after a date not later than the effective
date of such registration; and
(xi) if any class of securities of the Company is
listed on any national securities exchange or automated
quotation system at the time of the effectiveness of any
registration statement, the Company shall use its best efforts
to list all Registrable Securities covered by such
registration statement on such national securities exchange or
automated quotation system.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company in a reasonably prompt
manner such information regarding such seller and the distribution of such
securities as the Company may from time to time reasonably request in writing;
provided, that any such information shall be given or made by a seller of
Registrable Securities without representation or warranty of any kind whatsoever
except representations with respect to the identity of such seller, such
seller's Registrable Securities and such seller's intended method of
distribution or any other representations required by applicable law.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in subdivision (viii) of this
Section 2.3, such holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (viii) of this
Section 2.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.
2.4 Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by
the underwriters for any underwritten offering by holders of Registrable
Securities pursuant to a registration requested under Section 2.1, the Company
will use its best
<PAGE>
8
efforts to enter into an underwriting agreement with such underwriters for such
offering, such agreement to be reasonably satisfactory in substance and form to
each such holder of Registrable Securities and the underwriters and to contain
such representations and warranties by the Company and such other terms as are
generally prevailing in agreements of that type, including, without limitation,
indemnities to the effect and to the extent provided in Section 2.7. The holders
of the Registrable Securities proposed to be sold by such underwriters will
reasonably cooperate with the Company in the negotiation of the underwriting
agreement. Such holders of Registrable Securities to be sold by such
underwriters shall be parties to such underwriting agreement and may, at their
option, require that any or all of the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. No
holder of Registrable Securities shall be required to make any representations
or warranties to, or agreements with, the Company other than representations or
warranties regarding the identity of such holder, such holder's Registrable
Securities and such holder's intended method of distribution or any other
representations required by applicable law.
(b) Incidental Underwritten Offerings. If the Company
proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any
Requesting Holder of Registrable Securities, use its best efforts to arrange for
such underwriters to include all the Registrable Securities to be offered and
sold by such Requesting Holder among the securities of the Company to be
distributed by such underwriters, subject to the provisions of Section 2.2(b).
The holders of Registrable Securities to be distributed by such underwriters
shall be parties to the underwriting agreement between the Company and such
underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. Any such Requesting Holder of Registrable
Securities shall not be required to make any representations or warranties to or
agreements with the Company or the underwriters other than representations or
warranties regarding the identity of such Requesting Holder, such Requesting
Holder's Registrable Securities and such Requesting Holder's intended method of
distribution or any other representations required by applicable law.
(c) Underwriting Discounts and Commission. The
holders of Registrable Securities sold in any offering pursuant to Section
2.4(a) or
<PAGE>
9
Section 2.4(b) shall pay all underwriting discounts and commissions of the
underwriter or underwriters with respect to the Registrable Securities sold
thereby.
2.5 Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, the underwriters, if
any, and their respective counsel the opportunity to participate in the
preparation of such registration statement, each prospectus included therein or
filed with the Commission, and each amendment thereof or supplement thereto, and
will give each of them such reasonable access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such holders' and such underwriters'
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act.
2.6 Limitations, Conditions and Qualifications to Obligations
under Registration Covenants. The Company shall be entitled to postpone for a
reasonable period of time (but not exceeding 90 days) the filing of any
registration statement otherwise required to be prepared and filed by it
pursuant to Section 2.1 if the Company determines, in its good faith judgment,
that such registration and offering would interfere with any material financing,
acquisition, corporate reorganization or other material transaction involving
the Company or any of its affiliates and promptly gives the holders of
Registrable Securities requesting registration thereof pursuant to Section 2.1
written notice of such determination, containing a general statement of the
reasons for such postponement and an approximation of the anticipated delay. If
the Company shall so postpone the filing of a registration statement, holders of
Registrable Securities requesting registration thereof pursuant to Section 2.1,
representing not less than 33-1/3% of the Registrable Securities with respect to
which registration has been requested and constituting not less than 66-2/3% of
the Initiating Holders, shall have the right to withdraw the request for
registration by giving written notice to the Company within 30 days after
receipt of the notice of postponement and, in the event of such withdrawal, such
request shall not be counted for purposes of the requests for registration to
which holders of Registrable Securities are entitled pursuant to Section 2.1
hereof.
2.7 Indemnification.
(a) Indemnification by the Company. The Company will,
and hereby does, indemnify and hold harmless, in the case of any registration
statement filed pursuant to Section 2.1 or 2.2, each seller of any Registrable
Securities covered by such registration statement and each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls such seller or any such underwriter
within the meaning of the Securities Act, and their respective directors,
officers, partners, members, agents and affiliates against any losses, claims,
damages or liabilities, joint or several,
<PAGE>
10
to which such seller or underwriter or any such director, officer, partner,
member, agent, affiliate or controlling person may become subject under the
Securities Act or otherwise, including, without limitation, the fees and
expenses of legal counsel (including those incurred in connection with any claim
for indemnity hereunder), insofar as such losses, claims, damages or liabilities
(or actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading,
and the Company will reimburse such seller or underwriter and each such
director, officer, partner, member, agent, affiliate and controlling Person for
any legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such seller or underwriter, as the case may be, specifically stating that it is
for use in the preparation thereof; and provided, further, that the Company
shall not be liable to any Person who participates as an underwriter in the
offering or sale of Registrable Securities or any other Person, if any, who
controls such underwriter within the meaning of the Securities Act, in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Person's failure to
send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such seller or any such director, officer, partner, member, agent
or controlling person and shall survive the transfer of such securities by such
seller.
(b) Indemnification by the Sellers. As a condition to
including any Registrable Securities in any registration statement, the Company
shall have received an undertaking satisfactory to it from the prospective
seller of such Registrable Securities, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in Section 2.7(a)) the Company,
and each director of the Company, each officer of the Company and each other
Person, if any, who participates as an underwriter in the offering or sale of
such securities and each other Person who controls the Company or any such
underwriter within the meaning of the
<PAGE>
11
Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by such seller specifically stating
that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement; provided, however, that the liability of such indemnifying party
under this Section 2.7(b) shall be limited to the amount of the net proceeds
received by such indemnifying party in the offering giving rise to such
liability. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such securities
by such seller.
