<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(D)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
BURLINGTON RESOURCES COAL SEAM GAS ROYALTY TRUST
(NAME OF SUBJECT COMPANY)
SAN JUAN PARTNERS, L.L.C. ANDOVER GROUP, INC.
ENCAP ENERGY CAPITAL FUND III, L.P. CHARLES T. MCCORD III
ENCAP ENERGY ACQUISITION III-B, INC. O'SULLIVAN OIL & GAS COMPANY, INC.
ECIC CORPORATION CHRISTOPHER P. SCULLY
BOCP ENERGY PARTNERS, L.P. SCOTT W. SMITH FUNDING, L.L.C.
FIRST UNION INVESTORS, INC. JOHN V. WHITING
(BIDDERS)
UNITS OF BENEFICIAL INTEREST
(TITLE OF CLASS OF SECURITIES)
122016 10 8
(CUSIP NUMBER OF CLASS OF SECURITIES)
C. N. O'SULLIVAN
910 TRAVIS STREET
SUITE 2150
HOUSTON, TEXAS 77002
(713) 759-2030
WITH A COPY TO:
BRIAN D. BARNARD
HAYNES AND BOONE, LLP
201 MAIN STREET
SUITE 2200
FORT WORTH, TEXAS 76132
(817) 347-6600
(NAME, ADDRESSES AND TELEPHONE NUMBERS OF PERSONS AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
CALCULATION OF FILING FEE
================================================================================
TRANSACTION VALUATION AMOUNT OF FILING FEE
================================================================================
$44,936,595(1) $8,987.32
================================================================================
(1) For purposes of calculating fee only. The amount assumes the purchase of
5,446,860 Units of Beneficial Interest of the Trust at $8.25 per Unit. The
amount of the filing fee calculated in accordance with Rule 0-11 of the
Securities Exchange Act of 1934, as amended, equals 1/50 of 1% of the
transaction valuation.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: Not Applicable
Form or Registration No.: Not Applicable
Filing Party: Not Applicable
Date Filed: Not Applicable
================================================================================
<PAGE> 2
SCHEDULE 14D-1 AND SCHEDULE 13D
CUSIP NO. 122016 10 8 PAGE 2 OF 19 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
San Juan Partners, L.L.C.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
AF, BK
- --------------------------------------------------------------------------------
5 [ ] CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(e) or 2(f)
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Texas
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
449,140 UNITS
- --------------------------------------------------------------------------------
8 [ ] CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES.
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
5.1%
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON*
OO
- --------------------------------------------------------------------------------
*Based on the assumptions stated by virtue of Rule 13d-3(d)
<PAGE> 3
SCHEDULE 14D-1 AND SCHEDULE 13D
CUSIP NO. 122016 10 8 PAGE 3 OF 19 PAGES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
ENCAP ENERGY CAPITAL FUND III, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- --------------------------------------------------------------------------------
5 [ ] CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f)
[ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Texas
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
449,140 UNITS
- --------------------------------------------------------------------------------
8 [ ] CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES.
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
5.1%
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
*Based on the assumptions stated by virtue of Rule 13d-3(d)
<PAGE> 4
SCHEDULE 14D-1 AND SCHEDULE 13D
CUSIP NO. 122016 10 8 PAGE 4 OF 19 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
ENCAP ENERGY ACQUISITION III-B, INC.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- --------------------------------------------------------------------------------
5 [ ] CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f).
[ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Texas
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
449,140 UNITS
- --------------------------------------------------------------------------------
8 [ ] CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES.
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
5.1%
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*Based on the assumptions stated by virtue of Rule 13d-3(d)
<PAGE> 5
SCHEDULE 14D-1 AND SCHEDULE 13D
CUSIP NO. 122016 10 8 PAGE 5 OF 19 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
ECIC CORPORATION
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- --------------------------------------------------------------------------------
5 [ ] CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f).
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Texas
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
449,140 UNITS
- --------------------------------------------------------------------------------
8 [ ] CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES.
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
5.1%
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*Based on the assumptions stated by virtue of Rule 13d-3(d)
<PAGE> 6
SCHEDULE 14D-1 AND SCHEDULE 13D
CUSIP NO. 122016 10 8 PAGE 6 OF 19 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
BOCP ENERGY PARTNERS, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- --------------------------------------------------------------------------------
5 [ ] CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f).
[ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Texas
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
449,140 UNITS
- --------------------------------------------------------------------------------
8 [ ] CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES.
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
5.1%
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
*Based on the assumptions stated by virtue of Rule 13d-3(d)
<PAGE> 7
SCHEDULE 14D-1 AND SCHEDULE 13D
CUSIP NO. 122016 10 8 PAGE 7 OF 19 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
FIRST UNION INVESTORS, INC.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- --------------------------------------------------------------------------------
5 [ ] CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f).
[ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
North Carolina
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
449,140 UNITS
- --------------------------------------------------------------------------------
8 [ ] CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES.
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
5.1%
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*Based on the assumptions stated by virtue of Rule 13d-3(d)
<PAGE> 8
SCHEDULE 14D-1 AND SCHEDULE 13D
CUSIP NO. 122016 10 8 PAGE 8 OF 19 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
ANDOVER GROUP, INC.
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- --------------------------------------------------------------------------------
5 [ ] CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f). [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Texas
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
449,140 UNITS
- --------------------------------------------------------------------------------
8 [ ] CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES.
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
5.1%
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*Based on the assumptions stated by virtue of Rule 13d-3(d)
<PAGE> 9
SCHEDULE 14D-1 AND SCHEDULE 13D
CUSIP NO. 122016 10 8 PAGE 9 OF 19 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
CHARLES T. MCCORD III
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
PF
- --------------------------------------------------------------------------------
5 [ ] CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f). [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
449,140 UNITS
- --------------------------------------------------------------------------------
8 [ ] CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES.
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
5.1%
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*Based on the assumptions stated by virtue of Rule 13d-3(d)
<PAGE> 10
SCHEDULE 14D-1 AND SCHEDULE 13D
CUSIP NO. 122016 10 8 PAGE 10 OF 19 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
O'Sullivan Oil & Gas Company, INC.
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- --------------------------------------------------------------------------------
5 [ ] CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f).
[ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
TEXAS
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
449,140 UNITS
- --------------------------------------------------------------------------------
8 [ ] CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES.
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
5.1%
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*Based on the assumptions stated by virtue of Rule 13d-3(d)
<PAGE> 11
SCHEDULE 14D-1 AND SCHEDULE 13D
CUSIP NO. 122016 10 8 PAGE 11 OF 19 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
CHRISTOPHER P. SCULLY
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [X]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
PF
- --------------------------------------------------------------------------------
5 [ ] CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f).
[ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
449,140 UNITS
- --------------------------------------------------------------------------------
8 [ ] CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES.
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
5.1%
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*Based on the assumptions stated by virtue of Rule 13d-3(d)
<PAGE> 12
SCHEDULE 14D-1 AND SCHEDULE 13D
CUSIP NO. 122016 10 8 PAGE 12 OF 19 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Scott W. Smith Funding, L.L.C.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- --------------------------------------------------------------------------------
5 [ ] CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f).
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Texas
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
449,140 UNITS
- --------------------------------------------------------------------------------
8 [ ] CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES.
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7).
5.1%
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON*
OO
- --------------------------------------------------------------------------------
*Based on the assumptions stated by virtue of Rule 13d-3(d)
<PAGE> 13
SCHEDULE 14D-1 AND SCHEDULE 13D
CUSIP NO. 122016 10 8 PAGE 013 OF 19 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
JOHN V. WHITING
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
PF
- --------------------------------------------------------------------------------
5 [ ] CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f).
[ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
449,140 UNITS
- --------------------------------------------------------------------------------
8 [ ] CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES.
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7).
5.1%
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*Based on the assumptions stated by virtue of Rule 13d-3(d)
<PAGE> 14
This Tender Offer Statement on Schedule 14D-1 relates to the tender offer
by San Juan Partners, L.L.C., a Texas limited liability company (the
"Purchaser"), and EnCap Energy Capital Fund III, L.P., a Texas limited
partnership ("EnCap Energy"), EnCap Energy Acquisition III-B, Inc., a Texas
corporation ("EnCap B"), ECIC Corporation, a Texas corporation ("ECIC"), BOCP
Energy Partners, L.P., a Texas limited partnership ("BOCP"), First Union
Investors, Inc. a North Carolina corporation ("First Union Investors"), Andover
Group, Inc., a Texas corporation ("Andover"), Charles T. McCord III, O'Sullivan
Oil & Gas Company, Inc., a Texas corporation ("O'Sullivan Oil"), Christopher P.
Scully, Scott W. Smith Funding, L.L.C., a Texas limited liability company
("Smith Funding"), and John V. Whiting (EnCap Energy, EnCap B, ECIC, BOCP, First
Union Investors, Andover, McCord, O'Sullivan Oil, Scully, Smith Funding and
Whiting are collectively referred to herein as "Parents") to purchase 5,446,860
Units of Beneficial Interest (the "Units") of Burlington Resources Coal Seam Gas
Royalty Trust, a Delaware business trust (the "Trust"), at $8.25 per Unit, net
to the seller in cash, without interest thereon, upon the terms and subject to
the conditions set forth in the Offer to Purchase dated January 20, 1998 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which together
constitute the "Offer"). This Schedule 14D-1 also constitutes the Statement on
Schedule 13D of the Purchaser and Parents with respect to Units of the Trust.
The item numbers and responses thereto below are in accordance with the
requirements of Schedule 14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY
(a) The name of the subject company is Burlington Resources Coal
Seam Gas Royalty Trust, a Delaware business trust (the "Trust"). The principal
executive offices of the Trust are located at the offices of NationsBank of
Texas, N.A., 901 Main Street, Suite 1700, Dallas, Texas 75202.
(b) The class of securities to which this Statement relates is the
Units of Beneficial Interest of the Trust. The information set forth under
"INTRODUCTION" of the Offer to Purchase is incorporated herein by reference.
(c) The information set forth under "THE TENDER OFFER -- 8. Price
Range of Units; Cash Distributions" of the Offer to Purchase is incorporated
herein by reference.
ITEM 2. IDENTITY AND BACKGROUND
(a) - (d) and (g) This Statement is being filed by the Purchaser and
Parents. The information set forth under "THE TENDER OFFER -- 7. Certain
Information Concerning the Purchaser" and Schedule I of the Offer to Purchase is
incorporated herein by reference.
(e) During the last five years, neither Purchaser, Parents nor,
to the best knowledge of Parents and the Purchaser, any of the persons listed in
Schedule I of the Offer to Purchase has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors). The information set
forth under "THE TENDER OFFER -- 7. Certain Information Concerning the
Purchaser" of the Offer to Purchase is incorporated herein by reference.
(f) During the last five years, neither Purchaser, Parents nor,
to the best knowledge of Parents and the Purchaser, any of the persons listed in
Schedule I of the Offer to Purchase was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws. The information set forth
under "THE TENDER OFFER -- 7. Certain Information Concerning the Purchaser" of
the Offer to Purchase is incorporated herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS
(a) and (b) The information set forth under "THE TENDER OFFER --
7. Certain Information Concerning the Purchaser"; "THE TENDER OFFER -- 11.
Background of the Offer; Past Contacts, Transactions or Negotiations with the
Trust" and "THE TENDER OFFER -- 16. Certain Transactions" of the Offer to
Purchase is incorporated herein by reference.
<PAGE> 15
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a) and (b) The information set forth under "THE TENDER OFFER --
10. Financing of the Offer; Plans for the Trust" of the Offer to Purchase is
incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER
(a) - (g) The information set forth under "INTRODUCTION"; "THE TENDER
OFFER -- 12. Purpose and Structure of the Offer" and "THE TENDER OFFER -- 13.
Effect of the Offer on the Market for Units; NYSE Listing and Exchange Act
Registration; Margin Regulations" of the Offer to Purchase is incorporated
herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
(a) As of the date of this Schedule 14D-1 and Schedule 13D, the
Purchaser beneficially owned 449,140 Units consisting of approximately 5.1% of
currently outstanding Units (the percentage of Units being based upon 8,800,000
Units outstanding as of October 31, 1997, as set forth in the Trust's Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 1997).
Pursuant to the Amended and Restated Limited Liability Company
Regulations of the Purchaser, a copy of which is attached hereto as Exhibit (b)
of this Schedule 13D and Schedule 14D-1 and incorporated herein by reference,
the Parents have shared voting and dispositive power over the 449,140 Units
owned by the Purchaser.
The information set forth under "INTRODUCTION"; "THE TENDER OFFER -- 7.
Certain Information Concerning the Purchaser"; "THE TENDER OFFER -- 10.
Financing of the Offer" and Schedule II of the Offer to Purchase is incorporated
herein by reference.
(b) The information set forth under "INTRODUCTION"; "THE TENDER
OFFER -- 7. Certain Information Concerning the Purchaser"; "THE TENDER OFFER --
10. Financing of the Offer" and in Schedule II of the Offer to Purchase is
incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES
The information set forth under "INTRODUCTION"; "THE TENDER OFFER -- 7.
Certain Information Concerning the Purchaser"; "THE TENDER OFFER -- 10.
Financing of the Offer"; "THE TENDER OFFER -- 12. Purpose and Structure of the
Offer; Plans for the Trust" and Schedule II of the Offer to Purchase and the
information set forth in Exhibits (b), (c)(1) and (c)(2) of this Schedule 13D
and Schedule 14D-1 is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The information set forth under "INTRODUCTION" and "THE TENDER OFFER --
18. Fees and Other Expenses" of the Offer to Purchase is incorporated herein by
reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
(a) Not applicable.
(b) and (c) The information set forth under "THE TENDER OFFER --
17. Certain Legal Matters" of the Offer to Purchase is incorporated herein by
reference.
<PAGE> 16
(d) The information set forth under "THE TENDER OFFER -- 13. Effect of
the Offer on the Market for Units; NYSE Listing and Exchange Act Registration;
Margin Regulations" of the Offer to Purchase is incorporated herein by
reference.
(e) Not applicable
(f) The information set forth in the Offer to Purchase and the related
Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1)
and (a)(2), respectively, is incorporated herein by reference in its entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
(a)(1) -- Offer to Purchase, dated January 20, 1998.
(a)(2) -- Letter of Transmittal.
(a)(3) -- Notice of Guaranteed Delivery.
(a)(4) -- Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(5) -- Letter to Clients for Use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(6) -- Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) -- Form of Press Release, issued January 20, 1998.
(a)(8) -- Summary Advertisement, dated January 20, 1998.
(b) -- Credit Agreement between Bank One, Texas, N.A. and San Juan
Partners, L.L.C., dated January 15, 1998.
(c)(1) -- Amended and Restated Limited Liability Company Regulations
of San Juan Partners, L.L.C., a Texas Limited Liability
Company, dated January 15, 1998.
(c)(2) -- Credit Agreement between Bank One, Texas, N.A. and San Juan
Partners, L.L.C., dated January 15, 1998, is attached hereto
as Exhibit (b).
(d) -- None.
(e) -- Not applicable.
(f) -- Not applicable.
<PAGE> 17
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Date: January 19, 1998 SAN JUAN PARTNERS, L.L.C.
------------------------------
By: /s/ C. N. O'SULLIVAN
-----------------------------------
Name: C. N. O'Sullivan
Title: President - O'Sullivan Oil &
Gas Company, Manager
ENCAP ENERGY CAPITAL FUND III, L.P.
By: /s/ ROBERT L. ZORICH
-----------------------------------
Name: Robert L. Zorich
Title: Managing Director
ENCAP ENERGY ACQUISITION III-B, INC.
By: /s/ ROBERT L. ZORICH
-----------------------------------
Name: Robert L. Zorich
Title: Managing Director
ECIC CORPORATION
By: /s/ ROBERT L. ZORICH
-----------------------------------
Name: Robert L. Zorich
Title: Managing Director
BOCP ENERGY PARTNERS, L.P.
By: /s/ ROBERT L. ZORICH
-----------------------------------
Name: Robert L. Zorich
Title: Managing Director
FIRST UNION INVESTORS, INC.
By: /s/ TED A. GARDNER
-----------------------------------
Name: Ted A. Gardner
Title: Senior Vice President
<PAGE> 18
ANDOVER GROUP, INC.
By: /s/ A. JOHN KNAPP, JR.
-----------------------------------
Name: A. John Knapp, Jr.
Title: President
/s/ CHARLES T. McCORD III
--------------------------------------
Charles T. McCord III
O'SULLIVAN OIL & GAS COMPANY, INC.
By:/s/ C. N. O'SULLIVAN
-----------------------------------
Name: C. N. O'Sullivan
Title: President
/s/ CHRISTOPHER P. SCULLY
--------------------------------------
Christopher P. Scully
SCOTT W. SMITH FUNDING, L.L.C.
By: /s/ SCOTT W. SMITH
-----------------------------------
Name: Scott W. Smith
Title: Manager
/s/ JOHN V. WHITING
--------------------------------------
John V. Whiting
<PAGE> 19
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER EXHIBIT NAME
- ------- ------------
(a)(1) -- Offer to Purchase, dated January 20, 1998.
(a)(2) -- Letter of Transmittal.
(a)(3) -- Notice of Guaranteed Delivery.
(a)(4) -- Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(5) -- Letter to Clients for Use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(6) -- Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) -- Form of Press Release, issued January 20, 1998.
(a)(8) -- Summary Advertisement, dated January 20, 1998.
(b) -- Credit Agreement between Bank One, Texas, N.A. and San Juan
Partners, L.L.C., dated January 15, 1998.
(c)(1) -- Amended and Restated Limited Liability Company Regulations
of San Juan Partners, L.L.C., a Texas Limited Liability
Company, dated January 15, 1998.