(c) Notices of Claims, etc. Promptly after receipt by
an indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in Section 2.7(a) or (b), such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party,
give written notice to the latter of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 2.7, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action shall be brought against any indemnified party and it shall
notify 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 satis factory to
such indemnified party; provided, however, that any indemnified party may, at
its own expense, retain separate counsel to participate in such defense.
Notwithstanding the foregoing, in any action or proceeding in which both the
Company and an indemnified party is, or is reasonably likely to become, a party,
such indemnified party shall have the right to employ separate counsel at the
Company's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such indemnified party, (a) there
are or may be legal defenses available to such indemnified party or to other
indemnified parties that are different from or additional to those available to
the Company or (b) any conflict or potential conflict exists between the Company
and such indemnified party that would make such separate representation
advisable; provided, however, that in no event shall the Company be required to
pay fees and expenses under this Section 2.7 for more than one firm of attorneys
in any jurisdiction in any one legal action or group of related legal actions.
No indemnifying party shall be liable for any settle ment of any action or
proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect
<PAGE>
12
to such claim or litigation or which requires action other than the payment of
money by the indemnifying party.
(d) Contribution. If the indemnification provided for
in this Section 2.7 shall for any reason be held by a court to be unavailable to
an indemnified party under Section 2.7(a) or (b) hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under Section 2.7(a) or (b), the indemnified party
and the indemnifying party under Section 2.7(a) or (b) shall contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same,
including those incurred in connection with any claim for indemnity hereunder),
(i) in such proportion as is appropriate to reflect the relative fault of the
Company and the prospective sellers of Registrable Securities covered by the
registration statement which resulted in such loss, claim, damage or liability,
or action or proceeding in respect thereof, with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action or
proceeding in respect thereof, as well as any other relevant equitable
considerations or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as shall be appropriate to
reflect the relative benefits received by the Company and such prospective
sellers from the offering of the securities covered by such registration
statement; provided, however, that for purposes of this clause (ii), the
relative benefits received by the prospective sellers shall be deemed not to
exceed the amount of proceeds received by such prospective sellers. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation. Such prospective sellers'
obligations to contribute as provided in this Section 2.7(d) are several in
proportion to the relative value of their respective Registrable Securities
covered by such registration statement and not joint. In addition, no Person
shall be obligated to contribute hereunder any amounts in payment for any
settlement of any action or claim effected without such Person's consent, which
consent shall not be unreasonably withheld.
(e) Other Indemnification. Indemnification and
contribution similar to that specified in the preceding subdivisions of this
Section 2.7 (with appropriate modifications) shall be given by the Company and
each seller of Registrable Securities with respect to any required registration
or other qualification of securities under any federal or state law or
regulation of any governmental authority other than the Securities Act.
(f) Indemnification Payments. The indemnification and
contribution required by this Section 2.7 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred.
3. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
<PAGE>
13
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include a reference to the comparable section, if any, of any such similar
Federal statute.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
"Person" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Purchaser Stock" means the number of shares of Common Stock
represented by the sum of the Preferred Stock (assuming the conversion of the
Preferred Stock to Common Stock) and the Common Stock issued pursuant to the
Purchase Agreement (taking into account appropriate adjustments to such number
as a result of any dividend, stock split, merger, consolidation, combination,
reclassification, reorganization or other similar event with respect to the
Preferred Stock or Common Stock).
"Registrable Securities" means any shares of Common Stock issued or
issuable upon conversion of the Preferred Stock, any Related Registrable
Securities and any shares of Common Stock owned by the Purchaser. As to any
particular Registrable Securities, once issued, such securities shall cease to
be Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (b) they shall have been sold as permitted by Rule 144 (or any
successor provision) under the Securities Act and the purchaser thereof does not
receive "restricted securities" as defined in Rule 144, (c) they shall have been
otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent public distribution of them shall not, in the opinion of counsel for
the holders, require registration of them under the Securities Act or (d) they
shall have ceased to be outstanding. All references to percentages of
Registrable Securities shall be calculated pursuant to Section 9.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation, all
registration and filing fees, all fees of any national securities exchange or
automated quotation system, all fees and expenses of complying with securities
or blue sky laws,
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14
all word processing, duplicating and printing expenses, messenger and delivery
expenses, the fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of "cold comfort" letters
required by or incident to such performance and compliance, any fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities (excluding any underwriting discounts or commissions with respect to
the Registrable Securities) and the reasonable fees and expenses of one counsel
to the Selling Holders (selected by Selling Holders representing at least 50% of
the Registrable Securities covered by such registration). Notwithstanding the
foregoing, in the event the Company shall determine, in accordance with Section
2.2(a) or Section 2.6, not to register any securities with respect to which it
had given written notice of its intention to so register to holders of
Registrable Securities, all of the costs of the type (and subject to any
limitation to the extent) set forth in this definition and incurred by
Requesting Holders in connection with such registration on or prior to the date
the Company notifies the Requesting Holders of such determination shall be
deemed Registration Expenses.
"Related Registrable Securities" means with respect any shares of
Preferred Stock (or shares of Common Stock issued or issuable upon conversion of
the Preferred Stock) and Common Stock, any securities of the Company or any
other Person which are issued or issuable in respect of, or in exchange for,
such shares of Preferred Stock or Common Stock by way of a dividend or stock
split or as a result of a merger, consolidation, combination, reclassification,
reorganization or otherwise.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933, as amended, shall include a
reference to the comparable section, if any, of any such similar Federal
statute.
4. Rule 144 and Rule 144A. The Company shall take all actions
reasonably necessary to enable holders of Registrable Securities to sell such
securities without registration under the Securities Act within the limitation
of the provisions of (a) Rule 144 under the Securities Act, as such Rule may be
amended from time to time, (b) Rule 144A under the Securities Act, as such Rule
may be amended from time to time, or (c) any similar rules or regulations
hereafter adopted by the Commission. Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.
5. Amendments and Waivers. This Agreement may be amended with
the consent of the Company and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company shall have obtained the written consent to such amendment,
action or omission to act, of the holder or holders of at least 50% of the
Registrable Securities affected by such amendment, action or omission to act.
Each holder of any
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15
Registrable Securities at the time or thereafter outstanding shall be bound by
any consent authorized by this Section 5, whether or not such Registrable
Securities shall have been marked to indicate such consent.
6. Nominees for Beneficial Owners. In the event that any
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election in writing delivered to the
Company, be treated as the holder of such Registrable Securities for purposes of
any request or other action by any holder or holders of Registrable Securities
pursuant to this Agreement or any determination of any number or percentage of
shares of Registrable Securities held by any holder or holders of Registrable
Securities contemplated by this Agreement. If the beneficial owner of any
Registrable Securities so elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Registrable
Securities.
7. Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier,
courier service or personal delivery:
(a) if to the Purchaser, addressed to it in the
manner set forth in the Purchase Agreement, or at such other address as the
Purchasers shall have furnished to the Company in writing in the manner set
forth herein;
(b) if to any other holder of Registrable Securities,
at the address that such holder shall have furnished to the Company in writing
in the manner set forth herein, or, until any such other holder so furnishes to
the Company an address, then to and at the address of the last holder of such
Registrable Securities who has furnished an address to the Company; or
(c) if to the Company, addressed to it in the manner
set forth in the Purchase Agreement, or at such other address as the Company
shall have furnished to each holder of Registrable Securities at the time
outstanding in the manner set forth herein.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when delivered to a
courier, if delivered by overnight courier service; five Business Days after
being deposited in the mail, postage prepaid, if mailed; and when receipt is
acknowledged, if telecopied.
8. Assignment. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and, with respect to
the Company, its respective successors and permitted assigns and, with respect
to the Purchasers, any holder of any Registrable Securities, subject to the
provisions respecting the minimum numbers of percentages of shares of
Registrable Securities
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16
required in order to be entitled to certain rights, or take certain actions,
contained herein. Except by operation of law, this Agreement may not be assigned
by the Company without the prior written consent of the holders of a majority in
interest of the Registrable Securities outstanding at the time such consent is
requested.
9. Calculation of Percentage Interests in Registrable
Securities. For purposes of this Agreement, all references to a percentage of
the Registrable Securities shall be calculated based upon the number of shares
of Registrable Securities outstanding at the time such calculation is made,
assuming the conversion of all the outstanding Preferred Stock.
10. No Inconsistent Agreements. The Company will not hereafter
enter into any agreement with respect to its securities that is inconsistent
with the rights granted to the holders of Registrable Securities in this
Agreement. Without limiting the generality of the foregoing, the Company will
not hereafter enter into any agreement with respect to its securities that
grants, or modifies any existing agreement with respect to its securities to
grant, to the holder of its securities in connection with an incidental
registration of such securities higher priority to the rights granted to the
Purchaser under Section 2.2(b).
11. Remedies. Each holder of Registrable Securities, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
12. Certain Distributions. The Company shall not at any time
make a distribution on or with respect to the Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the resulting or surviving corporation and such Registrable
Securities are not changed or exchanged) of securities of another issuer if
holders of Registrable Securities are entitled to receive such securities in
such distribution as holders of Registrable Securities and any of the securities
so distributed are registered under the Securities Act, unless the securities to
be distributed to the holders of Registrable Securities are also registered
under the Securities Act.
13. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the
Purchasers shall be enforceable to the fullest extent permitted by law.
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17
14. Entire Agreement. This Agreement, together with the
Purchase Agreement (including the exhibits and schedules thereto), is intended
by the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement and the
Purchase Agreement (including the exhibits and schedules thereto) supersede all
prior agreements and understandings between the parties with respect to such
subject matter.
15. Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
17. Counterparts. This Agreement may be executed in multiple
counterparts, each of which when so executed shall be deemed an original and all
of which taken together shall constitute one and the same instrument.
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18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective representatives hereunto duly
authorized as of the date first above written.
VAALCO ENERGY, INC.
By:/s/ Robert L. Gerry III
-----------------------
Name: Robert L Gerry III
Title: Chief Executive Officer
THE 1818 FUND II, L.P.
By: Brown Brothers Harriman & Co.
General Partner
By:/s/ T. Michael Long
-------------------
Name: T. Michael Long
Partner
VAALCO ENERGY, INC.
CERTIFICATE OF DESIGNATION
OF CONVERTIBLE PREFERRED STOCK,
SERIES A SETTING FORTH THE POWERS,
PREFERENCES, RIGHTS, QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS OF
SUCH PREFERRED STOCK
Pursuant to Section 151 of the Delaware General Corporation Law,
VAALCO ENERGY, INC., a Delaware corporation (the "Corporation"), DOES HEREBY
CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors of the Corporation by the Certificate of Incorporation of the
Corporation (the "Charter"), the Board of Directors of the Corporation on
February 9, 1998 duly adopted the following resolution creating a series of
Preferred Stock designated as Convertible Preferred Stock, Series A and such
resolution has not been modified and is in full force and effect on the date
hereof:
RESOLVED that, pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of the Charter, a
series of authorized Preferred Stock, par value $25.00 per share, of the
Corporation are hereby created and that the designation and number of shares
thereof and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series of Preferred Stock, and
the qualifications, limitations and restrictions thereof are as follows:
Section 1. DESIGNATION AND NUMBER.
(a) The shares of such series of Preferred Stock shall be
designated as "Convertible Preferred Stock, Series A" ("Preferred Stock"). The
number of shares initially constituting the Preferred Stock shall be 10,000,
which number may be decreased (but not increased) by the Board of Directors
without a vote of stockholders; PROVIDED, HOWEVER, that such number may not be
decreased below the number of then outstanding shares of such series of
Preferred Stock.
(b) The Preferred Stock shall, with respect to rights on
liquidation, dissolution or winding up, rank prior to all other classes and
series of Junior Stock of the Corporation now or hereafter authorized including,
without limitation, the Common Stock.
(c) Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in Section 9 below.