(c)(2) -- Credit Agreement between Bank One, Texas, N.A. and San Juan
Partners, L.L.C., dated January 15, 1998, is attached
hereto as Exhibit (b).
(d) -- None.
(e) -- Not applicable.
(f) -- Not applicable.
<PAGE> 1
================================================================================
Offer to Purchase for Cash
5,446,860 Units of Beneficial Interest
of
Burlington Resources
Coal Seam Gas Royalty Trust
at
$8.25 Net Per Unit
by
San Juan Partners, L.L.C.
---------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, FEBRUARY 17, 1998, UNLESS EXTENDED.
---------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED
AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER 5,446,860 UNITS OF
BENEFICIAL INTEREST OF BURLINGTON RESOURCES COAL SEAM GAS ROYALTY TRUST, OR SUCH
GREATER OR LESSER NUMBER OF UNITS THAT, TOGETHER WITH THE UNITS OWNED BY SAN
JUAN PARTNERS, L.L.C., WOULD CONSTITUTE 67% OF THE OUTSTANDING UNITS AS OF THE
DATE THE UNITS ARE ACCEPTED FOR PAYMENT BY SAN JUAN PARTNERS, L.L.C. PURSUANT TO
THE OFFER (THE "MINIMUM NUMBER"). THE OFFER IS ALSO SUBJECT TO THE OTHER TERMS
AND CONDITIONS THAT ARE CONTAINED IN THIS OFFER TO PURCHASE. SEE "THE TENDER
OFFER -- 14. CERTAIN CONDITIONS OF THE OFFER."
---------------------
EACH UNIT HOLDER SHOULD MAKE HIS OR HER OWN DETERMINATION AS TO WHETHER TO
TENDER UNITS PURSUANT TO THE OFFER. HOLDERS OF UNITS ARE URGED TO READ THIS
OFFER TO PURCHASE CAREFULLY BEFORE MAKING ANY DECISION WITH REGARD TO THE OFFER.
---------------------
IMPORTANT
Any Unit holder desiring to tender all or any portion of his or her Units
should either (1) complete and sign the Letter of Transmittal or a facsimile
copy thereof in accordance with the instructions in the Letter of Transmittal,
have such Unit holder's signature thereon guaranteed if required by Instruction
1 to the Letter of Transmittal, mail or deliver the Letter of Transmittal (or
facsimile thereof), or, in the case of a book-entry transfer effected pursuant
to the procedure set forth in "THE TENDER OFFER -- 2. Procedures for Tendering
Units," an Agent's Message (as defined herein), and any other required documents
to the Depositary and either deliver the certificates for such Units to the
Depositary along with the Letter of Transmittal (or facsimile thereof) or
deliver such Units pursuant to the procedure for book-entry transfer set forth
in "THE TENDER OFFER -- 2. Procedures for Tendering Units," or (2) request his
or her broker, dealer, commercial bank, trust company or other nominee to effect
the transaction for him or her. A Unit holder having Units registered in the
name of a broker, dealer, commercial bank, trust company or other nominee must
contact such broker, dealer, commercial bank, trust company or other nominee if
he or she desires to tender such Units.
A Unit holder who desires to tender Units and whose certificates for such
Units are not immediately available, or who cannot comply with the procedures
for book-entry transfer on a timely basis, may tender such Units by following
the procedure for guaranteed delivery set forth in "THE TENDER
OFFER -- 2. Procedures for Tendering Units."
Requests for assistance or for additional copies of the Offer to Purchase,
the Letter of Transmittal or the Notice of Guaranteed Delivery may be directed
to the Information Agent or the Dealer Manager at their respective addresses and
telephone numbers set forth on the back cover of this Offer to Purchase. A Unit
holder may also contact brokers, dealers, commercial banks or trust companies
for assistance concerning the Offer.
---------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
---------------------
The Dealer Manager for the Offer is:
JEFFERIES & COMPANY, INC.
January 20, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
INTRODUCTION....................................................... 1
THE TENDER OFFER................................................... 2
1. Terms of Offer.............................................. 2
2. Procedures for Tendering Units.............................. 4
3. Withdrawal Rights........................................... 6
4. Acceptance for Payment and Payment for Units................ 7
5. Certain Federal Income Tax Consequences..................... 8
6. Certain Information Concerning the Trust.................... 9
7. Certain Information Concerning the Purchaser................ 10
8. Price Range of Units; Cash Distributions.................... 13
9. Distributions............................................... 14
10. Financing of the Offer...................................... 14
11. Background of the Offer; Past Contacts, Transactions or
Negotiations with the Trust................................. 18
12. Purpose and Structure of the Offer; Plans for the Trust..... 19
13. Effect of the Offer on the Market for Units; NYSE Listing
and Exchange Act Registration; Margin Regulations........... 20
14. Certain Conditions of the Offer............................. 22
15. Appraisal Rights............................................ 23
16. Certain Transactions........................................ 23
17. Certain Legal Matters....................................... 23
18. Fees and Other Expenses..................................... 24
19. Miscellaneous............................................... 25
</TABLE>
<PAGE> 3
TO THE OWNERS OF UNITS OF BENEFICIAL INTEREST OF
BURLINGTON RESOURCES COAL SEAM GAS ROYALTY TRUST:
INTRODUCTION
San Juan Partners, L.L.C., a Texas limited liability company (the
"Purchaser"), hereby offers to purchase 5,446,860 Units of Beneficial Interest
("Units") of Burlington Resources Coal Seam Gas Royalty Trust (the "Trust"), at
a price of $8.25 per Unit, net to the seller in cash, without interest (the
"Purchase Price"), upon the terms and subject to the conditions set forth in
this Offer to Purchase and in the related Letter of Transmittal (which together
constitute the "Offer"). According to the Trust's Quarterly Report on Form 10-Q
for its fiscal quarter ended September 30, 1997 (the "Trust 10-Q"), as of
October 31, 1997, there were 8,800,000 Units outstanding, of which 449,140 Units
(approximately 5.1%) are currently owned by the Purchaser. Tendering Unit
holders will not be obligated to pay brokerage fees or commissions or, except as
set forth in the Letter of Transmittal, stock transfer taxes on the purchase of
the Units by the Purchaser pursuant to the Offer. The Purchaser will pay all
charges and expenses of Jefferies & Company, Inc., as the Dealer Manager (the
"Dealer Manager"), The Bank of New York, as the Depositary (the "Depositary"),
and Morrow & Co., Inc., as the Information Agent (the "Information Agent"),
incurred in connection with the Offer. See "THE TENDER OFFER -- 18. Fees and
Other Expenses."
The members of the Purchaser are EnCap Energy Capital Fund III, L.P., a
Texas limited partnership ("EnCap Energy"), EnCap Energy Acquisition III-B,
Inc., a Texas corporation ("EnCap B"), ECIC Corporation, a Texas corporation
("ECIC"), BOCP Energy Partners, L.P., a Texas limited partnership ("BOCP"),
First Union Investors, Inc., a North Carolina corporation ("First Union
Investors"), Andover Group, Inc., a Texas corporation ("Andover"), Charles T.
McCord III, O'Sullivan Oil & Gas Company, Inc., a Texas corporation ("O'Sullivan
Oil"), Christopher P. Scully, Scott W. Smith Funding, L.L.C., a Texas limited
liability company, and John V. Whiting. EnCap Energy, EnCap B, ECIC and BOCP are
sometimes collectively referred to herein as the "EnCap Group." Andover, McCord,
O'Sullivan Oil, Scully, Smith Funding and Whiting are sometimes collectively
referred to herein as the "O'Sullivan Group." The EnCap Group, First Union
Investors and the O'Sullivan Group have approximately a 55.1%, 24.9% and 20.0%
respective interest in the Purchaser. EnCap Investments L.C. ("EnCap") is the
general partner of EnCap Energy and EnCap Energy Capital Fund III-B, L.P. The
sole shareholder of EnCap B is EnCap Energy Capital Fund III-B, L.P. Energy
Capital Investment Company PLC, a company incorporated in England and Wales
under the Companies Act 1985 and registered under number 2867571 ("Energy
Capital"), is the sole shareholder of ECIC. Banc One Capital Partners VIII, Ltd.
is the general partner of BOCP. First Union Investors is a wholly-owned
subsidiary of First Union Corporation, a North Carolina corporation. C. N.
O'Sullivan is the sole shareholder of O'Sullivan Oil. The members of Smith
Funding are Scott W. Smith, A. John Knapp, Jr., R. Randall Grace, Locke
Investments, L.P., R. Allen Schubert, Christopher L. Knapp and Breckinridge L.
Knapp. The Purchaser, the EnCap Group, First Union Investors and the O'Sullivan
Group are sometimes collectively referred to herein as the "Acquirors."
The purpose of the Offer is to acquire, together with Units already owned
by the Purchaser, 67% of the outstanding Units as the first step in effecting
the termination of the Trust, at which time the assets of the Trust would be
liquidated and sold as then required by the terms of the Trust Agreement, among
Meridian Oil Production Inc., Burlington Resources Inc., Mellon Bank (DE)
National Association and NationsBank of Texas, N.A., dated May 1, 1993 (the
"Trust Agreement"), and the eventual distribution to the Unit holders of the
proceeds from the sale of the assets of the Trust. Pursuant to the Trust
Agreement, the affirmative vote by the holders of not less than 66 2/3% of all
of the Units outstanding shall be required to terminate the Trust. See "THE
TENDER OFFER -- 12. Purpose and Structure of the Offer; Plans for the Trust."
Consummation of the Offer is conditioned upon there being validly tendered
and not withdrawn prior to the expiration of the Offer at least the Minimum
Number of Units (the "Minimum Condition"). Purchaser reserves the right (subject
to the applicable rules and regulations of the Securities and Exchange
Commission (the "Commission")), which it currently has no intention of
exercising, to waive or reduce the Minimum Condition and to elect to purchase,
pursuant to the Offer, fewer than the Minimum Number of Units. See
<PAGE> 4
"THE TENDER OFFER -- 1. Terms of Offer" and "THE TENDER OFFER -- 14. Certain
Conditions of the Offer."
The Purchaser has filed a Schedule 14D-1 and Schedule 13D with the
Commission in connection with the Offer (the "Purchaser Schedule 14D-1"). The
Purchaser Schedule 14D-1 contains additional information, including exhibits,
relating to the Offer and the Purchaser and may be inspected and copies of such
document may be obtained at the same places and in the same manner as set forth
in "THE TENDER OFFER -- 6. Certain Information Concerning the Trust."
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
TO THE KNOWLEDGE OF THE PURCHASER, AS OF THE DATE OF THIS OFFER TO
PURCHASE, THE TRUSTEE (AS DEFINED BELOW) HAS MADE NO RECOMMENDATION WITH RESPECT
TO THE OFFER.
Holders of record of Units on the record date for any regular quarterly
cash distribution declared by the Trust prior to the transfer to the Purchaser
on the Trust's transfer records of the Units purchased pursuant to the Offer
will be entitled to receive and retain any such regular quarterly cash
distribution. See "THE TENDER OFFER -- 8. Price Range of Units; Cash
Distributions."
THE TENDER OFFER
1. TERMS OF OFFER. Upon the terms and subject to the conditions of the
Offer (including, if the Offer is extended or amended, the terms and conditions
of any such extension or amendment), the Purchaser will accept and purchase the
Minimum Number of Units that are validly tendered on or prior to the Expiration
Date (as hereinafter defined) and not withdrawn in accordance with "THE TENDER
OFFER -- 3. Withdrawal Rights." The term "Expiration Date" means 12:00 midnight,
New York City time, on Tuesday, February 17, 1998, unless and until the
Purchaser, in its sole discretion, shall have extended the period of time for
which the Offer is open, in which event the term "Expiration Date" shall mean
the latest time and date on which the Offer, as so extended by the Purchaser,
shall expire.
Proration. If more than the Minimum Number of Units is validly tendered in
accordance with the procedures specified in "THE TENDER OFFER -- 2. Procedures
for Tendering Units" and not properly withdrawn in accordance with the
procedures specified in "THE TENDER OFFER -- 3. Withdrawal Rights," the
Purchaser will, upon the terms and subject to the conditions of the Offer, take
into account the number of Units so tendered, accept for payment and pay for the
Minimum Number of Units, pro rata, according to the number of Units validly
tendered by each Unit holder and not properly withdrawn on or prior to the
Expiration Date, with appropriate adjustments to avoid purchases of fractional
Units.
Because of the difficulty of determining the precise number of Units
validly tendered and not withdrawn, if proration of the tendered Units is
required, Purchaser does not expect to be able to announce the final results of
the proration until at least approximately seven business days after the
Expiration Date. The Purchaser does not intend to pay for any Units accepted for
payment pursuant to the Offer until the final proration or other adjustment
results are known.
Satisfaction of Certain Conditions. The Offer is subject to certain
conditions, including, among other things, satisfaction of the Minimum
Condition. See "THE TENDER OFFER -- 14. Certain Conditions of the Offer." If the
Minimum Condition is not satisfied, or if any or all of the other events set
forth in "THE TENDER OFFER -- 14. Certain Conditions of the Offer" shall have
occurred, prior to the Expiration Date, the Purchaser reserves the right (but
shall not be obligated) in its sole discretion to (i) decline to purchase any of
the Units tendered in the Offer, terminate the Offer and return all tendered
Units to the tendering Unit holders, (ii) waive or reduce the Minimum Condition,
or waive or amend any or all other conditions to the Offer to the extent
permitted by applicable law and, subject to complying with applicable rules and
regulations of the Commission, purchase all Units validly tendered, (iii) extend
the Offer and, subject to the right of the
2
<PAGE> 5
Unit holders to withdraw Units until the Expiration Date, retain the Units that
have been tendered during the period or periods for which the Offer is extended
or (iv) amend the Offer.
Modification of Minimum Number or Consideration. The Purchaser also
reserves the right (but shall not be obligated) to accept for payment more than
the Minimum Number of Units pursuant to the Offer. The Purchaser has no present
intention of exercising such right. If, prior to the Expiration Date, the
Purchaser should decide to increase or decrease the number of Units being sought
or to increase or decrease the consideration being offered in the Offer, subject
to any requirement to extend the period of time during which the Offer is open,
such increase or decrease in the number of Units being sought or such increase
or decrease in the consideration being offered will be applicable to all Unit
holders whose Units are accepted for payment pursuant to the Offer.
Right to Extend or Amend Offer. The Purchaser expressly reserves the right,
in its sole discretion, at any time or from time to time and regardless of
whether or not any of the events set forth in "THE TENDER OFFER -- 14. Certain
Conditions of the Offer" shall have occurred or shall have been determined by
the Purchaser to have occurred, (i) to extend the period of time during which
the Offer is open and thereby delay acceptance for payment of, and the payment
for, all Units validly tendered by giving oral or written notice of such
extension to the Depositary and (ii) to amend the Offer in any respect, by
giving oral or written notice of such extension or amendment to the Depositary.
The rights reserved by the Purchaser in this paragraph are in addition to the
Purchaser's rights to terminate the Offer pursuant to "THE TENDER OFFER -- 14.
Certain Conditions of the Offer." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID
ON THE PURCHASE PRICE FOR TENDERED UNITS, WHETHER OR NOT THE PURCHASER EXERCISES
ITS RIGHTS TO EXTEND THE OFFER.
Result of Material Modification. If the Purchaser makes a material change
in the terms of the Offer or in the information concerning the Offer or waives a
material condition of the Offer, the Purchaser will disseminate additional
tender offer materials and extend the Offer to the extent required by Rules
14d-4(c) and 14d-6(d) promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The minimum period during which an offer must
remain open following material changes in the terms of the Offer or information
concerning the Offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances, including the
relative materiality of the terms or information changed. With respect to a
change in price or a change in percentage of securities sought, if at the time
notice of such increase or decrease in the number of Units being sought or such
increase or decrease in the consideration being offered is first published, sent
or given to holders of such Units, the Offer is scheduled to expire at any time
earlier than the period ending on the tenth business day from and including the
date that such notice is first so published, sent or given, the Offer will be
extended at least until the expiration of such ten business day period. For
purposes of the Offer, a "business day" means any day other than a Saturday,
Sunday or federal holiday and consists of the time period from 12:01 a.m.
through 12:00 midnight, New York City time.
Announcements. Any extension, amendment or termination will be followed as
promptly as practicable by public announcement thereof, the announcement in the
case of an extension to be issued no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date in
accordance with the public announcement requirements of Rule 14d-4(c)
promulgated under the Exchange Act. Without limiting the obligation of the
Purchaser under such rule or the manner in which the Purchaser may choose to
make any public announcement, the Purchaser currently intends to make
announcements by issuing a release to the Dow Jones News Service.
Delay of Payments. If the Purchaser extends the Offer, or if the Purchaser
(whether before or after its acceptance for payment of Units) is delayed in its
purchase of or payment for Units or is unable to pay for Units pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer, the Depositary may retain tendered Units on behalf of the Purchaser,
and such Units may not be withdrawn except to the extent tendering Unit holders
are entitled to withdrawal rights as described in "THE TENDER OFFER -- 3.
Withdrawal Rights." However, the ability of the Purchaser to delay the payment
for Units that the Purchaser has accepted for payment is limited by Rule
14e-1(c) under the Exchange Act, which requires
3
<PAGE> 6
that a bidder pay the consideration offered or return the securities deposited
by or on behalf of the holders of securities promptly after the termination or
withdrawal of such bidder's offer.