Section 2. DIVIDENDS AND DISTRIBUTIONS. In the event that the Corporation shall
declare a cash dividend or make any other distribution (including, without
limitation, in capital stock (which shall include, without limitation, any
options, warrants or other rights to acquire capital stock) of the Corporation,
whether or not pursuant to a shareholder rights plan, "poison pill" or similar
arrangement, or other property or assets) to holders of Common Stock, then the
Board of Directors shall declare, and the holder of each share of Preferred
Stock shall be entitled to receive, a dividend or distribution in an amount
equal
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to the amount of such dividend or distribution received by a holder of the
number of shares of Common Stock for which such share of Preferred Stock is
convertible on the record date for such dividend or distribution. Any such
amount shall be paid to the holders of shares of Preferred Stock at the same
time such dividend or distribution is made to holders of Common Stock.
The holders of shares of Preferred Stock shall not be entitled to
receive any dividends or other distributions except as provided herein.
Section 3. VOTING RIGHTS.
In addition to any voting rights provided by law, the holders of
shares of Preferred Stock shall have the following voting rights:
(a) Except as otherwise required by applicable law and so long as
the Preferred Stock is outstanding, each share of Preferred Stock shall entitle
the holder thereof to vote, in person or by proxy or written consent, at a
special or annual meeting of stockholders or in connection with any stockholder
action taken in lieu of a meeting of stockholders, on all matters voted on by
holders of Common Stock, including the election of directors, voting together as
a single class with all other shares entitled to vote thereon. With respect to
any such vote, each share of Preferred Stock shall entitle the holder thereof to
cast that number of votes per share as is equal to the number of votes that such
holder would be entitled to cast had such holder converted his shares of
Preferred Stock into Common Stock on the record date for determining the
stockholders of the Corporation eligible to vote on any such matters.
(b) Unless the consent or approval of a greater number of shares
shall then be required by law, the affirmative vote of the holders of at least
66-2/3% of the outstanding shares of Preferred Stock, voting separately as a
single class, in person or by proxy, at a special or annual meeting of
stockholders called for the purpose, shall be necessary to (i) authorize, adopt
or approve an amendment to the Charter that would increase or decrease the par
value of the shares of Preferred Stock, or alter or change the powers,
preferences or special rights of the shares of Preferred Stock, (ii) amend,
alter or repeal the Charter so as to affect the shares of Preferred Stock
adversely, including, without limitation, by granting any voting right to any
holder of notes, bonds, debentures or other debt obligations of the Corporation,
or (iii) authorize, increase the authorized number of shares of, or issue
(including on conversion or exchange of any convertible or exchangeable
securities or by reclassification) any additional shares of Preferred Stock.
(c) The holders of shares of Preferred Stock shall have, in
addition to the other voting rights set forth herein, the exclusive right,
voting separately as a single class, to elect three directors of the
Corporation, by written consent as provided herein, or at a special meeting of
such holders called as provided herein, one of which director shall be elected
to each of the corporation's three classes if the Corporation has a classified
Board of Directors. Such directors shall continue as directors (subject to
reelection or removal as provided in Section 3(d)(ii)) and the holders of
Preferred Stock shall have such class voting rights until such time as the
number of outstanding shares of Preferred Stock represent (after giving effect
to any adjustments) on a fully-diluted basis less than 5% of the total number of
shares of Common Stock outstanding, at which time such additional director shall
cease to be a director and such additional voting rights of the holders of
Preferred Stock shall terminate subject to revesting in the event of each and
every subsequent event of the character indicated above.
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(d) (i) The foregoing right of holders of shares of Preferred
Stock to take any action as provided in Section 3(c) may be exercised at any
annual meeting of stockholders or at a special meeting of holders of shares of
Preferred Stock held for such purpose as hereinafter provided or at any
adjournment thereof, or by the written consent, delivered to the Secretary of
the Corporation, of the holders of the minimum number of shares required to take
such action.
So long as such right to vote continues (and unless such right
has been exercised by written consent of the minimum number of shares required
to take such action), the Chief Executive Officer or President of the
Corporation may call, and upon the written request of holders of record of at
least 5% of the outstanding shares of Preferred Stock, addressed to the
Secretary of the Corporation at the principal office of the Corporation, shall
call, a special meeting of the holders of shares entitled to vote as provided
herein. Such meeting shall be held within 30 days after delivery of such request
to the Secretary, at the place and upon the notice provided by law and in the
by-laws of the Corporation for the holding of meetings of stockholders.
(ii) At each meeting of stockholders at which the holders
of shares of Preferred Stock shall have the right, voting separately as a single
class, to elect three directors of the Corporation as provided in Section 3(c)
or to take any action, the presence in person or by proxy of the holders of
record of one-third of the total number of shares of Preferred Stock then
outstanding and entitled to vote on the matter shall be necessary and sufficient
to constitute a quorum. At any such meeting or at any adjournment thereof:
(A) the absence of a quorum of the holders of shares of
Preferred Stock shall not prevent the election of directors other
than those to be elected by the holders of shares of Preferred
Stock, and the absence of a quorum of the holders of shares of
any other class or series of capital stock shall not prevent the
election of directors to be elected by the holders of shares of
Preferred Stock, or the taking of any action as provided in this
Section 3: and
(B) in the absence of a quorum of the holders of shares of
Preferred Stock, a majority of the holders of such shares present
in person or by proxy shall have the power to adjourn the meeting
as to the actions to be taken by the holders of shares of
Preferred Stock from time to time and place to place without
notice other than announcement at the meeting until a quorum
shall be present.
For taking of any action as provided in Section 3(b) or Section
3(c) by the holders of shares of Preferred Stock, each such holder shall have
one vote for each share of such stock standing in his or her name on the
transfer books of the Corporation as of any record date fixed for such purpose
or, if no such date be fixed, at the close of business on the Business Day next
preceding the day on which notice is given, or if notice is waived, at the close
of business on the Business Day next preceding the day on which the meeting is
held; provided, however, that shares of Preferred Stock held by the Corporation
or any Affiliate of the Corporation shall not be deemed to be outstanding for
purposes of taking any action as provided in this Section 3.