Request for Unit Holder List. A request has been made to NationsBank of
Texas, N.A. (the "Trustee") for the use of the Trust's Unit holder list and
security position listings for the purpose of disseminating the Offer to holders
of Units. Once the Trust has provided such list and listings or otherwise
complied with such request, this Offer to Purchase and the Letter of Transmittal
and other relevant materials will be mailed to record holders of Units and will
be furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the Unit holder
list or, if applicable, who are listed as participants in a clearing agency's
security position listing for subsequent transmittal to beneficial owners of
Units by the Purchaser.
2. PROCEDURES FOR TENDERING UNITS.
Valid Tender of Units. Except as set forth below, for Units to be validly
tendered pursuant to the Offer, a Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, together with any required signature
guarantees, or an Agent's Message in connection with a book-entry delivery of
Units, and any other documents required by the Letter of Transmittal must be
received by the Depositary at one of its addresses set forth on the back cover
page of this Offer to Purchase on or prior to the Expiration Date. In addition,
either (i) certificates for Units representing tendered Units must be received
by the Depositary along with the Letter of Transmittal, or such Units must be
tendered pursuant to the procedure for book-entry transfer described below and a
Book-Entry Confirmation (as defined below) must be received by the Depositary,
in each case prior to the Expiration Date, or (ii) the tendering Unit holder
must comply with the guaranteed delivery procedures set forth below.
Book-Entry Transfer. The Depositary will make a request to establish an
account with respect to the Units at The Depository Trust Company (the
"Book-Entry Transfer Facility") for purposes of the Offer within two business
days after the date of this Offer to Purchase, and any financial institution
which is a participant in the Book-Entry Transfer Facility's system may make
book-entry delivery of Units by causing the Book-Entry Transfer Facility to
transfer such units into the Depositary's account at the Book-Entry Transfer
Facility in accordance with its procedures for transfer. However, although
delivery of Units may be effected through book-entry transfer at the Book-Entry
Transfer Facility, the Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, or an Agent's Message in connection with a
book-entry transfer, and any other required documents must, in any case, be
transmitted to and received by the Depositary at one of its addresses set forth
on the back cover page of this Offer to Purchase prior to the Expiration Date,
or the guaranteed delivery procedures described below must be complied with.
Delivery of documents to the Book-Entry Transfer Facility in accordance
with its procedures does not constitute delivery to the Depositary. None of the
Purchaser, the Purchaser's affiliates or assigns, the Depositary, the Dealer
Manager, the Information Agent or any other person will assume any
responsibility for, or will be under any duty to give notification of, the
failure by the Book-Entry Transfer Facility to forward documents to the
Depositary.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm that is a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the Securities
Transfer Agent's Medallion Program ("STAMP"), the Stock Exchange Medallion
Program ("SEMP") or the New York Stock Exchange, Inc. Medallion Signature
Program ("MSP") (each, an "Eligible Institution"), unless the Units tendered
thereby are tendered (i) by a registered holder of Units who has not completed
either the box labeled "Special Delivery Instructions" or the box labeled
"Special Payment Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. See Instruction 1 of the Letter of
Transmittal.
If the certificates for Units are registered in the same name of a person
other than the signer of the Letter of Transmittal, or if payment is to be made
to, or certificates for unpurchased Units are to be issued or returned to, a
person other than the registered owner, then the tendered certificates must be
endorsed or accompanied by appropriate transfer powers, in either case signed
exactly as the name or names of the
4
<PAGE> 7
registered owner or owners appear on the certificates, with the signatures on
the certificates or transfer powers guaranteed by an Eligible Institution as
described above. See Instructions 1 and 5 of the Letter of Transmittal.
Guaranteed Delivery. If a Unit holder desires to tender Units pursuant to
the Offer and certificates for such Units are not immediately available, or time
will not permit all required documents to reach the Depositary on or prior to
the Expiration Date, or the procedures for book-entry transfer cannot be
completed on a timely basis, such Units may nevertheless be tendered if all of
the following guaranteed delivery procedures are duly complied with:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser herewith, is
received by the Depositary, as provided below, on or prior to the
Expiration Date; and
(iii) the certificates (or a Book-Entry Confirmation) representing all
tendered Units, in proper form for transfer, together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof),
with any required signature guarantees (or, in the case of a book-entry
transfer, an Agent's Message) and any other documents required by the
Letter of Transmittal, are received by the Depositary within three New York
Stock Exchange ("NYSE") trading days after the date of the execution of
such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mailed to the Depositary and must include
a guarantee by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery.
THE METHOD OF DELIVERY OF UNITS, THE LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING UNIT HOLDER. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED.
Notwithstanding any other provision hereof, payment for the Units accepted
for payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of certificates for, or of Book-Entry Confirmation
with respect to, such Units, a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), together with any signature guarantees (or,
in the case of a book-entry transfer, an Agent's Message) and any other
documents required by the Letter of Transmittal. Accordingly, payment might not
be made to all tendering Unit holders at the same time and will depend upon when
Units are received into the Depositary's account at the Book-Entry Transfer
Facility.
Backup Federal Tax Withholding. Under the federal income tax laws, the
Depositary will be required to withhold 31% of the amount of any payments made
to certain Unit holders pursuant to the Offer. TO PREVENT BACKUP FEDERAL INCOME
TAX WITHHOLDING WITH RESPECT TO PAYMENT OF THE PURCHASE PRICE OF UNITS SOLD
PURSUANT TO THE OFFER, A TENDERING UNIT HOLDER MUST PROVIDE THE DEPOSITARY WITH
HIS OR HER CORRECT TAXPAYER IDENTIFICATION NUMBER OR CERTIFY THAT HE OR SHE IS
NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE
SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL.
Appointment as Proxy. By executing a Letter of Transmittal as set forth
above, a tendering Unit holder irrevocably appoints designees of the Purchaser
as his attorneys-in-fact and proxies, in the manner set forth in the Letter of
Transmittal, each with full power of substitution, to the full extent of such
Unit holder's rights with respect to the Units tendered by the Unit holder and
accepted for payment by the Purchaser and with respect to any and all other
Units or other securities, rights or distributions, other than regular cash
distributions declared by the Trust having a record date prior to the date of
transfer to the Purchaser on the Trust's transfer records of the Units tendered
(such Units or other securities, rights or distributions other than such regular
cash distributions being referred to herein as "Distributions"), issued or
issuable in respect of such Units on or after the date of this Offer to
Purchase. All such powers of attorney and proxies shall be considered
irrevocable and coupled with an interest in the tendered Units. This appointment
will be effective when, and only to the extent that, the Purchaser pays for such
Units by depositing the Purchase Price therefor with the Depositary. Upon such
payment, all powers of attorney and proxies given by such Unit holder with
5
<PAGE> 8
respect to such Units and any Distributions will, without further action, be
revoked, and no subsequent powers of attorney or proxies may be given by such
Unit holder (and, if given, will not be deemed effective). The designees of the
Purchaser will, with respect to the Units and any Distribution, be empowered to
exercise all voting and other rights of such Unit holder with respect to such
Units and any Distributions as they, in their sole discretion, may deem proper
at any meeting of the Unit holders, or any adjournment or postponement thereof,
or by written consent or otherwise. The Purchaser reserves the right to require
that, in order for Units to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of such Units, the Purchaser must be able to
exercise full voting rights with respect to such Units, including voting at any
meeting of Unit holders.
Determination of Validity. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for payment of
any tender of Units pursuant to any of the procedures described above will be
determined by the Purchaser, in its sole discretion, whose determination will be
final and binding. The Purchaser reserves the absolute right to reject any or
all tenders of any Units determined by it not to be in proper form or the
acceptance of or payment for which may, in the opinion of the Purchaser's
counsel, be unlawful. The Purchaser also reserves the absolute right to waive
any of the conditions of the Offer or any defect or irregularity in any tender
of Units of any particular Unit holder.
The Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding. No tender will be deemed to have been validly made until all
defects and irregularities with respect to such tender have been cured or
waived. None of the Purchaser, the Purchaser's affiliates or assigns, the
Depositary, the Dealer Manager, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give such notification.
A tender of Units pursuant to any one of the procedures described above
will constitute the tendering Unit holder's acceptance of the terms and
conditions of the Offer, as well as the tendering Unit holder's representation
and warranty that (i) such Unit holder has full power and authority to tender,
sell, assign and transfer such Units, (ii) the tender of the tendered Units
complies with Rule 14e-4 under the Exchange Act and (iii) when the same are
accepted for payment by the Purchaser, the Purchaser will acquire good,
marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and will not be subject to any adverse
claim. The Purchaser's acceptance for payment of Units tendered pursuant to the
Offer will constitute a binding agreement between the tendering Unit holder and
the Purchaser upon the terms and subject to the conditions to the Offer.
3. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 3,
tenders of Units made pursuant to the Offer are irrevocable, provided that Units
tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by the Purchaser as
provided herein, may also be withdrawn at any time after March 20, 1998, or at
such later time as may apply if the Offer is extended.
If, for any reason whatsoever, acceptance for payment of Units tendered
pursuant to the Offer is delayed, or the Purchaser is unable to accept for
payment or pay for Units tendered pursuant to the Offer, then, without prejudice
to the Purchaser's rights set forth herein, the Depositary may, nevertheless, on
behalf of the Purchaser, retain tendered Units, and such Units may not be
withdrawn except to the extent that the tendering Unit holder is entitled to and
duly exercises withdrawal rights as described in this Section 3. Any such delay
will be by an extension of the Offer to the extent required by law.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses specified on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Units to be withdrawn, the number of Units to be withdrawn, and (if certificates
for Units have been tendered) the name of the registered holder of the Units as
set forth in the certificate for the Unit, if different from the name of the
person who tendered such Units. If certificates for Units to be withdrawn have
been delivered or otherwise identified to the Depositary, then, prior to the
release of such certificates, the serial numbers shown on such certificates must
be submitted to the Depositary and, unless such Units have been tendered by an
Eligible
6
<PAGE> 9
Institution, the signatures on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Units have been tendered pursuant to the procedure for
book-entry transfer as set forth in "THE TENDER OFFER -- 2. Procedures for
Tendering Units," any notice of withdrawal must also specify the name and number
of the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Units and otherwise comply with the Book-Entry Transfer Facility's
procedures.
Withdrawals of tenders of Units may not be rescinded and any Units properly
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However, withdrawn Units may be retendered by again following one of the
procedures described in "THE TENDER OFFER -- 2. Procedures for Tendering Units"
at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. None of the
Purchaser, the Purchaser's affiliates or assigns, the Depositary, the Dealer
Manager, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in any notice of withdrawal
or incur any liability for failure to give such notification.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS. Upon the terms and subject
to the conditions of the Offer (including, if the Offer is extended or amended,
the terms and conditions of any such extension or amendment), the Purchaser will
purchase, by accepting for payment, and will pay for the Minimum Number of Units
validly tendered prior to the Expiration Date (and not properly withdrawn in
accordance with "THE TENDER OFFER -- 3. Withdrawal Rights") as promptly as
practicable after the Expiration Date.
UNDER NO CIRCUMSTANCE WILL INTEREST ON THE PURCHASE PRICE BE PAID,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
The Purchaser expressly reserves the right, in its sole discretion, to
delay acceptance for payment of, or, subject to the requirements of Rule
14e-1(c) referred to in "THE TENDER OFFER -- 1. Terms of the Offer," payment
for, Units in order to comply in whole or in part with any applicable law or
condition. See "THE TENDER OFFER -- 14. Certain Conditions of the Offer." In all
cases, payment for Units purchased pursuant to the Offer will be made only after
timely receipt by the Depositary of (i) certificates for such Units or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Units into the Depositary's account at the Book-Entry Transfer Facility pursuant
to the procedures set forth in "THE TENDER OFFER -- 2. Procedures for Tendering
Units," (ii) the Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or an
Agent's Message (as defined below) in connection with a book-entry transfer, and
(iii) any other documents required by the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Units which are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Purchaser may enforce such
agreement against such participant.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment (and thereby purchased) Units validly tendered and not withdrawn as,
if and when the Purchaser gives oral or written notice to the Depositary of the
Purchaser's acceptance of such Units for payment pursuant to the Offer. Upon the
terms and subject to the conditions of the Offer, payment for Units purchased
pursuant to the Offer will be made by deposit of the Purchase Price therefor
with the Depositary, which will act as agent for tendering Unit holders for the
purpose of receiving payment from the Purchaser and transmitting payment to
tendering Unit holders. Under no circumstances will interest on the Purchase
Price be paid by the Purchaser by reason of any delay in making such payment.
If any tendered Units are not purchased pursuant to the Offer for any
reason, or if certificates are submitted representing more Units than are
tendered, certificates for tendered Units not purchased or tendered will be
returned, without expense to the tendering Unit holder (or, in the case of Units
tendered by
7
<PAGE> 10
book-entry transfer into the Depositary's account at the Book-Entry Transfer
Facility pursuant to the procedures set forth in "THE TENDER OFFER -- 2.
Procedures for Tendering Units," such Units will be credited to the account
maintained at the Book-Entry Transfer Facility), as promptly as practicable
after the expiration, termination or withdrawal of the Offer.
If, on or prior to the Expiration Date, the Purchaser shall increase the
consideration offered to Unit holders pursuant to the Offer, such increased
consideration shall be paid to all Unit holders whose Units have previously been
accepted for payment pursuant to the Offer.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following summary of
federal income tax consequences is based upon laws, regulations, interpretive
rulings and judicial decisions in effect on the date hereof, all of which are
subject to change (possibly with retroactive effect). This summary does not
discuss all aspects of federal income taxation that may be relevant to a
particular taxpayer in light of its personal investment circumstances or to
certain types of taxpayers subject to special treatment under the federal income
tax laws (such as life insurance companies, banks, tax-exempt organizations,
nonresident aliens and foreign corporations). This summary also does not discuss
any aspect of state, local or foreign taxation. Accordingly, each Unit holder is
urged to consult with its own tax advisor as to the tax ramifications of
tendering Units pursuant to the Offer.
Tendering Unit Holders. Each tendering Unit holder will be treated, for
federal income tax purposes, as having disposed of an undivided interest in each
of the assets of the Trust. As a result, each tendering Unit holder will
recognize gain or loss, for federal income tax purposes, measured by the
difference between the amount realized on the sale and the Unit holder's tax
basis in the Unit sold. A Unit holder's tax basis in its Units will generally
include its allocable share of the debts of the Trust, if any, at the time that
the Unit holder acquired its Units, and such tax basis must be reduced, but not
below zero, by any depletion deductions that the Unit holder has been allowed. A
Unit holder's amount realized will generally include an allocable share of the
debts of the Trust, if any, at the time the Units are sold pursuant to the
Offer. The character of the gain or loss as ordinary income or loss or as
capital gain or loss (and, if capital gain or loss, as long-term or short-term)
will be determined by reference to the Royalty Interests (as defined in "THE
TENDER OFFER -- 6. Certain Information Concerning the Trust"), rather than by
reference to the Units (with the result, inter alia, that the depletion
recapture rules will generally require a Unit holder to recharacterize, as
ordinary income, any capital gain recognized in connection with the sale of
Units, but not in excess of the depletion deductions previously allowed to the
Unit holder that were applied to reduce tax basis). A tendering Unit holder who
has taken a Section 29 tax credit will not have to recapture as ordinary income
any amount previously taken as a credit. While net capital gains are taxed, in
the case of corporate taxpayers, at the same rates that apply to ordinary
income, such gains are taxed, in the case of individual taxpayers, at a maximum
rate of (i) 28% if the relevant holding period is more than 12 months but no
more than 18 months and (ii) 20% if the relevant holding period is more than 18
months. Capital losses may be used, for federal income tax purposes, to offset
only capital gains and may not be used to offset ordinary income (subject to a
$3,000 exemption in the case of individual taxpayers).
The Trust will allocate its income, gain, loss, deduction and credit for
1998 between a tendering Unit holder and the Purchaser based on the number of
monthly record dates of regular cash distributions by the Trust that each such
person held the Unit during the year.
Non-Tendering Unit Holders. The Trust will continue to be classified as a
grantor trust subsequent to the consummation of the Offer and will not be
required to close its taxable year, change its method of accounting or otherwise
be adversely affected as a result of the Offer. Upon the successful consummation
of the Offer, the Purchaser intends to cause the termination of the Trust within
one year from the date of this Offer to Purchase. See "THE TENDER OFFER -- 12.
Purpose and Structure of the Offer; Plans for the Trust." In the event of
dissolution, each Unit holder will directly own and control its interests in the
Royalty Interests. The tax treatment of directly holding such Royalty Interests
will be substantially similar to the tax treatment of indirectly owning such
properties through the Trust, except that the rules of administrative
convenience imposed by the Trust, such as allocation of the Section 29 credit on
a quarterly basis, will no longer be applicable.
8
<PAGE> 11
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. UNIT HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE OFFER, INCLUDING THE EFFECTS OF
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES THEREOF.
6. CERTAIN INFORMATION CONCERNING THE TRUST. According to the Trust's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996 (the
"Trust 10-K"), the Trust was created under the laws of the State of Delaware.
According to the Trust 10-Q, the Trust maintains its principal offices at the
offices of the Trustee, located at 901 Main Street, Suite 1700, Dallas, Texas
75202. According to the Trust 10-K, the Trust has been formed under Delaware law
pursuant to the terms of the Trust Agreement to acquire and hold certain net
profits interests (the "Royalty Interests") in Meridian Oil Production Inc.'s
interest in the Fruitland coal formation underlying the Northeast Blanco Unit
(the "Underlying Properties"). The Purchaser believes that the name of Meridian
Oil Production Inc. has been changed to Burlington Resources Oil & Gas Company
("BROG").