Each director elected by the holders of shares of Preferred Stock
as provided in Section 3(c) shall, unless his or her term shall expire earlier
in accordance with the
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<PAGE>
provisions thereof, hold office until the annual meeting of stockholders at
which directors of the class stand for election or until his or her successor,
if any, is elected and qualified.
If any director so elected by the holders of Preferred Stock
shall cease to serve as a director before his or her term shall expire (except
by reason of the termination of the voting rights accorded to the holders of
Preferred Stock in accordance with Section 3(c)), the holders of the Preferred
Stock then outstanding and entitled to vote for such director may, by written
consent as provided herein, or at a special meeting of such holders called as
provided herein, elect a successor to hold office for the unexpired term of the
director whose place shall be vacant.
Any director elected by the holders of shares of Preferred Stock
voting separately as a single class may be removed from office with or without
cause by the vote or written consent of the holders of at least a majority of
the outstanding shares of Preferred Stock, at the time of removal. A special
meeting of the holders of shares of Preferred Stock may be called in accordance
with the procedures set forth in Section 3(d)(i).
Section 4. REDEMPTION. The Corporation shall not have any right to redeem any
shares of Preferred Stock.
Section 5. REACQUIRED SHARES.
Any shares of Preferred Stock converted, exchanged, redeemed,
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares of Preferred Stock shall upon their cancellation become authorized but
unissued shares of preferred stock, par value $25.00 per share, of the
Corporation and, upon the filing of an appropriate Certificate of Designation
with the Secretary of State of the State of Delaware, may be reissued as part of
another series of preferred stock, par value $25.00 per share, of the
Corporation subject to the conditions or restrictions on issuance set forth
herein, but in any event may not be reissued as shares of Preferred Stock or
other Parity Stock unless all of the shares of Preferred Stock issued on the
Issue Date shall have already been redeemed, converted or exchanged.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) If the Corporation shall commence a voluntary case under the
United States bankruptcy laws or any applicable bankruptcy, insolvency or
similar law of any other country, or consent to the entry of an order for relief
in an involuntary case under any such law or to the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the Corporation or of any substantial part of its property, or make
an assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due (any such event, a
"Voluntary Liquidation Event"), or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the United States bankruptcy laws or any applicable
bankruptcy, insolvency or similar law of any other country, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and on account of any
such event the Corporation shall liquidate, dissolve or wind up, or if the
Corporation shall otherwise liquidate, dissolve or wind up, no distribution
shall be made (i) to the holders of
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shares of Junior Stock unless, prior thereto, the holders of shares of Preferred
Stock shall have received the Liquidation Preference.
(b) Neither the consolidation or merger of the Corporation with
or into any other Person nor the sale or other distribution to another Person of
all or substantially all the assets, property or business of the Corporation
shall be deemed to be a liquidation, dissolution or winding up of the
Corporation for purposes of this Section 6.
Section 7. CONVERSION.
(a) Any holder of Preferred Stock shall have the right, at its
option, at any time and from time to time, to convert, subject to the terms and
provisions of this Section 7, any or all of such holder's shares of Preferred
Stock into such number of fully paid and non-assessable shares of Common Stock
as is equal, subject to Section 7(g), to the product of the number of shares of
Preferred Stock being so converted multiplied by the quotient of (i) the
Purchase Price divided by (ii) the Conversion Price (as defined below) then in
effect. The Conversion Price shall be $1.00, subject to adjustment as set forth
in Section 7(d). Such conversion right shall be exercised by the surrender of
the shares to be converted to the Corporation at any time during usual business
hours at its principal place of business to be maintained by it, accompanied by
written notice that the holder elects to convert such shares and specifying the
name or names (with address) in which a certificate or certificates for shares
of Common Stock are to be issued and (if so required by the Corporation) by a
written instrument or instruments of transfer in form reasonably satisfactory to
the Corporation duly executed by the holder or its duly authorized legal
representative and transfer tax stamps or funds therefor, if required pursuant
to Section 7(j). All shares of Preferred Stock surrendered for conversion shall
be delivered to the Corporation for cancellation and cancelled by it and no
shares of Preferred Stock shall be issued in lieu thereof.
(b) As promptly as practicable after the surrender, as herein
provided, of any shares of Preferred Stock for conversion pursuant to Section
7(a), the Corporation shall deliver to or upon the written order of the holder
of such shares so surrendered a certificate or certificates representing the
number of fully paid and non-assessable shares of Common Stock into which such
shares of Preferred Stock may be or have been converted in accordance with the
provisions of this Section 7. Subject to the following provisions of this
paragraph and of Section 7(d), such conversion shall be deemed to have been made
immediately prior to the close of business on the date that such shares of
Preferred Stock shall have been surrendered in satisfactory form for conversion,
and the Person or Persons entitled to receive the Common Stock deliverable upon
conversion of such shares of Preferred Stock shall be treated for all purposes
as having become the record holder or holders of such Common Stock at such
appropriate time, and such conversion shall be at the Conversion Price in effect
at such time; PROVIDED, HOWEVER, that no surrender shall be effective to
constitute the Person or Persons entitled to receive the Common Stock
deliverable upon such conversion as the record holder or holders of such Common
Stock while the share transfer books of the Corporation shall be closed (but not
for any period in excess of five days), but such surrender shall be effective to
constitute the Person or Persons entitled to receive such Common Stock as the
record holder or holders thereof for all purposes immediately prior to the close
of business on the next succeeding day on which such share transfer books are
open, and such conversion shall be deemed to have been made at, and shall be
made at the Conversion Price in effect at, such time on such next succeeding
day.
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(c) To the extent permitted by law, when shares of Preferred
Stock are converted, all dividends declared and unpaid on the Preferred Stock so
converted to the date of conversion shall be immediately due and payable and
must accompany the shares of Common Stock issued upon such conversion.
(d) The Conversion Price shall be subject to adjustment as
follows:
(i) In case the Corporation shall at any time or from time to
time (A) pay a dividend or make a distribution (other than a dividend or
distribution paid or made to holders of shares of Preferred Stock in the
manner provided in Section 2) on the outstanding shares of Common Stock
in capital stock (which, for purposes of this Section 7(d) shall
include, without limitation, any dividends or distributions in the form
of options, warrants or other rights to acquire capital stock) of the
Corporation, (B) subdivide the outstanding shares of Common Stock into a
larger number of shares, (C) combine the outstanding shares of Common
Stock into a smaller number of shares, or (D) issue any shares of its
capital stock in a reclassification of the Common Stock then, and in
each such case, the Conversion Price in effect immediately prior to such
event shall be adjusted (and any other appropriate actions shall be
taken by the Corporation) so that the holder of any share of Preferred
Stock thereafter surrendered for conversion shall be entitled to receive
the number of shares of Common Stock or other securities of the
Corporation that such holder would have owned or would have been
entitled to receive upon or by reason of any of the events described
above, had such share of Preferred Stock been converted immediately
prior to the occurrence of such event. An adjustment made pursuant to
this Section 7(d)(i) shall become effective retroactively (A) in the
case of any such dividend or distribution, to a date immediately
following the close of business on the record date for the determination
of holders of Common Stock entitled to receive such dividend or
distribution or (B) in the case of any such subdivision, combination or
reclassification, to the close of business on the day upon which such
corporate action becomes effective.
(ii) In case the Corporation shall at any time or from time to
time issue shares of Common Stock (or securities convertible into or
exchangeable for Common Stock, or any options, warrants or other rights
to acquire shares of Common Stock) for a consideration per share less
than the Current Market Price per share of Common Stock then in effect
at the record date or issuance date, as the case may be (the "Date"),
referred to in the following sentence (treating the price per share of
any security convertible or exchangeable or exercisable into Common
Stock as equal to (A) the sum of the price for such security
convertible, exchangeable or exercisable into Common Stock plus any
additional consideration payable (without regard to any anti-dilution
adjustments) upon the conversion, exchange or exercise of such security
into Common Stock divided by (B) the number of shares of Common Stock
initially underlying such convertible, exchangeable or exercisable
security), then, and in each such case, the Conversion Price then in
effect shall be adjusted by dividing the Conversion Price in effect on
the day immediately prior to the Date by a fraction (x) the numerator of
which shall be the sum of the number of shares of Common Stock
outstanding on the Date plus the number of additional shares of Common
Stock issued or to
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be issued (or the maximum number into which such convertible or
exchangeable securities initially may convert or exchange or for which
such options, warrants or other rights initially may be exercised) and
(y) the denominator of which shall be the sum of the number of shares of
Common Stock outstanding on the Date plus the number of shares of Common
Stock which the aggregate consideration for the total number of such
additional shares of Common Stock so issued or would be issued upon the
conversion, exchange or exercise of such convertible or exchangeable
securities or options, warrants or other rights (plus the aggregate
amount of any additional consideration initially payable upon such
conversion, exchange or exercise of such security) would purchase at the
Current Market Price per share of Common Stock on the Date. Such
adjustment shall be made whenever such shares, securities, options,
warrants or other rights are issued, and shall become effective
retroactively to a date immediately following the close of business (i)
in the case of issuance to stockholders of the Corporation, as such, on
the record date for the determination of stockholders entitled to
receive such shares, securities, options, warrants or other rights and
(ii) in all other cases, on the date ("issuance date") of such issuance;
PROVIDED that: (A) the determination as to whether an adjustment is
required to be made pursuant to this Section 7(d)(ii) shall be made upon
the issuance of such shares or such convertible or exchangeable
securities, options, warrants or other rights; (B) if any convertible or
exchangeable securities, options, warrants or other rights (or any
portions thereof) which shall have given rise to an adjustment pursuant
to this Section 7(d)(ii) shall have expired or terminated without the
exercise thereof and/or if by reason of the terms of such convertible or
exchangeable securities, options, warrants or other rights there shall
have been an increase or increases, with the passage of time or
otherwise, in the price payable upon the exercise or conversion thereof,
then the Conversion Price hereunder shall be readjusted (but to no
greater extent than originally adjusted) on the basis of (x) eliminating
from the computation any additional shares of Common Stock corresponding
to such convertible or exchangeable securities, options, warrants or
other rights as shall have expired or terminated, (y) treating the
additional shares of Common Stock, if any, actually issued or issuable
pursuant to the previous exercise of such convertible or exchangeable
securities, options, warrants or other rights as having been issued for
the consideration actually received and receivable therefor and (z)
treating any of such convertible or exchangeable securities, options,
warrants or other rights which remain outstanding as being subject to
exercise or conversion on the basis of such exercise or conversion price
as shall be in effect at this time; and (C) no adjustment in the
Conversion Price shall be made pursuant to this Section 7(d)(ii) as a
result of any issuance of securities by the Corporation in respect of
which an adjustment to the Conversion Price is made pursuant to Section
7(d)(i).
(iii) In the case the Corporation, at any time or from time to
time, shall take any action affecting its Common Stock similar to or
having an effect similar to any of the actions described in any of
Section 7(d)(i) and Section 7(d)(ii), or Section 7(h) (but not including
any action described in any such Section) and the Board of Directors of
the Corporation in good faith determines that it would be equitable in
the circumstances to adjust the Conversion Price as a result of such
action, then, and in each such case, the
7
<PAGE>
Conversion Price shall be adjusted in such manner and at such time as
the Board of Directors of the Corporation in good faith determines would
be equitable in the circumstances (such determination to be evidenced in
a resolution, a certified copy of which shall be mailed to the holders
of the Preferred Stock).
(iv) Notwithstanding anything herein to the contrary, no
adjustment under this Section 7(d) need be made to the Conversion Price
unless such adjustment would require an increase or decrease of at least
1% of the Conversion Price then in effect. Any lesser adjustment shall
be carried forward and shall be made at the time of and together with
the next subsequent adjustment, which, together with any adjustment or
adjustments so carried forward, shall amount to an increase or decrease
of at least 1% of such Conversion Price. Any adjustment to the
Conversion Price carried forward and not theretofore made shall be made
immediately prior to the conversion of any shares of Preferred Stock
pursuant hereto.
(v) Notwithstanding anything herein to the contrary, no
adjustment under this Section 7(d) shall be made upon the grant of
options to employees or directors of the Corporation pursuant to benefit
plans approved by the Board of Directors of the Corporation or upon the
issuance of shares of Common Stock upon exercise of such options if the
exercise price thereof was not less than the Market Price of the Common
Stock on the date such options were granted.