The Trust is subject to the information and reporting requirements of the
Exchange Act and in accordance therewith files reports and other information
with the Commission relating to its properties, financial condition and other
matters. These reports and other information are available for inspection at the
Commission's public reference facilities at 450 Fifth Street, N.W., Washington,
D.C. 20549, and also should be available for inspection and copying at the
regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material may also be
obtained by mail, upon payment of the Commission's customary fees, from the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
In addition, the Commission maintains a web site on the Internet that can be
accessed at http://www.sec.gov and that contains information filed
electronically regarding the Trust. Reports and other information concerning the
Trust can also be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005.
The selected financial data set forth below relating to the Trust have been
taken or derived from the audited financial statements contained in the Trust
10-K or the unaudited financial statements contained in the Trust 10-Q. More
comprehensive financial information is included in the Trust 10-K, the Trust
10-Q and the other documents filed by the Trust with the Commission, and the
financial data set forth below are qualified in its entirety by reference to
such reports and other documents including the financial statements and related
notes contained therein.
BURLINGTON RESOURCES
COAL SEAM GAS ROYALTY TRUST
SELECTED FINANCIAL DATA
CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------------------
1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Assets
Cash and cash equivalents..................... $ 77,522 $ 158,251 $ 31,260
Net royalty interests in oil and gas
properties.................................... 95,634,222 107,371,880 123,603,700
----------- ------------ ------------
Total assets.......................... $95,711,744 $107,530,131 $123,634,960
=========== ============ ============
Liabilities and Trust Corpus
Trust expenses payable........................ $ 96,836 $ 201,966 $ 100,220
Trust corpus (8,800,000 Units authorized and
outstanding)............................... 95,614,908 107,328,165 123,534,740
----------- ------------ ------------
Total liabilities and trust corpus.............. $95,711,744 $107,530,131 $123,634,960
=========== ============ ============
</TABLE>
9
<PAGE> 12
CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------ --------------------------
1997 1996 1996 1995
---------- ---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Royalty income........................ $5,077,755 $8,376,309 $10,671,428 $14,076,780
Interest income....................... 12,826 22,184 28,339 37,576
---------- ---------- ----------- -----------
$5,090,581 $8,398,493 $10,699,767 $14,114,356
General and administrative expenses... (538,911) (532,286) (659,226) (711,959)
---------- ---------- ----------- -----------
Distributable income.................. $4,551,670 $7,866,207 $10,040,541 $13,402,397
========== ========== =========== ===========
Distributable income per Unit
(8,800,000 Units)................... $ .52 $ .89 $ 1.14 $ 1.52
========== ========== =========== ===========
</TABLE>
CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------------- ---------------------------
1997 1996 1996 1995
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Trust corpus, beginning of period..... $107,328,165 $123,534,740 $123,534,740 $147,459,837
Amortization and impairment of royalty
interests........................... (11,737,658) (15,008,321) (16,231,820) (23,913,096)
Distributable income.................. 4,551,670 7,866,207 10,040,541 13,402,397
Distributions to Unit holders......... (4,527,269) (7,806,576) (10,015,296) (13,414,398)
Trust corpus, end of period........... $ 95,614,908 $108,586,050 $107,328,165 $123,534,740
</TABLE>
The information concerning the Trust contained herein has been taken from
or is based upon reports and other documents on file with the Commission or
otherwise publicly available. Although the Purchaser does not have any knowledge
that would indicate that any statements contained herein based upon such reports
and documents are untrue, the Purchaser does not take any responsibility for the
accuracy or completeness of the information contained in such reports and other
documents or for any failure by the Trust to disclose events that may have
occurred and may affect the significance or accuracy of any such information but
that are unknown to the Purchaser.
7. CERTAIN INFORMATION CONCERNING THE PURCHASER. The Purchaser, a Texas
limited liability company, was recently organized and has not engaged in any
business since its organization other than that incident to its organization and
in connection with the Offer. The Amended and Restated Limited Liability Company
Regulations of the Purchaser (the "Regulations"), a copy of which is attached as
Exhibit (c)(1) to the Purchaser Schedule 14D-1, provide that the purpose and
nature of the business of the Purchaser shall be (i) to directly or indirectly,
acquire, invest in, own and dispose of the Units, (ii) to, directly or
indirectly, invest in, own and dispose of interests in the properties owned by
the Trust and (iii) to exercise all of the rights and powers conferred upon the
Purchaser pursuant to agreements relating to the business of the Purchaser. The
Purchaser is not expected to engage in any business other than in connection
with its organization, the Offer and, upon the successful consummation of the
Offer, the termination of the Trust. The principal executive offices of the
Purchaser are located at 910 Travis Street, Suite 2150, Houston, Texas 77002.
The Regulations provide that, other than certain specified major decisions,
the powers of the Purchaser shall be exercised by or under the authority of, and
the business and affairs of the Purchaser shall be managed by the manager of the
Purchaser, O'Sullivan Oil. The Regulations also provide that no member of the
Purchaser shall, directly or indirectly, purchase or otherwise acquire, among
other things, any Units.
Pursuant to the Regulations, the consent of all the members of the
Purchaser (other than First Union Investors and its successors and assigns,
except in certain circumstances) is required, among other things, to (i) sell
any of the Units owned by the Purchaser and (ii) take any action that varies
from the Business Plan.
10
<PAGE> 13
The Regulations provide that the "Business Plan" includes voting the Units owned
by the Purchaser in favor of the liquidation of the Trust.
The name, citizenship, business address and present principal occupation of
the manager of the Purchaser are set forth in Schedule I to this Offer to
Purchase.
The members of the Purchaser are the EnCap Group, First Union Investors and
the O'Sullivan Group. The EnCap Group, First Union Investors and the O'Sullivan
Group have approximately a 55.1%, 24.9% and 20.0% respective interest in the
Purchaser.
The EnCap Group and EnCap. EnCap Energy is a Texas limited partnership with
its principal executive offices at 1100 Louisiana Street, Suite 3150, Houston,
Texas 77002. The principal business of EnCap Energy is engaging in oil and gas
investments. EnCap is the general partner of EnCap Energy.
EnCap B is a Texas corporation with its principal executive offices at 1100
Louisiana Street, Suite 3150, Houston, Texas 77002. The principal business of
EnCap B is engaging in oil and gas investments. EnCap Energy Capital Fund III-B,
L.P. is the sole shareholder of EnCap B. Current information concerning the
directors and executive officers of EnCap B is set forth on Schedule I hereto.
EnCap Energy Capital Fund III-B, L.P. is a Texas limited partnership with
its principal executive offices at 1100 Louisiana Street, Suite 3150, Houston,
Texas 77002. The principal business of EnCap Energy Capital Fund III-B, L.P. is
engaging in oil and gas investments. EnCap is the general partner of EnCap
Energy Capital Fund III-B, L.P.
ECIC is a Texas corporation with its principal executive offices at 1100
Louisiana Street, Suite 3150, Houston, Texas 77002. The principal business of
ECIC is engaging in oil and gas investments. Energy Capital is the sole
shareholder of ECIC. Current information concerning the directors and executive
officers of ECIC is set forth on Schedule I hereto.
Energy Capital is a company registered in England and Wales under the
Companies Act 1985 under number 2867571, with its principal executive offices at
1100 Louisiana Street, Suite 3150, Houston, Texas 77002. The principal business
of Energy Capital is engaging in oil and gas investments. Energy Capital is the
sole shareholder of ECIC. Current information concerning the directors of Energy
Capital is set forth on Schedule I hereto.
EnCap is a Texas limited liability company with its principal executive
offices at 1100 Louisiana Street, Suite 3150, Houston, Texas 77002. EnCap is the
general partner of EnCap Energy and EnCap Energy Capital Fund III-B, L.P. The
principal business of EnCap is engaging in oil and gas investments. Current
information concerning the members and managing directors of EnCap is set forth
on Schedule I hereto.
BOCP is a Texas limited partnership with its principal executive offices at
1100 Louisiana Street, Suite 3150, Houston, Texas 77002. The principal business
of BOCP is engaging in oil and gas investments. Banc One Capital Partners VIII,
Ltd. is the general partner of BOCP.
Banc One Capital Partners VIII, Ltd. is an Ohio limited liability company,
with its principal executive offices at 150 East Gay Street, Columbus, Ohio
43215. The principal business of Banc One Capital Partners VIII, Ltd. is
operating a closed-end investment fund ("Business") that acts as the general
partner of BOCP, a Texas limited partnership, and to engage in other activities
necessary or incidental to such Business. The managing member of Banc One
Capital Partners VIII, Ltd. is BOCP Holdings Corporation. Current information
concerning the managers of Banc One Capital Partners VIII, Ltd. is set forth on
Schedule I hereto.
BOCP Holdings Corporation is an Ohio corporation with its principal
executive offices at 150 East Gay Street, Columbus, Ohio 43215. The principal
business of BOCP Holdings Corporation is investments. BOCP Holdings is a
wholly-owned subsidiary of Banc One Capital Holdings Corporation, an Ohio
corporation. Current information concerning the directors of BOCP Holdings
Corporation is set forth on Schedule I hereto.
Banc One Capital Holdings Corporation is an Ohio corporation with its
principal executive offices at 150 East Gay Street, Columbus, Ohio 43215 and is
a wholly-owned subsidiary of BANC ONE CORPORA-
11
<PAGE> 14
TION. The principal business of Banc One Capital Holdings Corporation is
investments. Current information concerning the directors of Banc One Capital
Holdings Corporation is set forth on Schedule I hereto.
First Union Investors and First Union Corporation. First Union Investors is
a North Carolina corporation and is a wholly-owned subsidiary of First Union
Corporation, a North Carolina corporation. The principal business of First Union
Investors is engaging in various investment activities on behalf of First Union
Corporation and its affiliates. First Union Corporation is a registered bank
holding company that is principally engaged in the business of banking through
its subsidiaries. The principal executive offices of First Union Investors and
First Union Corporation are located at One First Union Center, Charlotte, North
Carolina 28288. Current information concerning the directors and executive
officers of First Union Investors and First Union Corporation is set forth on
Schedule I hereto.
First Union National Bank, a wholly-owned subsidiary of First Union
Corporation, has investment discretion, but not voting authority, for 200 Units.
The address of First Union National Bank is One First Union Center, Charlotte,
North Carolina 28288.
The O'Sullivan Group. Andover is a Texas corporation with its principal
executive offices at 910 Travis Street, Suite 2205, Houston, Texas 77002. The
principal business of the Andover is real estate development. A. John Knapp,
Jr., a United States citizen, is the controlling shareholder and President of
Andover. His business address is 910 Travis Street, Suite 2205, Houston, Texas
77002. The principal employment of Mr. Knapp for the preceding five years has
been acting as President of Andover. Current information concerning the
directors and executive officers of Andover is set forth on Schedule I hereto.
Charles T. McCord III, a United States citizen, is the President and owner
of McCord Investments, Inc., the general partner of McCord Production, Ltd., and
his business address and the business address of McCord Production, Ltd. is 1201
Louisiana, Suite 1048, Houston, Texas 77002. The principal business of McCord
Production, Ltd. is the exploration, acquisition and enhancement of oil and gas
properties. In addition to his employment with McCord Production, Ltd., for the
preceding five years Mr. McCord has been the managing member of CTM 1994, LLC
and CTM 1995, LLC, which are all engaged in the business of oil and gas
exploration and production. The business address of McCord Investments, Inc.,
CTM 1994, LLC and CTM 1995, LLC is 1201 Louisiana Street, Suite 1048, Houston,
Texas 77002.
O'Sullivan Oil is a Texas corporation with its principal executive offices
at 910 Travis Street, Suite 2150, Houston, Texas 77002. The principal business
of O'Sullivan Oil is oil and gas exploration and production. C. N. O'Sullivan, a
United States citizen, is the sole shareholder and the President of O'Sullivan
Oil. His business address is 910 Travis Street, Suite 2150, Houston, Texas
77002. The principal employment of Mr. O'Sullivan for the preceding five years
has been acting as President of O'Sullivan Oil. Current information concerning
the director and executive officer of O'Sullivan is set forth on Schedule I
hereto.
Christopher P. Scully, a United States citizen, is the President of Scully
Oil & Gas Company and Excelsior Exploration Corporation. His business address,
and the business address of Scully Oil & Gas Company and Excelsior Exploration
Corporation, is 910 Travis Street, Suite 2150, Houston, Texas 77002. The
principal business of Scully Oil & Gas Company and Excelsior Exploration
Corporation is oil and gas exploration and production. Mr. Scully has been
President of Scully Oil & Gas Company from 1994 to the present and has been
President of Excelsior Exploration Corporation from 1989 to the present.
Smith Funding is a Texas limited liability company with its principal
executive offices at 910 Travis Street, Suite 2150, Houston, Texas 77002. The
principal business of Smith Funding is to own a membership interest in the
Purchaser. Current information concerning the members and managers of Smith
Funding is set forth on Schedule I hereto.
John V. Whiting, a United States citizen, is a Consulting Operations
Manager for O'Sullivan Oil. His business address, and the business address of
O'Sullivan Oil, is 910 Travis Street, Suite 2150, Houston, Texas 77002. The
principal business of O'Sullivan Oil is oil and gas exploration and production.
From 1993 to 1995, Mr. Whiting was an Operations Manager for Main Energy, Inc.,
an oil and gas exploration and production company, and a Vice President of Main
Operating Co., Inc., a consulting and contract operation firm. The principal
executive offices of both Main Energy, Inc. and Main Operating Co., Inc. are
1111 Fannin,
12
<PAGE> 15
Suite 1346, Houston, Texas 77002, and the principal business of both companies
is oil and gas exploration and production. From 1995 to 1996, Mr. Whiting acted
as an independent consultant for engineering and operations and the principal
address from which such operations were conducted is 5200 Nett, Houston, Texas
77007. From 1996 to 1997, he was employed as Vice President of O'Sullivan Oil.
Except as set forth in this Offer to Purchase, the Purchaser Schedule 14D-1
and Schedule II hereto: (i) none of the Acquirors nor, to the knowledge of the
Acquirors, EnCap Energy Capital Fund III-B, L.P., Energy Capital, EnCap, Banc
One Capital Partners VIII, Ltd., BOCP Holdings Corporation, Banc One Capital
Holdings Corporation or First Union Corporation (collectively, the "Acquiror
Affiliates"), any of the persons listed on Schedule I hereto or any associate or
majority-owned subsidiary of any of the persons so listed, beneficially owns or
has a right to acquire any Units or any other equity securities of the Trust;
(ii) none of the Acquirors nor, to the knowledge of the Acquirors, any of the
persons or entities referred to in clause (i) above or any of their executive
officers, directors or subsidiaries, has effected any transaction in the Units
or any other equity securities of the Trust during the past 60 days; (iii) none
of the Acquirors nor, to the knowledge of the Acquirors, the Acquiror Affiliates
or any of the persons listed on Schedule I hereto has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Trust, including, but not limited to any contract,
arrangement, understanding or relationship concerning the transfer or voting
thereof, joint ventures, loan or option arrangements, puts or calls, guarantees
of loans, guarantees against loss or the giving or withholding of proxies; (iv)
since January 1, 1995, there have been no transactions which would require
reporting under the rules and regulations of the Commission between any of the
Acquiror or, to the best knowledge of the Acquirors, the Acquiror Affiliates or
any of the persons listed on Schedule I hereto, on the one hand, and the Trust
or any of its executive officers, directors or affiliates, on the other hand;
(v) since January 1, 1995, there have been no contracts, negotiations or
transactions between any of the Acquirors or any of their respective
subsidiaries or, to the best knowledge of the Acquirors, the Acquiror Affiliates
or any of the persons listed on Schedule I hereto, on the one hand, and the
Trust or its affiliates, on the other hand, concerning a merger, consolidation
or acquisition, tender offer or other acquisition of securities, an election of
directors or a sale or other transfer of a material amount of assets of the
Trust; (vi) none of the Acquirors nor, to the knowledge of the Acquirors, the
Acquiror Affiliates or any of the persons listed on Schedule I hereto, have (a)
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors), or (b) been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.
8. PRICE RANGE OF UNITS; CASH DISTRIBUTIONS. The Units are listed and
traded on the NYSE under the symbol BRU. The following table sets forth for the
periods indicated, the reported high and low closing sales prices for the Units
and the distributions per Unit, as reported in the Trust 10-K with respect to
the fiscal years 1995 and 1996 and the high and low closing sale prices for the
Units and the distributions per Unit reported in published financial sources for
the periods indicated thereafter.
<TABLE>
<CAPTION>
PRICE
------------------ DISTRIBUTIONS
1995 HIGH LOW PER UNIT
---- ------- ------- -------------
<S> <C> <C> <C>
First Quarter....................................... $17.625 $15.125 $0.364168
Second Quarter...................................... 17.125 14.750 0.399989
Third Quarter....................................... 16.000 14.375 0.385197
Fourth Quarter...................................... 15.375 12.375 0.375008
</TABLE>
<TABLE>
<CAPTION>
1996
----
<S> <C> <C> <C>
First Quarter....................................... $13.625 $10.125 $0.332882
Second Quarter...................................... 11.750 8.750 0.298843
Third Quarter....................................... 10.000 8.750 0.255385
Fourth Quarter...................................... 10.000 8.250 0.250990
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
1997
----
<S> <C> <C> <C>
First Quarter....................................... $ 9.875 $ 7.500 0.147801
Second Quarter...................................... 8.500 6.750 0.160766
Third Quarter....................................... 8.000 6.875 0.205895
Fourth Quarter...................................... 7.9375 5.3125 0.125486
</TABLE>
<TABLE>
<CAPTION>
1998
----
<S> <C> <C> <C>
First Quarter (through January 16, 1998)............ $ 6.750 $ 5.875 *
</TABLE>
- ---------------
* This information has not been publicly announced as of January 16, 1998.