(e) If the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Conversion Price then in
effect shall be required by reason of the taking of such record.
(f) Upon any increase or decrease in the Conversion Price, then,
and in each such case, the Corporation promptly shall deliver to each registered
holder of Preferred Stock at least 10 Business Days prior to effecting any of
the foregoing transactions a certificate, signed by the President or a
Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Corporation, setting forth in reasonable detail
the event requiring the adjustment and the method by which such adjustment was
calculated and specifying the increased or decreased Conversion Price then in
effect following such adjustment.
(g) No fractional shares or scrip representing fractional shares
shall be issued upon the conversion of any shares of Preferred Stock. If more
than one share of Preferred Stock shall be surrendered for conversion at one
time by the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate Purchase
Price of the shares of Preferred Stock so surrendered. If the conversion of any
share or shares of Preferred Stock results in a fraction, an amount equal to
such fraction multiplied by the Current Market Price of the Common Stock on the
Business Day preceding the day of conversion shall be paid to such holder in
cash by the Corporation.
(h) In case of any capital reorganization or reclassification or
other change of outstanding shares of Common Stock (other than a change in par
value, or from par value to no par value, or from
8
<PAGE>
no par value to par value), or in case of any consolidation or merger of the
Corporation with or into another Person (other than a consolidation or merger in
which the Corporation is the resulting or surviving Person and which does not
result in any reclassification or change of outstanding Common Stock), or in
case of any sale or other disposition to another Person of all or substantially
all of the assets of the Corporation (any of the foregoing, a "Transaction"),
the Corporation, or such successor or purchasing Person, as the case may be,
shall execute and deliver to each holder of Preferred Stock at least 10 Business
Days prior to effecting any of the foregoing Transactions a certificate that the
holder of each share of Preferred Stock then outstanding shall have the right
thereafter to convert such share of Preferred Stock into the kind and amount of
shares of stock or other securities (of the Corporation or another issuer) or
property or cash receivable upon such Transaction by a holder of the number of
shares of Common Stock into which such share of Preferred Stock could have been
converted immediately prior to such Transaction. Such certificate shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 7. If, in the case of any such
Transaction, the stock, other securities, cash or property receivable thereupon
by a holder of Common Stock includes shares of stock or other securities of a
Person other than the successor or purchasing Person and other than the
Corporation, which controls or is controlled by the successor or purchasing
Person or which, in connection with such Transaction, issues stock, securities,
other property or cash to holders of Common Stock, then such certificate also
shall be executed by such Person, and such Person shall, in such certificate,
specifically acknowledge the obligations of such successor or purchasing Person
and acknowledge its obligations to issue such stock, securities, other property
or cash to the holders of Preferred Stock upon conversion of the shares of
Preferred Stock as provided above. The provisions of this Section 7(h) and any
equivalent thereof in any such certificate similarly shall apply to successive
Transactions.
(i) The Corporation shall at all times reserve and keep available
for issuance upon the conversion of the Preferred Stock, such number of its
authorized but unissued shares of Common Stock as will from time to time be
sufficient to permit the conversion of all outstanding shares of Preferred
Stock, and shall take all action required to increase the authorized number of
shares of Common Stock if at any time there shall be insufficient authorized but
unissued shares of Common Stock to permit such reservation or to permit the
conversion of all outstanding shares of Preferred Stock.
(j) The issuance or delivery of certificates for Common Stock
upon the conversion of shares of Preferred Stock shall be made without charge to
the converting holder of shares of Preferred Stock for such certificates or for
any tax in respect of the issuance or delivery of such certificates or the
securities represented thereby, and such certificates shall be issued or
delivered in the respective names of, or (subject to compliance with the
applicable provisions of federal and state securities laws) in such names as may
be directed by, the holders of the shares of Preferred Stock converted;
PROVIDED, HOWEVER, that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate in a name other than that of the holder of the
shares of Preferred Stock converted, and the Corporation shall not be required
to issue or deliver such certificate unless or until the Person or Persons
requesting the issuance or delivery thereof shall have paid to the Corporation
the amount of such tax or shall have established to the reasonable satisfaction
of the Corporation that such tax has been paid.
9
<PAGE>
Section 8. CERTAIN REMEDIES.
Any registered holder of Preferred Stock shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Certificate of Designation and to enforce specifically the terms and provisions
of this Certificate of Designation in any court of the United States or any
state thereof having jurisdiction, this being in addition to any other remedy to
which such holder may be entitled at law or in equity.
Section 9. DEFINITIONS.
For the purposes of this Certificate of Designation of Preferred
Stock, the following terms shall have the meanings indicated:
"Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act; PROVIDED that
"Affiliate" shall not include the Purchaser or any Affiliate of the Purchaser.
"Business Day" shall mean any day other than a Saturday, Sunday
or other day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.
"Common Stock" shall mean and include the Common Stock, par value
$0.10 per share, of the Corporation and each other class of capital stock of the
Corporation that does not have a preference over any other class of capital
stock of the Corporation as to dividends or upon liquidation, dissolution or
winding up of the Corporation and, in each case, shall include any other class
of capital stock of the Corporation into which such stock is reclassified or
reconstituted.
"Current Market Price" per share shall mean, on any date
specified herein for the determination thereof, (a) the average daily Market
Price of the Common Stock for those days during the period of 20 days, ending on
such date, which are Trading Days, and (b) if the Common Stock is not then
listed or admitted to trading on any national securities exchange or quoted in
the over-the-counter market, the Market Price on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Securities and Exchange Commission
thereunder.
"Issue Date" shall mean the first date on which shares of
Preferred Stock are issued.
"Junior Stock" shall mean any capital stock of the Corporation
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Preferred Stock including, without limitation, the Common
Stock.
"Liquidation Preference" with respect to a share of Preferred
Stock shall mean $10.00.