On January 16, 1996, the last full trading day prior to the commencement of
the Offer, the closing sales price for the Units on the NYSE was $6.4375 per
Unit. UNIT HOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE UNITS.
Cash distributions are made by the Trustee on a quarterly basis. According
to the Trust 10-K, the quarterly distribution is payable to Unit holders of
record on the 63rd day following the end of such calendar quarter unless such
day is not a business day in which case the record date will be the next
business day thereafter. The Trustee distributes the quarterly distribution on
or prior to 75 days after the end of each calendar quarter to each person who
was a Unit holder of record on the associated record date, together with
interest estimated to be earned on such amount from the date of receipt thereof
by the Trustee to the payment date. The Purchaser believes that the amount of
each quarterly distribution is generally announced before the quarterly record
date. HOLDERS OF RECORD OF UNITS ON THE QUARTERLY RECORD DATE FOR ANY REGULAR
CASH DISTRIBUTION DECLARED BY THE TRUST PRIOR TO THE TRANSFER TO THE PURCHASER
ON THE TRUST'S TRANSFER RECORDS OF THE UNITS PURCHASED PURSUANT TO THE OFFER
WILL BE ENTITLED TO RECEIVE AND RETAIN SUCH REGULAR CASH DISTRIBUTION.
9. DISTRIBUTIONS. If, on or after the date of this Offer to Purchase, the
Trust should split, combine or otherwise change the Units or its capitalization,
or disclose that it has taken such action, then, without prejudice to the
Purchaser's rights under applicable law and subject to the provisions in "THE
TENDER OFFER -- 14. Certain Conditions of the Offer," the Purchaser, in its sole
discretion, may make such adjustments in the Purchase Price and other terms of
the Offer as it deems appropriate to reflect such split, combination or other
change including, without limitation, the number Units to be purchased.
If, on or after the date of this Offer to Purchase, the Trust should
declare or pay any distribution with respect to the Units, other than the
regular quarterly cash distributions (see "THE TENDER OFFER -- 8. Price Range of
Units; Cash Distributions"), that is payable or distributable to record holders
as of a date prior to the transfer to the Purchaser on the Trust's transfer
records of the Units purchased pursuant to the Offer, then without prejudice to
the Purchaser's rights under applicable law and subject to the provisions in
"THE TENDER OFFER -- 14. Certain Conditions of the Offer," (i) in the case of
any cash distribution, the Purchase Price will be reduced by the amount of such
cash distribution and (ii) in the case of any non-cash distribution, such
non-cash distribution shall be received and held by the tendering Unit holders
for the account of the Purchaser and will be required to be promptly remitted
and transferred by each tendering Unit holder to the Depositary for the account
of the Purchaser, accompanied by appropriate documentation of transfer. Pending
such remittance and subject to applicable law, the Purchaser will be entitled to
all rights and privileges as owner of any such non-cash distribution and may
withhold the entire Purchase Price or deduct from the Purchase Price the amount
or value thereof, as determined by the Purchaser in its sole discretion.
10. FINANCING OF THE OFFER. The total amount of funds required by Purchaser
to purchase the Minimum Number of Units and satisfy its obligations pursuant to
the Offer is expected to be approximately $44,936,595. Purchaser will also
require approximately $1,941,397 to pay fees, expenses and other costs expected
to be incurred in connection with the successful completion of the Offer
(excluding fees and expenses that may be incurred in connection with the
financing required to complete the Offer).
The Purchaser arranged financing needed for the Offer through (i) $25
million of financing to be provided by Bank One Texas, NA (the "Lender" or "Bank
One"), upon the satisfaction of certain conditions as specified below, and (ii)
approximately $25 million in the form of cash and the value of Units previously
14
<PAGE> 17
contributed to the Purchaser by its members. All amounts to be provided by Bank
One will be made available to the Purchaser, subject to the satisfaction of
certain conditions as described below, prior to or at the time Units tendered
pursuant to the Offer are accepted for payment.
The sources and uses of the financing are expected to be as follows:
<TABLE>
<S> <C>
Sources of Funds:
Purchaser member cash................................... $21,877,992
Bank loans.............................................. 25,000,000
-----------
Total sources of funds........................ $46,877,992
===========
Use of Funds:
Payment for Units....................................... $44,936,595
Fees, expenses and other costs.......................... 1,941,397
-----------
Total use of funds............................ $46,877,992
===========
</TABLE>
Equity Financing. On January 15, 1998, as contemplated by the Regulations,
the following members of the Purchaser contributed the indicated initial cash
contributions to the Purchasers:
<TABLE>
<CAPTION>
INITIAL CASH
MEMBER CONTRIBUTION
------ ------------
<S> <C>
EnCap Energy............................................ $ 5,823,556
EnCap B................................................. 4,404,360
ECIC.................................................... 2,056,388
BOCP.................................................... 1,424,960
First Union Investors................................... 6,195,294
Andover................................................. 128,651
Charles T. McCord III................................... 657,770
O'Sullivan Oil.......................................... 443,952
Christopher P. Scully................................... 443,952
Smith Funding........................................... 205,307
John V. Whiting......................................... 93,801
</TABLE>
In addition to such initial cash contributions, on January 15, 1998, the
following members of the Purchaser contributed the indicated Units to the
Purchaser as contemplated by the Regulations, as set forth in detail on Schedule
II hereof:
<TABLE>
<CAPTION>
MEMBER UNITS
------ -----------
<S> <C>
Andover................................................. 34,300
Charles T. McCord III................................... 124,100
O'Sullivan Oil.......................................... 100,000
Christopher P. Scully................................... 100,000
Smith Funding........................................... 42,200
John V. Whiting......................................... 21,740
</TABLE>
The aggregate cash value as of the date hereof of the Units contributed is
$3,002,706.
15
<PAGE> 18
In return for such contributions, the members of the Purchaser received the
following units of interest in the Purchaser, as contemplated by the
Regulations:
<TABLE>
<CAPTION>
PURCHASER
UNITS
----------------------
MEMBER CLASS A CLASS B
------ --------- ---------
<S> <C> <C>
EnCap Energy.................................. 5,940,675 0
EnCap B....................................... 4,492,937 0
ECIC.......................................... 2,097,745 0
BOCP.......................................... 1,453,611 0
First Union Investors......................... 6,319,886 0
Andover....................................... 0 380,716
Charles T. McCord III......................... 0 1,573,626
O'Sullivan Oil................................ 0 1,180,220
Christopher P. Scully......................... 0 1,180,220
Smith Funding................................. 0 507,621
John V. Whiting............................... 0 253,810
</TABLE>
According to the Regulations, the difference between the Class A and Class
B units of interest in the Purchaser are not material, other than differences
with regard to (i) distributions of net cash flow and (ii) certain dispositions
of the units of interest in the Purchaser.
Pursuant to the Regulations, if the Purchaser has the opportunity to
acquire Units pursuant to the Offer that would place its ownership in excess of
66 2/3%, but the Purchaser does not have sufficient funds to acquire such Units,
the manager of the Purchaser will provide notice to the members of the Purchaser
of the need for additional capital contributions to acquire the additional Units
and request additional pro rata capital contributions by the members. If a
member fails to make such additional contribution, the remaining members may
fund the shortfall and receive additional units of interest in the Purchaser in
return for such funding.
Loan Agreement. The Purchaser has entered into an Advancing Term Credit
Agreement dated January 15, 1998 (the "Loan Agreement") with the Lender. The
following is a summary of the Loan Agreement, a copy of which is attached to the
Purchaser Schedule 14D-1 as Exhibit (b) and is incorporated by reference herein.
All references to and summaries of the Loan Agreement herein are qualified in
their entirety by reference to the Loan Agreement. The Loan Agreement provides
that the Lender will provide up to $25 million in financing (the "Loan") to the
Purchaser, subject to satisfaction of certain conditions discussed below. The
material terms of the Loan Agreement are as follows:
Pursuant to the Loan Agreement, the Lender will lend to the Purchaser an
amount equal to the lesser of $25 million or 50% of the purchase price of the
Units purchased by Purchaser, up to a certain specified purchase price. The
facility may only be used as bridge financing in support of the Offer.
The Loan Agreement provides that the Loan will be secured by a first lien
security interest in substantially all of the assets of Purchaser, including,
but not limited to, the Units acquired by the Purchaser, Purchaser's rights and
interests under the Trust and all of the dividends, disbursements,
distributions, products and proceeds thereof.
The Loan Agreement provides that the interest rate for the Loan will be, at
the option of the Purchaser, LIBOR plus 2% per annum, based on 30, 60 and 90 day
options, or the Bank One base rate (the "Base Rate"). Draws can be made through
January 1, 1999. Interest on the loan will be due and payable quarterly for all
Loan amounts accruing interest at the Base Rate or at the maturity of individual
LIBOR tranches.
The Loan Agreement states that the Loan will have a maturity date of
January 2, 1999, provided that the maturity date will be automatically extended
to July 1, 1999, if (i) on January 2, 1999, no event of default or event which,
with the giving of notice or passage of time or both, would become an event of
default, has occurred and is continuing, (ii) on or before January 2, 1999 (a)
the Purchaser has paid to the Lender an additional fee in the amount of 0.25% of
the amount of the loan commitment then in effect, (b) the owners of
16
<PAGE> 19
66.67% of the Units have voted to liquidate the Trust and (c) the Trustee has
taken certain actions described in Section 9.03(b) of the Trust Agreement,
including the making of certain notices required in the Trust Agreement and
retaining an investment banking firm on behalf of the Trust to help value the
Trust's assets, evaluate offers to purchase Trust assets, seek buyers for the
Trust's assets and render certain fairness opinions. At maturity, the
outstanding principal balance on the Loan will be due and payable. Mandatory
prepayments will be required if the Loan balance exceeds the lesser of (i) a
specified borrowing base or (ii) 70% of the per Unit price at which Units are
trading, multiplied by the number of Units owned by the Purchaser.
The funding of the Loan is conditioned upon the following items: (i) the
Trust has good and defensible title to its assets, free and clear of all liens,
encumbrances and adverse claims; (ii) receipt and acceptance by the Lender of a
satisfactory funding request; (iii) satisfactory evidence that all of the
Purchaser's representations and warranties are true, that it is not in default
of any of its covenants and that no event of default has occurred under any of
the loan documents; (iv) the contemporaneous acquisition by the Purchaser of the
Units on which the Borrowing base was calculated; and (v) that no material
adverse change shall have occurred since the date of the Loan Agreement in the
condition, financial or otherwise, of the Purchaser or Trust.
Pursuant to the Loan Agreement, the Lender received a facility fee paid at
closing of $125,000, and will receive a fee payable on each funding equal to
$1,406.25. Purchaser also paid a $10,000 engineering and underwriting fee. In
addition, at closing, the Purchaser paid the Lender a $52,500 fee and a $15,000
retainer for legal fees to the Lender's counsel.
Pursuant to the Loan Agreement, the Purchaser is subject to certain
periodic reporting requirements to the Lender and must disclose other
information as required by the Lender from time to time. The Purchaser also is
subject to certain representations and warranties, covenants and events of
default, including covenants (i) that, if the Trustee is not actively pursuing
liquidation of the Trust by September 1, 1998 to the satisfaction of the Lender,
within 45 days thereafter the Purchaser shall have completed a tax credit
monetization transaction, 100% of the net proceeds of which shall be paid into a
cash collateral account established with the Lender, (ii) that general and
administrative expenses of the Purchaser will not exceed $100,000 per year,
(iii) that the Purchaser will comply with applicable laws and regulations
(including applicable environmental laws), pay taxes, accounts payable and other
uncontested obligations of the Purchaser, including certain fees, maintain its
existence and good standing, maintain its material tangible property and
maintain customary insurance, and (iv) that require average year-to-date
distributions from the Trust to the Purchaser with respect to each Unit owned by
the Purchaser to be equal to at least $0.15 per Unit per calendar quarter.
Negative covenants in the Loan Agreement restrict the Purchaser's ability, with
certain limited exceptions, to incur debt, make loans or other investments,
create liens or security interests on its assets, materially change the nature
of its business, sell assets, declare or pay dividends, allow the termination of
any insurance policy, change its corporate structure, permit any change in the
legal or beneficial ownership of the Purchaser or enter into transactions with
any of its affiliates other than arm's-length transactions. Purchaser has also
agreed to indemnify and to reimburse the Lender for certain expenses.
It is anticipated that the indebtedness incurred pursuant to the Loan
Agreement will be repaid from funds generated by the Trust and distributed to
the Unit holders and by the liquidation of the Trust. See "THE TENDER
OFFER -- 12. Purpose and Structure of the Offer; Plans for the Trust." To the
extent that the equity financing and the Loan Agreement do not provide
sufficient funds to consummate the Offer, the Purchaser will attempt to arrange
for additional financing or equity sources to satisfy such obligations. The
Purchaser has not made any arrangements for such additional financing or equity,
and there can be no assurance that such financing or equity will be available
or, if available, on terms favorable to the Purchaser.
Because the Loan has a maturity date of January 2, 1999 and is subject to
extension to July 1, 1999 if the Trust has not terminated and its assets have
not been distributed in a sufficient amount to satisfy all amounts due
thereunder by such date, the Purchaser will be required to seek an additional
extension of the Loan from the Lender. In the event that the Lender does not
extend the Loan, the Purchaser will attempt to arrange for additional financing
or equity sources to repay the Loan in full by such maturity date. If the
Purchaser is unable to obtain such additional financing, however, the Purchaser
may be required to liquidate some or all of
17
<PAGE> 20
the Units it has acquired either pursuant to the Offer or prior to the
commencement of the Offer to satisfy its payment obligations under the Loan.
The Lender is an affiliate of Banc One Capital Partners VIII, Ltd., which
is the general partner of BOCP. BOCP is one of the Acquirors.
11. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS
WITH THE TRUST. During the week of October 13, 1997, Scott W. Smith, a
consultant to O'Sullivan Oil and a member and manager of Smith Funding, spoke
with Ron E. Hooper, Vice President of the Trustee, pursuant to a telephone
conversation. During such conversation, Mr. Smith, on behalf of C. N.
O'Sullivan, President of O'Sullivan Oil, requested an opportunity to review the
ownership ledger of the Trust. Mr. Hooper requested that Mr. Smith provide
written notice of such request.
On October 20, 1997, Mr. Smith sent the following letter by overnight
courier to the Trustee:
October 20, 1997 Federal Express
Nationsbank of Texas, N.A., Trustee
Burlington Resources Coal Seam Gas Royalty Trust
910 Main Street, Suite 1700
Dallas, Texas 75202
Attention: Mr. Ron Hooper
Re: Inspection of Books
Gentlemen:
Pursuant to Article 12.01 of the Trust Agreement of the Burlington
Resources Coal Seam Gas Royalty Trust dated May 1, 1993, by and between
Meridian Oil Production, Inc., Burlington Resources, Inc., Mellon Bank
National Association and Nationsbank of Texas, N.A., Chris N. O'Sullivan,
as the owner of 20,000 units of said trust is hereby requesting the
opportunity to review the ownership ledger of the trust at your earliest
convenience.
Mr. O'Sullivan owns these units in Account No. 32004087 at the firm of
Morgan Keegan & Company, Inc. Should you have any questions concerning his
position, please contact Mr. William Vaseliades at (713) 840-3628.
We are looking forward to hearing from you as soon as possible to schedule
a mutually agreeable appointment.
Very truly yours,
Scott W. Smith
SWS/ncy
On or about October 21, 1997, Mr. Smith contacted Mr. Hooper by telephone
regarding the request to review the ownership ledger of the Trust. Mr. Hooper
responded that the Trustee would confer with its counsel concerning the
Trustee's response to the request.
During the week of October 27, 1997, Mr. Smith contacted the Trustee by
telephone. During this telephone conversation with Mr. Hooper, a meeting date of
November 11, 1997, was set for Mr. Smith to review the ownership ledger
concerning the Units.
18
<PAGE> 21
On November 11, 1997, at the offices of the Trustee, Mr. Smith reviewed a
Unit ownership ledger, dated as of September 2, 1997.
On November 24, 1997, Mr. Smith contacted the Trustee by telephone. Mr.
Smith requested information concerning the calculation of the tax credit
allocation in connection with the 1997 fourth quarter distribution, which was
announced on November 1, 1997. Donald Yuchs, a representative of the Trustee, in
response to the request of Mr. Smith, faxed Mr. Smith several sheets regarding
the cash and tax credit allocation for the fourth quarter distribution.
Except as described in this Offer to Purchase, there have been no contacts,
transactions or negotiations between any of the Acquirors or the Acquiror
Affiliates, or, to the best of any Acquiror's knowledge, any of their respective
affiliates or subsidiaries or any of the persons listed on Schedule I, on the
one hand, and the Trust or any of its affiliates, on the other hand, concerning
a merger, consolidation or acquisition, a tender offer or other acquisition of
securities, an election of directors, or sale or other transfer of a material
amount of the Trust's assets.
12. PURPOSE AND STRUCTURE OF THE OFFER; PLANS FOR THE TRUST. The purpose of
the Offer is to acquire a significant number of Units as the first step in the
ultimate termination of the Trust. The Purchaser is conducting the Offer and
pursuing the termination of the Trust with the intention of making a profit;
consequently, the interests of the Purchaser and the other Acquirors may be
adverse to the interests of other Unit holders.
Subsequent to the successful consummation of the Offer, the Purchaser
currently intends to call a meeting of the Unit holders within one year of the
date of this Offer to Purchase for the purpose of voting on the termination of
the Trust. If a meeting of the Unit holders is held concerning the termination
of the Trust, the Purchaser intends to vote any Units it holds at the time of
such meeting in favor of terminating the Trust.
The information in the following paragraphs of this Section 12 has been
taken or derived from the Trust Agreement, which was filed as Exhibit 3.1 to the
Registration Statement on Form S-3 (Registration No. 33-61164), as amended,
filed by Burlington Resources Inc. with the Commission on its own behalf and as
sponsor of the Trust. More comprehensive information concerning meetings of Unit
holders and the termination of the Trust is included in the Trust Agreement, and
the information set forth below is qualified in its entirety by reference to the
Trust Agreement.
According to the terms of the Trust Agreement, the Trust may terminate
prior to January 1, 2003, only upon the affirmative vote in favor of termination
of the Trust by the holders of at least 66 2/3% of the outstanding Units. A
meeting of the Unit holders may be called by Unit holders owning of record not
less than 10% of the then outstanding Units. After the successful conclusion of
the Offer, the Purchaser intends to call a special meeting of the Unit holders
for the purpose of voting to terminate the Trust pursuant to a notice
distributed to all of the Unit holders of record. The notice of such meeting
must be distributed at least 20, but not more than 60, days prior to the date of
the meeting. At such meeting, if the holders of at least 66 2/3% of the Units
vote to terminate the Trust, the Trustee will commence the liquidation process,
and the Trust will still continue until all of the affairs of the Trust are
liquidated and wound up.
Within five business days of the date the Unit holders vote to terminate
the Trust (the "Termination Date"), the Trustee must (i) provide BROG,
Burlington Resources Inc. and Mellon Bank (DE) National Association (the
"Delaware Trustee") or its successor with written notice of the termination of
the Trust and (ii) engage an investment banking firm (the "Advisor") to assist
the Trustee in selling the remaining Royalty Interests then owned by the Trust
(the "Remaining Royalty Interests").
BROG may, but is not obligated to, make a written cash offer to purchase
the Remaining Royalty Interests, which offer must be delivered to the Trustee
within 60 days following the Termination Date (the "Option Period Termination
Date"). If BROG does make an offer to purchase the Remaining Royalty Interests,
the Trustee must decide, based on the recommendation of the Advisor, whether to
accept the offer. The Trustee must provide written notice to BROG of the
decision by the later of (i) the Option Period Termination Date or (ii) the
tenth business day after the date the Trustee receives BROG's offer. The
Trustee's notice must state that the Trustee (i) accepts the offer (which
acceptance is conditional on the
19
<PAGE> 22
receipt of an opinion of the Advisor of the fairness of BROG's offer to the Unit
holders from a financial point of view) or (ii) defers action on the offer. If
the Trustee accepts BROG's offer, BROG and the Trustee must use their best
efforts to close the purchase within 30 days of BROG's receipt of notice of
acceptance.
If the Trustee defers action on BROG's offer, the Trustee must use its best
efforts, with the Advisor's assistance, to obtain other cash offers for the
Remaining Royalty Interests. The Trustee must notify BROG of the highest offer,
if any, received by the Trust within 120 days following the Termination Date. If
the highest offer is more than 105% of BROG's original offer, or if BROG did not
make an offer, BROG may, but is not obligated to, purchase all of the Remaining
Royalty Interests for a cash purchase price equal to 105% of the highest offer.
If the highest offer is equal to or less than 105% of BROG's original offer,
BROG may, but is not obligated to, purchase all of the Remaining Royalty
Interests for a cash purchase price equal to the highest offer. BROG must
provide written notice of its election to purchase the Remaining Royalty
Interests within five business days of BROG receipt of notice of the highest
offer. BROG and the Trustee must use their best efforts to close the purchase
within 30 days of BROG's receipt of notice of the highest offer.
If no other acceptable cash offers are received for the Remaining Royalty
Interests, the Trustee may request that BROG submit another offer. If BROG makes
an offer, and the Trustee accepts it, the acceptance will be conditional upon
receipt of an opinion of the Advisor of the fairness of the offer to the Unit
holders. BROG and the Trustee must use their best efforts to close the purchase
within 30 days of BROG's receipt of notice of acceptance of the offer.
If any assets or property of the Trust estate have not been sold, or no
definitive agreement for their sale has been entered into, within one year after
the Termination Date, the Trustee will cause the property to be sold at public
auction to the highest bidder (which may be BROG or any of its affiliates).
Notice of such auction must be mailed to each Unit holder at least 30 days prior
to the sale.
Although the Purchaser has not made any determination to do so, the
Purchaser or one of its affiliates may seek to purchase assets of the Trust. If
the Purchaser or one of its affiliates do not buy the assets of the Trust in the
event of the proposed termination of the Trust, there can be no assurance that a
buyer could be found for the assets of the Trust. Furthermore, there can be no
assurance as to whether or when any such transaction might be proposed by the
Purchaser or its affiliates or as to the purchase price which might be offered
by the Purchaser or its affiliates or by any third party in any such
transaction.
The Purchaser and its affiliates also reserve the right, following
termination of the Offer, to purchase additional Units, either in open market or
privately negotiated transactions, in one or more additional tender offers or
otherwise, or to sell all or any portion of the Units owned by them. Any such
sales or purchases would depend upon current market prices for the Units,
prevailing industry and general economic and market conditions, the business,
financial condition and results of operations of the Trust and other relevant
factors, and would be on such terms and at such prices as the Purchaser or its
affiliates may then determine.
The Trust Agreement provides that, under certain circumstances, the Trustee
and the Delaware Trustee may be removed by a majority vote of the Unit holders.
The Purchaser has no present plans to vote its Units for the removal of either
the Trustee or the Delaware Trustee.
Currently, the Purchaser has no intention to materially change the
distributions of the Trust, except as set forth in this Offer to Purchase.
The Purchaser is not, pursuant to the Offer, requesting votes by Unit
holders in favor of terminating the Trust or on any other matters. Such a
request, if any, will occur pursuant to a proxy statement prepared in accordance
with applicable law, distributed to Unit holders after the successful
consummation of the Offer, and in the event the Purchaser shall deliver to the
Unit holders a notice of meeting in accordance with the Trust Agreement and
applicable law.
13. EFFECT OF THE OFFER ON THE MARKET FOR UNITS; NYSE LISTING AND EXCHANGE
ACT REGISTRATION; MARGIN REGULATIONS. The purchase of Units pursuant to the
Offer will reduce the number of Units that might otherwise trade publicly and
the number of holders of Units and could adversely affect the liquidity and
market value of the remaining Units held by the public. The purchase of Units
pursuant to the Offer can also be expected to reduce the number of holders of
Units.
20
<PAGE> 23
In addition, if the Trust is dissolved, as described in "THE TENDER
OFFER -- 12. Purpose and Structure of the Offer; Plans for the Trust," the Units
may be delisted by the NYSE, and the registration of the Units under the
Exchange Act would be terminated.
Stock Exchange Listing. According to the NYSE's published guidelines, the
NYSE would consider delisting the Units if, among other things, the number of
record holders of at least 100 Units should fall below 1,200 (the number of
beneficial holders of Units held in nominee form through an NYSE member being
considered for such purpose), the number of publicly held Units (exclusive of
holdings of officers, directors, their immediate families and other concentrated
holdings of 10% or more ("NYSE Excluded Holdings")) should fall below 600,000,
or the aggregate market value of such Units should fall below $5,000,000.
Depending on the number of Units purchased pursuant to the Offer, the Units
may no longer meet the requirements of the NYSE for continued listing and may,
therefore, be delisted from such exchange. If, as a result of the purchase of
Units pursuant to the Offer or otherwise, the Units no longer meet the
requirements of the NYSE for continued listing and/or trading and such trading
of the Units were discontinued, the market for such Units could be adversely
affected.
In the event of the delisting of the Units by the NYSE (which the Purchaser
intends to cause the Trust to seek following the Offer if the continued listing
criteria of the NYSE are no longer satisfied), it is possible that the Units
would continue to trade on another securities exchange or in the
over-the-counter market and that price quotations would be reported by such
exchange, by the National Association of Securities Dealers, Inc. (the "NASD")
through the NASD Automated Quotation System ("Nasdaq") or by other sources. The
extent of the public market for Units and the availability of such quotations
would, however, depend upon such factors as the number of Unit holders remaining
at such time, the interest in maintaining a market in such Units on the part of
securities firms, the possible termination of registration under the Exchange
Act as described below and other factors.
Exchange Act Registration. The Units are currently registered under the
Exchange Act. The purchase of the Units pursuant to the Offer may result in the
Units becoming eligible for deregistration under the Exchange Act. Registration
of the Units under the Exchange Act may be terminated upon application of the
Trust to the Commission if the Units are not listed on a national securities
exchange and there are fewer than 300 record holders of the Units. Termination
of registration of the Units under the Exchange Act would substantially reduce
the information required to be furnished by the Trust to Unit holders and to the
Commission and would make certain provisions of the Exchange Act, such as the
short-swing profit recovery provisions of Section 16(b) of the Exchange Act and
the requirements of furnishing a proxy statement in connection with Unit
holders' meeting pursuant to Section 14(a) of the Exchange Act, no longer
applicable to the Trust. If the Units are no longer registered under the
Exchange Act, the requirements of Rule 13e-3 under the Exchange Act with respect
to "going private" transactions would no longer be applicable to the Trust.
Furthermore, the ability of "affiliates" of the Trust and persons holding
"restricted securities" of the Trust to dispose of such securities pursuant to
Rule 144 promulgated under the Securities Act of 1933, as amended, may be
impaired or eliminated. In addition, if registration of the Units under the
Exchange Act were terminated, the Units would no longer be eligible for listing
or Nasdaq reporting.
It is the present intention of the Purchaser to seek to cause the Trust to
make such an application for termination of registration of the Units as soon as
possible following the Offer if the requirements for termination of registration
are met.
Margin Regulations. The Units are presently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of such Units for the purpose of
buying, carrying or trading in securities ("Purpose Loans"). Depending upon
factors such as the number of record holders of the Units and the number and
market value of publicly held Units, following the purchase of Units pursuant to
the Offer, the Units may no longer constitute margin securities for purposes of
the Federal Reserve Board's margin regulations and, therefore, could no longer
be used as collateral for Purpose Loans made by brokers. In addition, if
registration of the Units under the Exchange Act were terminated, the Units
would no longer constitute margin securities.
21
<PAGE> 24
14. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provisions
of the Offer and in addition to (and not in limitation of) the Purchaser's
rights to extend and amend the Offer at any time in its sole discretion, the
Purchaser shall not be required to accept for payment, purchase or pay for,
subject to Rule 14e-1(c) under the Exchange Act and any other applicable rules
and regulations of the Commission, any Units not theretofore accepted for
payment or paid for and may terminate or amend the Offer as to such Units unless
(i) the Minimum Condition is satisfied, (ii) the satisfaction of the conditions
to the funding of the Loan, as described in "THE TENDER OFFER -- 10. Financing
of the Offer," and (iii) approvals required by law to be obtained prior to the
consummation of the Offer under any antitrust or competition laws relating to
the purchase of the Units pursuant to the Offer shall have been obtained.
Furthermore, notwithstanding any other term of the Offer, the Purchaser shall
not be required to accept for payment or to pay for any Units not theretofore
accepted for payment or paid for, and may terminate or amend the Offer if at any
time prior to the expiration of the Offer, any of the following conditions exist
or shall occur and remain in effect:
(a) there shall be threatened, instituted or pending any action or
proceeding by or before any court or governmental, administrative or
regulatory agency or authority or any other person, domestic or foreign,
challenging the making of the Offer or the acquisition by the Purchaser of
any Units, or otherwise directly or indirectly relating to the Offer or, in
the sole judgment of the Purchaser, otherwise adversely affecting the
Trust, the Purchaser, any of the other Acquirors or any of their respective
subsidiaries or affiliates; or
(b) any change shall have occurred or be threatened in the properties,
financial condition, operations, results of operations or prospects of the
Trust or the Royalty Interests that, in the sole judgment of the Purchaser,
is or may be materially adverse to the Trust or the Royalty Interests, or
the Purchaser shall have become aware of any facts that, in the sole
judgment of the Purchaser, have or may have material adverse significance
with respect to the value of the Trust or the Royalty Interests or the
value of the Units to the Purchaser; or
(c) a tender or exchange offer for some portion or all of the Units
shall have been publicly proposed to be made or shall have been made by
another person, or it shall have been publicly disclosed or the Purchaser
shall have learned that (i) any person or "group" (as defined in Section
13(d)(3) of the Exchange Act) shall have acquired or proposed to acquire
more than 5% of the outstanding Units, other than acquisitions for bona
fide arbitrage purposes and other than acquisitions by persons or groups
who have publicly disclosed such ownership on or prior to the date of this
Offer to Purchase or (ii) any such person or group who has publicly
disclosed any such ownership of more than 5% of the Units prior to such
date shall have acquired or proposed to acquire additional Units
constituting more than 1% of the outstanding Units or shall have been
granted any option or right to acquire more than 1% of the outstanding
Units; or
(d) there shall have been any action taken, or any statute, rule,
regulation or order proposed, promulgated, enacted, entered or deemed
applicable to the Offer, by any domestic or foreign government or
governmental authority or by any court, domestic or foreign, that, in the
sole judgment of the Purchaser, might (i) make the acceptance for payment
of or payment for some or all of the Units illegal or otherwise restrict or
prohibit consummation of the Offer, or impose material obligations upon the
Purchaser as a result of any such acceptance or payment, (ii) result in a
delay in the ability of the Purchaser, or render the purchaser unable, to
accept for payment or pay for some or all of the Units, (iii) require the
Purchaser or the Trust or any of their respective affiliates to hold
separate or to divest itself of all or any portion of the business, assets
or property of any of them or any Units or impose any limitation on the
ability of any of them to conduct their business and own such assets,
properties and Units, (iv) impose material limitations on the ability of
the Purchaser to acquire, hold or exercise effectively all rights of
ownership of the Units, including the right to vote any Units purchased by
it on all matters properly presented to the Unit holders or (v) otherwise
adversely affect the Purchaser, any of the other Acquirors, the Trust or
the Units; or
22
<PAGE> 25
(e) there shall have been proposed or adopted by the Trustee or any
Unit holder any amendment to the Trust Agreement, any proposal to terminate
the Trust or any proposal for the sale or transfer by the Trust of all or
any portion of the Royalty Interests; or
(f) there shall occurred (i) any general suspension of trading, or
limitation on prices for, securities on any national securities exchange or
in the over-the-counter market in the United States, (ii) a declaration of
a banking moratorium or any suspension of payments in respect of banks in
the United States, (iii) the commencement of war, armed hostilities or
other international or national calamity directly or indirectly involving
the United States, (iv) any limitation (whether or not mandatory) by any
United States governmental authority or agency on the extension of credit
by banks or other financial institutions in the United States, (v) from the
date of this Offer to Purchase through the date of expiration or
termination of the Offer, a decline of at least 10% in either the Dow Jones
Average of Industrial Stocks or the Standard & Poor's 500 Index, which
decline shall have remained in effect for at least five NYSE trading days
or (vi) in the case of any of the situations described in the clauses (i)
through (iv) inclusive, existing at the date of the commencement of the
Offer, a material acceleration or worsening thereof;
which, in the sole judgment of the Purchaser, in any such case, and regardless
of the circumstances (including any action or inaction by the Purchaser, the
other Acquirors or any of their affiliates) giving rise to any such condition,
makes it inadvisable to proceed with the Offer or with acceptance for payment or
payment for Units.
The foregoing conditions are for the sole benefit of the Purchaser, the
other Acquirors and their respective affiliates and may be asserted by the
Purchaser, in whole or in part, at any time and from time to time in the sole
judgment of the Purchaser. The failure by the Purchaser at any time to exercise
its rights under any of the foregoing conditions shall not be deemed a waiver of
any such rights and each such right shall be deemed an ongoing right which may
be asserted at any time or from time to time. Any determination by the Purchaser
concerning the events described in this Section shall be final and binding on
all parties.
15. APPRAISAL RIGHTS. Holders of Units do not have appraisal rights in
connection with the Offer.
16. CERTAIN TRANSACTIONS. Effective as of September 1, 1997, O'Sullivan Oil
and Scully Oil & Gas Company, Inc. acquired a 0.0572% non-operated
working/0.05033% net revenue interest in the Underlying Properties. The
president and sole shareholder of Scully Oil & Gas Company is Christopher P.
Scully. Each of Christopher P. Scully and O'Sullivan Oil are Acquirors.
17. CERTAIN LEGAL MATTERS.
General. Except as set forth in this Offer to Purchase, including but not
limited to this Section 17, based upon an examination of publicly available
information filed by the Trust with the Commission and other publicly available
information with respect to the Trust, the Purchaser is not aware of any license
or any other regulatory permit that appears to be material to the business of
the Trust, that might be adversely affected by the Purchaser's acquisition of
the Units as contemplated herein or, except as disclosed below, of any filing,
approval or other action by or with any state, federal or foreign governmental,
administrative or regulatory agency that would be required prior to the
acquisition of Units pursuant to the Offer as contemplated herein. Should any
such approval or other action be required, the Purchaser currently contemplates
that such approval or other action will be sought. While the Purchaser does not
currently intend to delay the acceptance for payment of Units tendered pursuant
to the Offer pending the outcome of any such matter, there can be no assurance
that any such approval or other action, if needed, would be obtained or would be
obtained without substantial conditions or that failure to obtain any such
approval or other action might not result in consequences adverse to the
properties and assets of the Trust or that certain of the Trust's properties and
assets might not have to be disposed of in the event that such approvals were
not obtained or such other actions were not taken in order to obtain any such
approval or other action. If certain types of adverse action are taken with
respect to the matters discussed below, the Purchaser could decline to accept
for payment or pay for any Units tendered. See "THE TENDER OFFER -- 14. Certain
Conditions of the Offer" for certain conditions to the Offer, including
conditions with respect to litigation and governmental action.