"Market Price" shall mean, per share of Common Stock on any date
specified herein: (a) the closing price per share of the Common Stock on such
date published in the Wall Street Journal or, if no such closing price on such
date is published in the Wall Street Journal, the average of the closing bid and
asked prices on such date, as
10
<PAGE>
officially reported on the principal national securities exchange on which the
Common Stock is then listed or admitted to trading; or (b) if the Common Stock
is not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the NASD, the last
trading price of the Common Stock on such date; or (c) if there shall have been
no trading on such date or if the Common Stock is not so designated, the average
of the reported closing bid and asked prices of the Common Stock on such date as
shown by NASDAQ and reported by any member firm of the New York Stock Exchange,
Inc. selected by the Corporation. If none of (a), (b) or (c) is applicable,
Market Price shall mean a market price per share determined at the Corporation's
expense by an appraiser chosen by the holders of a majority of the shares of
Preferred Stock or, if no such appraiser is so chosen more than twenty business
days after notice of the necessity of such calculation shall have been delivered
by the Corporation to the holders of Preferred Stock, then by an appraiser
chosen by the Corporation.
"NASD" shall mean the National Association of Securities Dealers
Inc.
"NASDAQ" shall mean the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotations System.
"Parity Stock" shall mean any capital stock of the corporation
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Preferred Stock.
"Person" shall mean any individual, firm, corporation,
partnership, trust, incorporated or unincorporated association, limited
liability company, joint venture, joint stock company, government (or an agency
or political subdivision thereof) or other entity of any kind, and shall include
any successor (by merger) of such entity.
"Purchase Price" means $2,750 per share of Preferred Stock.
"Purchaser" shall mean The 1818 Fund II, L.P., a Delaware limited
partnership.
"Senior Stock" shall mean any capital stock of the Corporation
ranking senior (either as to dividends or upon liquidation, dissolution or
winding up) to the Preferred Stock.
"Subsidiary" shall mean, with respect to any Person, a
corporation or other entity of which 50% or more of the voting power of the
voting equity securities or equity interest is owned, directly or indirectly, by
such Person.
"Trading Day" shall mean a day on which the national securities
exchanges are open for trading.
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<PAGE>
IN WITNESS WHEREOF, VAALCO ENERGY, INC. has caused this
Certificate to be duly executed in its corporate name on this ____ day
of __________, 1998.
VAALCO ENERGY, INC.
By
Name:
Title:
ATTEST:
By
Name:
Title:
12
VAALCO ENERGY, INC.
4600 Post Oak Place, Suite 309
Houston, Texas 770027
April 21, 1998
The 1818 Fund II, L.P.
c/o Brown Brothers Harriman & Co.
59 Wall Street
New York, NY 10005
Robert L. Gerry
W. Russell Scheirman
c/o Vaalco Energy, Inc.
4600 Post Office Place, Suite 309
Houston, Texas 77027
Gentlemen:
Reference is made to (i) the Stock Acquisition Agreement and Plan of
Reorganization, dated as of February 17, 1998 and amended as of April 21, 1998
(the "Stock Acquisition Agreement"), among Vaalco Energy, Inc., a Delaware
corporation ("Vaalco"), The 1818 Fund II, L.P., a Delaware limited partnership
(the "Fund"), and 1818 Oil Corp., a Delaware corporation ("1818 Oil"), and (ii)
the Private Placement Memorandum dated April 15, 1998 of Vaalco (the "PPM").
Vaalco hereby agrees that it shall, as soon as practicable after the
date hereof, take all action necessary to amend the Certificate of Incorporation
of Vaalco (including, without limitation, causing a special meeting of the
stockholders of Vaalco to be called or circulating a written consent and mailing
an information statement to stockholders in connection with any stockholder
action taken by written consent) so that Vaalco will have reserved and available
for issuance such number of authorized but unissued shares of Common Stock, par
value $.10 per share (the "Common Stock"), of Vaalco as would be sufficient to
permit the conversion of all outstanding (i) shares of Preferred Stock, par
value $25.00 per share (the "Preferred Stock"), of Vaalco and (ii) options,
warrants or similar rights with respect to shares of Common Stock (collectively,
the "Options"), and each of the undersigned agrees to vote all of their shares
of Common Stock and Preferred Stock in favor of such amendment.
Notwithstanding anything to the contrary contained in the Certificate
of Designation of the Preferred Stock or in any plan or agreement pursuant to
which any Options were issued (collectively, the "Option Agreements'), each of
the undersigned
<PAGE>
2
hereby understands and agrees that, upon the consummation of the transactions
contemplated by the Stock Acquisition Agreement and the PPM, Vaalco will not
have reserved and available for issuance such number of authorized but unissued
shares of Common Stock as would be sufficient to permit the conversion of all
outstanding Options and shares of Preferred Stock and each of the undersigned
hereby waives any breach by Vaalco of the terms of the Preferred Stock or any
Option Agreement in connection therewith.
In furtherance of the foregoing, each person listed below agrees not to
convert the number of Options or shares of Preferred Stock set forth opposite
their name until such time as Vaalco has reserved and available for issuance
such number of authorized but unissued shares of Common Stock as would be
sufficient to permit the conversion of all outstanding Options and shares of
Preferred Stock:
Shares of
Preferred Stock Options
--------------- -------
The 1818 Fund II, L.P. 364
Robert L. Gerry 500,000
W. Russell Scheirman 500,000
Vaalco shall notify each of the undersigned at such time as Vaalco has
reserved and available for issuance such number of authorized but unissued
shares of Common Stock as would be sufficient to permit the conversion of all
outstanding Options and shares of Preferred Stock.
<PAGE>
3
This letter agreement may be executed in counterparts, each of which
will be deemed an original but all of which together will constitute one and the
same instrument.
VAALCO ENERGY, INC.
By:/s/ Robert L. Gerry III
-----------------------
Name: Robert L. Gerry III
Title: Chief Executive Officer
Accepted and Agreed to,
as of this 21 day of April, 1998
THE 1818 FUND II, L.P.
By: Brown Brothers Harriman & Co.,
its general partner
By:/s/ T. Michael Long
-------------------
Name: T. Michael Long
Title: Partner
/s/ Robert L. Gerry III
- -----------------------
Robert L. Gerry III
/s/ W. Russell Scheirman
- ------------------------
W. Russell Scheirman