23
<PAGE> 26
State Takeover Statutes. Based upon its knowledge of the assets of the
Trust and upon publicly available information with respect to the Trust, the
Purchaser does not believe that any state takeover statutes or regulations are
applicable to the Offer. In the event that it is asserted that one or more state
takeover statutes or regulations is applicable to the Offer, and an appropriate
court does not determine that it is inapplicable or invalid as applied to the
Offer, the Purchaser might be required to file certain information with, or
receive approvals from, the relevant state authorities, and the Purchaser might
be unable to purchase or pay for Units tendered pursuant to the Offer or might
be delayed in continuing or consummating the Offer. In such case, the Purchaser
may not be obligated to accept Units for payment. See "THE TENDER
OFFER -- 14. Certain Conditions of the Offer."
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), certain acquisition transactions may not be
consummated unless certain information has been furnished to the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the Federal
Trade Commission (the "FTC") and certain waiting period requirements have been
satisfied. The Purchaser believes that the acquisition of Units pursuant to the
Offer is not subject to the HSR Act or such requirements. However, if the HSR
Act is applicable to the purchase of Units pursuant to the Offer, the Purchaser
intends to take all action necessary to comply with the HSR Act, which could
result in a delay in the consummation of the Offer pending the satisfaction of
the waiting period requirements of the HSR Act.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the acquisition of Units by the
Purchaser pursuant to the Offer. At any time before or after the consummation of
the transaction, the Antitrust Division or the FTC could take such action under
the antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the transaction or seeking divestiture of the Units
so acquired or divestiture of substantial assets of the Purchaser or the Trust.
The Purchaser believes that the acquisition of the Units pursuant to the
Offer would not violate the antitrust laws. However, there can be no assurance
that a challenge to the Offer on antitrust grounds will not be made, or if such
a challenge is made, what the result will be. See "THE TENDER OFFER -- 14.
Certain Conditions of the Offer" for certain conditions to the Offer, including
conditions with respect to litigation and certain governmental actions.
18. FEES AND OTHER EXPENSES. The Purchaser has retained Jefferies &
Company, Inc. in connection with the Offer to provide advice and assistance to
Purchaser with respect to defining objectives, and to act as the Dealer Manager
in connection with the Offer. The terms of such engagement are set forth in a
Dealer Manager Agreement (herein so called) dated January 20, 1998. Jefferies &
Company, Inc. was not asked to, and did not, provide any report, opinion or
appraisal in connection with the Offer.
Pursuant to the Dealer Manager Agreement, a fee of $75,000 became payable
to the Dealer Manager upon the Dealer Manager's engagement thereunder. The
Dealer Manager is entitled to an additional $0.02 per Unit tendered and accepted
by Purchaser pursuant to the Offer. In the event that the Trust is terminated
and the Trust assets are liquidated following completion of the Offer, the
Dealer Manager also will be entitled to an additional of $0.04 for each Unit (i)
purchased by the Purchaser pursuant to the Offer or (ii) acquired by the
Purchaser in an open market transaction after January 7, 1998, solely through
brokerage services provided by the Dealer Manager. The Purchaser has also agreed
to reimburse the Dealer Manager for its out-of-pocket expenses and to indemnify
the Dealer Manager against certain liabilities and expenses, including certain
liabilities under the federal securities laws. In the ordinary course of its
business, the Dealer Manager may actively trade the Units for its own account
and for the account of customers and, accordingly, may at any time hold a long
or short position in such securities.
The Purchaser also has retained Morrow & Co., Inc. to act as the
Information Agent and The Bank of New York to act as the Depositary in
connection with the Offer. The Information Agent may contact holders of Units by
mail, telephone, telex, telecopy, telegraph and personal interview and may
request banks, brokers, dealers and other nominee Unit holders to forward
materials relating to the Offer to beneficial holders. Each of the Information
Agent and the Depositary will receive reasonable and customary compensation for
its services,
24
<PAGE> 27
will be reimbursed for certain reasonable out-of-pocket expenses and will be
indemnified against certain liabilities and expenses in connection therewith.
Brokers, dealers, commercial banks and trust companies will, upon request
only, be reimbursed by the Purchaser for customary mailing and handling expenses
incurred by them in forwarding material to their customers. Except as set forth
above, the Purchaser will not pay any fees or commissions to any broker, dealer
or other person (other than to the Dealer Manager and to the Information Agent)
for soliciting tenders of Units pursuant to the Offer.
19. MISCELLANEOUS. The Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Units residing in any jurisdiction in
which the making of the Offer or the acceptance thereof would not be in
compliance with the securities, blue sky or other laws of such jurisdiction. The
Purchaser is not aware of any jurisdiction in which the making of the Offer or
the acceptance thereof would not be in compliance with the laws of such
jurisdiction. To the extent the Purchaser becomes aware of any state law that
would limit the class of offerees in the Offer, the Purchaser may, in its
discretion, take such action as it may deem necessary to make the Offer in any
jurisdiction and extend the Offer to holders of Units in such jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer will be deemed to
be made on behalf of the Purchaser by one or more registered brokers or dealers
that are licensed under the laws of such jurisdiction.
The Acquirors have filed with the Commission a Tender Offer Statement on
the Purchaser Schedule 14D-1, together with exhibits thereto, furnishing certain
additional information with respect to the Offer, and may file amendments
thereto from time to time. The Schedules and any amendments thereto, including
exhibits, may be examined and copies may be obtained from the offices of the
Commission in the manner set forth in "THE TENDER OFFER -- 6. Certain
Information Concerning the Trust" (except that such information will not be
available at the regional offices of the Commission).
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER NOT CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, ANY SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED.
NEITHER THE DELIVERY OF THE OFFER TO PURCHASE NOR ANY PURCHASE PURSUANT TO THE
OFFER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE PURCHASER OR THE TRUST SINCE THE DATE AS OF
WHICH INFORMATION IS FURNISHED OR THE DATE OF THIS OFFER TO PURCHASE.
January 20, 1998 SAN JUAN PARTNERS, L.L.C.
25
<PAGE> 28
SCHEDULE I
DIRECTORS, MANAGERS, EXECUTIVE OFFICERS
OR CONTROLLING PERSONS OF THE ACQUIRORS
1. The Purchaser. Set forth below are the name, business address and
present principal occupation or employment, and material occupations, positions,
offices or employments for the past five years of the manager of the Purchaser.
Except as set forth below, the manager does not own any Units.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL OCCUPATIONS,
NAME POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
---- -----------------------------------------------------------------
<S> <C>
O'Sullivan Oil O'Sullivan Oil is a Texas corporation with its principal executive offices at 910
Travis Street, Suite 2150, Houston, Texas 77002. The principal business of
O'Sullivan Oil is oil and gas exploration and production. C. N. O'Sullivan, a
United States citizen, is the controlling shareholder and the President of
O'Sullivan Oil. His business address is 910 Travis Street, Suite 2150, Houston,
Texas 77002. The principal employment of Mr. O'Sullivan for the preceding five
years has been acting as President of O'Sullivan Oil.
</TABLE>
2. EnCap B. Set forth below are the name, business address and present
principal occupation or employment, and material occupations, positions, offices
or employments for the past five years of each director and executive officer of
EnCap B. Each of the persons listed below is a director of EnCap B. The business
address of each director and executive officer, unless otherwise indicated
below, is 1100 Louisiana Street, Suite 3150, Houston, Texas 77002. Each of the
persons listed below is a United States citizen. None of such individuals owns
any Units.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL OCCUPATIONS,
NAME POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
---- -----------------------------------------------------------------
<S> <C>
Gary R. Petersen Gary R. Petersen is Vice President and Treasurer of EnCap B, the Vice President
and Secretary/Treasurer of ECIC, and Managing Director of EnCap. His business
address, and the business address of EnCap B, ECIC and EnCap, is 1100 Louisiana
Street, Suite 3150, Houston, Texas 77002, and the principal business of all such
entities is engaging in oil and gas investments. Mr. Petersen has been employed
in the capacity of Managing Director of EnCap from 1988 to the present.
D. Martin Phillips D. Martin Phillips is Vice President and Secretary of EnCap B and Managing
Director of EnCap. His business address, and the business address of EnCap B and
EnCap, is 1100 Louisiana Street, Suite 3150, Houston, Texas 77002, and the
principal business of both such entities is engaging in oil and gas investments.
Mr. Phillips has been employed in the capacity of Managing Director of EnCap from
1989 to the present.
David B. Miller David B. Miller is Vice President of EnCap B and Managing Director of EnCap. His
business address, and the business address of EnCap B and EnCap, is 1100
Louisiana Street, Suite 3150, Houston, Texas 77002, and the principal business of
both such entities is engaging in oil and gas investments. Mr. Miller has been
employed in the capacity of the Managing Director of EnCap from 1988 to the
present.
Robert L. Zorich Robert L. Zorich is President of EnCap B, President of ECIC, and Managing
Director of EnCap. His business address, and the business address of EnCap B,
ECIC and EnCap, is 1100 Louisiana Street, Suite 3150, Houston, Texas 77002, and
the principal business of all such entities is engaging in oil and gas
investments. Mr. Zorich has been employed in the capacity of Managing Director of
EnCap from 1988 to the present.
</TABLE>
I-1
<PAGE> 29
3. ECIC. Set forth below are the name, business address and present
principal occupation or employment, and material occupations, positions, offices
or employments for the past five years of each director and executive officer of
ECIC. Each of the persons listed below is a director of ECIC. The business
address of each director and executive officer, unless otherwise indicated
below, is 1100 Louisiana Street, Suite 3150, Houston, Texas 77002. Each of
persons listed below is a United States citizen. None of such individuals owns
any Units.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL OCCUPATIONS,
NAME POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
---- -----------------------------------------------------------------
<S> <C>
Gary R. Petersen See Part 2 above.
Robert L. Zorich See Part 2 above.
</TABLE>
4. Energy Capital. Set forth below are the name, business address and
present principal occupation or employment, and material occupations, positions,
offices or employments for the past five years of each director of Energy
Capital. None of such individuals owns any Units.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL OCCUPATIONS,
NAME POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
---- -----------------------------------------------------------------
<S> <C>
Peter C. Tudball Peter Tudball C.B.E. is a citizen of the United Kingdom. His business address is
C.B.E. Casu Investments Ltd., London House, 53-54 Haymarket, London SW1Y 4RP. Mr.
Tudball retired in 1993 as Managing Director and Vice Chairman of Graig Shipping
PLC, which is in the shipping business. He is currently employed as a
Non-executive Director of various companies.
Sir Peter G. Cazalet Sir Peter G. Cazalet is a citizen of the United Kingdom. His business address is
15 Thames Walk, Hestor Road, London SW11 38G. Sir Cazalet retired in 1989 as
Managing Director of British Petroleum. In addition, he retired in 1996 as
Chairman of AVP PLC. He is currently employed as a Non-executive Director of P &
O PLC and other companies.
Leo G. Deschuyteneer Leo G. Deschuyteneer is a citizen of Belgium. Mr. Deschuyteneer is currently
employed as Executive Director of Sofina SA, a financial holding company, and his
business address and the address of Sofina SA is 38 Rue de Naples, B-1050,
Brussels, Belgium. He is also currently employed as a Non-executive Director of
other companies.
Eugene Fiedorek Eugene Fiedorek, a United State citizen, is Managing Director of EnCap. The
business address of EnCap is 1100 Louisiana Street, Suite 3150, Houston, Texas
77002, and the principal business EnCap is engaging in oil and gas investments.
Mr. Fiedorek has been employed in the capacity of Managing Director of EnCap from
1988 to the present.
Alan B. Henderson Alan B. Henderson is a citizen of the United Kingdom. Mr. Henderson is currently
employed as Chairman of Ranger Oil (UK) Ltd. and his business address and the
address of Ranger Oil (UK) Ltd. is Ranger House, Walnut Tree Close, Guildford,
Surrey GU1 4US. He is also currently employed as a Non-executive Director of
other companies.
James F. Ladner James F. Ladner is a citizen of Switzerland. Mr. Ladner is Executive Director of
RP & C International, an investment banker, and his business address and the
address of RP & C International is Gartenstrasse 10, CH-8002, Zurich,
Switzerland. He is also currently employed as a Non-executive Director of other
companies.
Gary R. Petersen See Part 2 above.
</TABLE>
I-2
<PAGE> 30
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL OCCUPATIONS,
NAME POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
---- -----------------------------------------------------------------
<S> <C>
William W. Vanderfelt William W. Vanderfelt is a citizen of the United Kingdom. Mr. Vanderfelt is
Managing Partner of Petercam S.A., a stock brokerage firm, and his business
address and the address of Petercam S.A. is 19 Place Sainte-Gudule, B-1000,
Brussels, Belgium.
</TABLE>
5. EnCap. Set forth below are the name, business address and present
principal occupation or employment, and material occupations, positions, offices
or employments for the past five years of each member and managing director of
EnCap. Each managing director is a member of EnCap. The business address of each
member and managing director, unless otherwise indicated below, is 1100
Louisiana Street, Suite 3150, Houston, Texas 77002. Each member and managing
director of EnCap is a United States citizen. None of such individuals owns any
Units.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL OCCUPATIONS,
NAME POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
---- -----------------------------------------------------------------
<S> <C>
Eugene C. Fiedorek See Part 4 above.
David B. Miller See Part 2 above.
D. Martin Phillips See Part 2 above.
Gary R. Petersen See Part 2 above.
Robert L. Zorich See Part 2 above.
</TABLE>
6. Banc One Capital Partners VIII, Ltd. Set forth below are the name,
business address and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years of each
manager of Banc One Capital Partners VIII, Ltd. Each of the managers of Banc One
Capital Partners VIII, Ltd. is a United States citizen. None of such individuals
owns any Units.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL OCCUPATIONS,
NAME POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
---- -----------------------------------------------------------------
<S> <C>
David R. Meuse David R. Meuse is Chairman and Chief Executive Officer of Banc One Capital
Holdings Corporation. His business address, and the address of Banc One Capital
Holdings Corporation, is 150 E. Gay Street, 24th Floor, Columbus, Ohio 43215. The
principal business of Banc One Capital Holdings Corporation is investments. Mr.
Meuse has been employed in the capacity of Chairman and Chief Executive Officer
of Banc One Capital Holdings Corporation since 1993.
James J. Henson James J. Henson is General Counsel of Banc One Capital Holdings Corporation. His
business address, and the address of Banc One Capital Holdings Corporation, is
150 E. Gay Street, 24th Floor, Columbus, Ohio 43215. The principal business of
Banc One Capital Holdings Corporation is investments. Mr. Henson has been
employed in the capacity of General Counsel of Banc One Capital Holdings
Corporation since 1993.
Michael J. Endres Michael J. Endres is Vice Chairman of Banc One Capital Corporation and Chairman
of BOCP Holdings Corporation. His business address, and the address of Banc One
Capital Holdings Corporation, is 150 E. Gay Street, 24th Floor, Columbus, Ohio
43215. The principal business of Banc One Capital Holdings Corporation is
investments. Mr. Endres has been employed in the capacity of Vice Chairman of
Banc One Capital Corporation since 1992. The address of BOCP Holdings Corporation
is 150 E. Gay Street, Columbus, Ohio 43215, and its principal business is
investments.
</TABLE>
7. BOCP Holdings Corporation. Set forth below are the name, business
address and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years
I-3
<PAGE> 31
of each director of BOCP Holdings Corporation. Each of the directors of BOCP
Holdings Corporation is a United States citizen. None of such individuals owns
any Units.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL OCCUPATIONS,
NAME POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
---- -----------------------------------------------------------------
<S> <C>
Michael J. Endres See Part 6 above.
William P. Boardman William P. Boardman is employed by BANC ONE CORPORATION. His business address,
and the address of BANC ONE CORPORATION, is 100 E. Broad Street, Columbus, Ohio
43215. The principal business of BANC ONE CORPORATION is banking. Mr. Boardman
has been employed with BANC ONE CORPORATION for the preceding five years.
Ronald D. Brooks Ronald D. Brooks is employed by Banc One Capital Corporation. His business
address, and the address of Banc One Capital Corporation, is 150 E. Gay Street,
22nd Floor, Columbus, Ohio 43215. The principal business of Banc One Capital
Corporation is investments. Mr. Brooks has been employed with Banc One Capital
Corporation for the preceding five years.
Frederick L. Cullen Frederick L. Cullen is employed by BANC ONE CORPORATION. His business address,
and the address of BANC ONE CORPORATION, is 100 E. Broad Street, Columbus, Ohio
43215. The principal business of BANC ONE CORPORATION is banking. Mr. Cullen has
been employed with BANC ONE CORPORATION for the preceding five years.
G. Lee Griffin G. Lee Griffin is Chairman and Chief Executive Officer of Banc One Louisiana. His
business address, and the address of Banc One Louisiana, is Bank One
Tower - Suite 2100, 451 Florida Street, Baton Rouge, Louisiana 70801. Mr. Griffin
has been employed with Banc One Louisiana, or its predecessor, Premier Bancorp,
for the preceding five years.
Daniel J. Jessee Daniel J. Jessee is employed by Banc One Capital Corporation. His business
address, and the address of Banc One Capital Corporation, is 150 E. Gay Street,
22nd Floor, Columbus, Ohio 43215. The principal business of Banc One Capital
Corporation is investments. Mr. Jessee has been employed with Banc One Capital
Corporation for the preceding five years.
David J. Kundert David J. Kundert is Chairman and Chief Executive Officer of Banc One Investment
Management Group. His business address, and the address of Banc One Investment
Management Group, is 1111 Polaris Parkway-B2, Columbus, Ohio 43240. Mr. Kundert
has been employed in the capacity of Chairman and Chief Executive Officer of Banc
One Investment Management Group, or its predecessor, since 1995. Mr. Kundert is
also President and Chief Executive Officer of Banc One Investment Advisors
Corporation. The business address of Banc One Investment Advisors Corporation is
1111 Polaris Parkway-B2, Columbus, Ohio 43240. Mr. Kundert has been employed in
the capacity of Chairman and Chief Executive Officer of Banc One Investment
Advisors Corporation since 1992.
Robert F. B. Logan Robert F. B. Logan is currently retired. From 1995 to his retirement in 1996, Mr.
Logan was President and Chief Executive Officer of Bank One, Arizona. His
address, and the address of Bank One, Arizona, is 241 North Central - 36th Floor,
Phoenix, Arizona 85004. From 1992 to 1995, Mr. Logan was retired.
Donald L. McWhorter Donald L. McWhorter is currently retired. Prior to his retirement in 1994, Mr.
McWhorter was employed with BANC ONE CORPORATION. His address, and the address of
BANC ONE CORPORATION, is 100 E. Broad Street, Columbus, Ohio 43215. The principal
business of BANC ONE CORPORATION is banking.
</TABLE>
I-4
<PAGE> 32
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL OCCUPATIONS,
NAME POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
---- -----------------------------------------------------------------
<S> <C>
David R. Meuse See Part 6 above.
James V. Pickett James V. Pickett is Vice Chairman of Banc One Capital Corporation. His business
address, and the address of Banc One Capital Corporation, is 150 E. Gay Street,
22nd Floor, Columbus, Ohio 43215. The principal business of Banc One Capital
Corporation is investments. Mr. Pickett has been employed in the capacity of Vice
Chairman of Banc One Capital Corporation since 1993.
William E. Roberts William E. Roberts is Vice Chairman of Banc One Capital Corporation. His business
address, and the address of Banc One Capital Corporation, is 150 E. Gay Street,
22nd Floor, Columbus, Ohio 43215. The principal business of Banc One Capital
Corporation is investments. Mr. Roberts has been employed in the capacity of Vice
Chairman of Banc One Capital Corporation since 1993. Prior to this position, Mr.
Roberts was Chairman of Pickett Companies. The business address of Pickett
Companies is 150 E. Gay Street, 22nd Floor, Columbus, Ohio 43215.
Ronald G. Steinhart Ronald G. Steinhart is Chairman and Chief Executive Officer of Banc One
Commercial Banking Group. His business address, and the address of Banc One
Commercial Banking Group, is 150 E. Gay Street, Columbus, Ohio 43215. Mr.
Steinhart has served as Chairman and Chief Executive of Banc One Commercial
Banking Group since 1996. From 1992 to 1996, Mr. Steinhart was President of Bank
One, Texas. The business address of Bank One, Texas is 1717 Main Street, Dallas,
Texas 75201.
</TABLE>
8. Banc One Capital Holdings Corporation. Set forth below are the name,
business address and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years of each
director of Banc One Capital Holdings Corporation. Each of the directors of Banc
One Capital Holdings Corporation is a United States citizen. None of such
individuals owns any Units.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL OCCUPATIONS,
NAME POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
---- -----------------------------------------------------------------
<S> <C>
John B. McCoy John B. McCoy is employed by BANC ONE CORPORATION. His business address, and the
address of BANC ONE CORPORATION, is 100 E. Broad Street, Columbus, Ohio 43215.
The principal business of BANC ONE CORPORATION is banking. Mr. McCoy has been
employed with BANC ONE CORPORATION for the preceding five years.
David R. Meuse See Part 6 above.
James J. Henson See Part 6 above.
Ronald D. Brooks See Part 7 above.
David J. Kundert See Part 7 above.
Michael J. Endres See Part 6 above.
</TABLE>
I-5
<PAGE> 33
9. First Union Investors. Set forth below are the name, business address
and present principal occupation or employment, and material occupations,
positions, offices or employments for the past five years of each director and
executive officer of First Union Investors. Each person listed below is a
director of First Union Investors. Each of the directors and executive officers
of First Union Investors is a United States citizen. To the knowledge of
Acquirors, none of such individuals owns any Units.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL OCCUPATIONS,
NAME POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
---- -----------------------------------------------------------------
<S> <C>
Robert T. Atwood Robert T. Atwood is Executive Vice President and Chief Financial Officer of First
Union Corporation and Executive Vice President of First Union Investors. His
business address, the address of First Union Corporation, and the address of
First Union Investors is One First Union Center, Charlotte, North Carolina 28288.
First Union Corporation is registered as a bank holding company. The principal
business of First Union Investors is engaging in various investment activities on
behalf of First Union Corporation and its affiliates. Mr. Atwood has been
employed with First Union Corporation for the preceding five years.
Edward E. Crutchfield Edward E. Crutchfield is Chairman and Chief Executive Officer of First Union
Corporation. His business address, and the address of First Union Corporation, is
One First Union Center, Charlotte, North Carolina 28288. First Union Corporation
is registered as a bank holding company. Mr. Crutchfield has been employed with
First Union Corporation for the preceding five years.
John R. Georgius John R. Georgius is President of First Union Corporation and President of First
Union Investors. His business address, the address of First Union Corporation,
and the address of First Union Investors is One First Union Center, Charlotte,
North Carolina 28288. First Union Corporation is registered as a bank holding
company. The principal business of First Union Investors is engaging in various
investment activities on behalf of First Union Corporation and its affiliates.
Prior to 1993, Mr. Georgius was Chairman and Chief Executive Officer of First
Union National Bank -- North Carolina. The address of First Union National
Bank -- North Carolina is One First Union Center, Charlotte, North Carolina
28288, and its principal business is banking.
</TABLE>
10. First Union Corporation. Set forth below are the name, business address
and present principal occupation or employment, and material occupations,
positions, offices or employments for the past five years of each director and
executive officer of First Union Corporation. Directors are indicated by an
asterisk (*). Each of the directors and executive officers of First Union
Corporation is a United States citizen. To the knowledge of Acquirors, none of
such individuals owns any Units.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL OCCUPATIONS,
NAME POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
---- -----------------------------------------------------------------
<S> <C>
A. Dano Davis* A. Dano Davis is Chairman and Principal Executive Officer of Winn-Dixie Stores,
Inc. His business address, and the address of Winn-Dixie Stores, Inc., is 5050
Edgewood Court, Jacksonville, Florida 32254. The principal business of Winn-Dixie
Stores, Inc. is retail grocery sales. Mr. Davis has been employed with Winn-Dixie
Stores, Inc. for the preceding five years.
Roddey Dowd, Sr.* Roddey Dowd, Sr. is Chairman of Charlotte Pipe and Foundry Company. His business
address, and the address of Charlotte Pipe and Foundry Company, is P.O. Box
35430, Charlotte, North Carolina 28235. The principal business of Charlotte Pipe
and Foundry Company is manufacturing pipe and fittings. Mr. Dowd has been
employed with Charlotte Pipe and Foundry Company for the preceding five years.
</TABLE>
I-6
<PAGE> 34
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL OCCUPATIONS,
NAME POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
---- -----------------------------------------------------------------
<S> <C>
William H. Goodwin, William H. Goodwin, Jr. is Chairman of CCA Industries. His business address, and
Jr.* the address of CCA Industries, is 901 East Cary Street, Suite 1400, Richmond,
Virginia 23219. The principal business of CCA Industries is manufacturing sports
and other equipment. CCA Industries is also a diversified holding company. Mr.
Goodwin has been employed with CCA Industries for the preceding five years.
Jack A. Laughery* Jack A. Laughery is Chairman of Laughery Investments. His business address, and
the address of Laughery Investments, is 800 Tiffany Boulevard, Suite 305, Rocky
Mount, North Carolina 27804. The principal business of Laughery Investments is
developing restaurants. From 1995 to 1997, Mr. Laughery was Chairman of The Bagel
Group, Inc., a restaurant developer. The address of The Bagel Group, Inc. is 800
Tiffany Boulevard, Suite 305, Rocky Mount, North Carolina 27804. Prior to 1995,
Mr. Laughery was Chairman of Hardee's Food, Inc., a fast food chain. The address
of Hardee's Food, Inc. is 1233 Hardee's Boulevard, Rocky Mount, North Carolina
27804.
Radford D. Lovett* Radford D. Lovett is Chairman of Commodores Point Terminal Corp. His business
address, and the address of Commodores Point Terminal Corp, is 1600 Independent
Square, Jacksonville, Florida 32202. The principal business of Commodores Point
Terminal Corp is operating a marine terminal and a real estate management
company. Mr. Lovett has been employed with Commodores Point Terminal Corp. for
the preceding five years.
Randolph N. Reynolds* Randolph N. Reynolds is Vice Chairman of Reynolds Metals Company. His business
address, and the address of Reynolds Metals Company, is 6601 W. Broad Street,
Richmond, Virginia 23261. The principal business of Reynolds Metals Company is
the manufacturing of aluminum. Mr. Reynolds has been employed with Reynolds
Metals Company for the preceding five years.
John D. Uible* John D. Uible is an investor. His business address is 225 Water Street, Suite
840, Jacksonville, Florida 32202. Mr. Uible has been an investor for the
preceding five years.
G. Alex Bernhardt, G. Alex Bernhardt, Sr. is Chairman and Chief Executive Officer of Bernhardt
Sr.* Furniture Company. His business address, and the address of Bernhardt Furniture
Company, is P.O. Box 740, Lenoir, North Carolina 28645. The principal business of
Bernhardt Furniture Company is the manufacturing of furniture. Prior to 1996, Mr.
Bernhardt was President and Chief Executive Officer of Bernhardt Furniture
Company.
W. Waldo Bradley* W. Waldo Bradley is Chairman of Bradley Plywood Corporation. His business
address, and the address of Bradley Plywood Corporation, is P.O. Box 1408,
Savannah, Georgia 31402-1408. The principal business of Bradley Plywood
Corporation is wholesale distribution of building materials. Mr. Bradley has been
employed with Bradley Plywood Corporation for the preceding five years.
Howard H. Haworth* Howard H. Haworth is President of The Haworth Group and The Haworth Foundation,
Inc. His business address, and the address of The Haworth Group and The Haworth
Foundation, Inc., is P.O. Box 15369, Charlotte, North Carolina 28211. The
principal business of The Haworth Group and The Haworth Foundation, Inc. is in
investments. Mr. Haworth has been employed with The Haworth Group and The Haworth
Foundation, Inc. for the preceding five years.
</TABLE>
I-7
<PAGE> 35
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL OCCUPATIONS,
NAME POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
- ---------------------------- ------------------------------------------------------------------------------------
<S> <C>
Leonard G. Herring* Leonard G. Herring is an investor. His business address is P.O. Box 427, North
Wilkesboro, North Carolina 28659. Prior to 1996, he was President and Chief
Executive Officer of Lowe's Companies, Inc. Lowe's Companies, Inc. is a retailer of
building materials and related products for home improvement. The address of Lowe's
Companies, Inc. is P.O. Box 1111, North Wilkesboro, North Carolina 28656.
Mackey J. McDonald* Mackey J. McDonald is President and Chief Executive Officer of VF Corporation. His
business address, and the address of VF Corporation, is 1047 North Park Road,
Wyomissing, Pennsylvania 19610. VF Corporation is a manufacturer of apparel. Mr.
McDonald has been employed with VF Corporation for the preceding five years.
Lanty L. Smith* Lanty L. Smith is Chairman and Chief Executive Officer of Precision Fabrics Group,
Inc. His business address, and the address of Precision Fabrics Group, Inc., is 301
North Elm Street, Suite 600, Greensboro, North Carolina 27401. The principal
business of Precision Fabrics Group, Inc. is the manufacturing of technical,
high-performance textile products. Mr. Smith has been employed with Precision
Fabrics Group, Inc. for the preceding five years.
Dewey L. Trogdon* Dewey L. Trogdon is Chairman of Cone Mills Corporation. His business address, and
the address of Cone Mills Corporation, is 3101 North Elm Street, P.O. Box 26540,
Greensboro, North Carolina 27415-6540. The principal business of Cone Mills
Corporation is textile manufacturing. Mr. Trogdon has been employed with Cone Mills
Corporation for the preceding five years.
Robert J. Brown* Robert J. Brown is Chairman, President and Chief Executive Officer of B&C
Associates, Inc. His business address, and the address of B&C Associates, Inc., is
P.O. Box 2636, High Point, North Carolina 27261. The principal business of B&C
Associates, Inc. is public relations and marketing research. Mr. Brown has been
employed with B&C Associates, Inc. for the preceding five years.
Edward E. Crutchfield* See Part 9 above.
R. Stuart Dickson* R. Stuart Dickson has been Chairman of the Executive Committee of Ruddick
Corporation since 1994. His business address, and the address of Ruddick
Corporation, is 2000 Two First Union Center, Charlotte, North Carolina 28282.
Ruddick Corporation is a diversified holding company. Prior to 1994, he was Chairman
of Ruddick Corporation.
B. F. Dolan* B. F. Dolan is an investor. His business address is 1990 Two First Union Center,
Charlotte, North Carolina 28282. Prior to being an investor, Mr. Dolan was Chairman
of Textron, Inc., in Providence, Rhode Island. Textron, Inc. manufactures aerospace,
consumer, industrial and other products.
John R. Georgius* See Part 9 above.
Max Lennon* Max Lennon has been President of Mars Hill College since 1996. His business address,
and the address of Mars Hill College, is 50 Marshall Street, Mars Hill, North
Carolina 28754. From 1994 to 1996, Mr. Lennon was President and Chief Executive
Officer of Eastern Foods, Inc., a food manufacturer and distributor. The address of
Eastern Foods, Inc. is 1000 Naturally Fresh Boulevard, Atlanta, Georgia 30349. Prior
to 1994, Mr. Lennon was President of Clemson University in Clemson, South Carolina
29634.
</TABLE>
I-8
<PAGE> 36
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL OCCUPATIONS,
NAME POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
---- -----------------------------------------------------------------
<S> <C>
Ruth G. Shaw* Ruth G. Shaw has been Senior Vice President, Corporate Resources and Chief
Administrative Officer of Duke Power Company since 1994. Her business address, and
the address of Duke Power Company, is 422 S. Church Street, PB04G, Charlotte, North
Carolina 28242. Duke Power Company is an electric utility. From 1992 to 1994, Ms.
Shaw was Vice President, Corporate Communications, of Duke Power Company.
B. J. Walker* B. J. Walker is Vice Chairman of First Union Corporation. His business address, and
the address of First Union Corporation, is One First Union Center, Charlotte, North
Carolina 28288. First Union Corporation is registered as a bank holding company. Mr.
Walker has been employed with First Union Corporation for the preceding five years.
Edward E. Barr* Edward E. Barr is Chairman, President and Chief Executive Officer of Sun Chemical
Corporation. His business address, and the address of Sun Chemical Corporation, is
222 Bridge Plaza South, Fort Lee, New Jersey 07024. Sun Chemical Corporation is a
graphic arts materials manufacturer. Mr. Barr has been employed with Sun Chemical
Corporation for the preceding five years.
Arthur M. Goldberg* Arthur M. Goldberg is Executive Vice President and President of Gaming Operations of
Hilton Hotels Corporation. His business address, and the address of Hilton Hotels
Corporation, is 9336 Civic Center Drive, Beverly Hills, California 90210. The
principal business of Hilton Hotels Corporation is lodging and casinos. Prior to
1996, Mr. Goldberg was Chairman, President and Chief Executive Officer of Bally
Entertainment Corporation. The address of Bally Entertainment Corporation is 8700
West Bryn Mawr Avenue, Chicago, Illinois 60631, and its principal business is
casinos and entertainment.
Frank M. Henry* Frank M. Henry is Chairman of Frank Martz Coach Company. His business address, and
the address of Frank Martz Coach Company, is P.O. Box 1007, Wilkes-Barre,
Pennsylvania 18773. The principal business of Frank Martz Coach Company is bus
transportation. Mr. Henry has been employed with Frank Martz Coach Company for the
preceding five years.
Joseph Neubauer* Joseph Neubauer is Chairman, President and Chief Executive Officer of ARAMARK
Corporation. His business address, and the address of ARAMARK Corporation, is ARA
Tower, 1101 Market Street, Philadelphia, Pennsylvania 19107. The principal business
of ARAMARK Corporation is provider or manager of food, leisure, uniform, health
education and distribution services. Mr. Neubauer has been employed with ARAMARK
Corporation for the preceding five years.
Anthony P. Terracciano* From 1996 to December 31, 1997, Anthony P. Terracciano was President of First Union
Corporation. His business address, and the address of First Union Corporation is One
First Union Center, Charlotte, North Carolina 28288. First Union Corporation is
registered as a bank holding company. Prior to 1996, Mr. Terracciano was Chairman of
the Board, President and Chief Executive Officer of First Fidelity Bancorporation.
Malcom S. McDonald* Malcom S. McDonald is Chairman and Chief Executive Officer of First Union --
VA/MD/DC. His business address, and the address of First Union -- VA/MD/DC, is P.O.
Box 25970, Richmond, Virginia 23260-5970. The principal business of First Union --
VA/MD/DC is banking.
</TABLE>
I-9
<PAGE> 37
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL OCCUPATIONS,
NAME POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
---- -----------------------------------------------------------------
<S> <C>
Charles M. Shelton, Sr.* Charles M. Shelton, Sr. is General Partner of The Shelton Companies. His business
address, and the address of The Shelton Companies, is 301 S. College Street, Suite
3600, Charlotte, North Carolina 28202. The principal business of The Shelton
Companies is investments. Mr. Shelton has been employed with The Shelton Companies
for the preceding five years.
Marion A. Cowell, Jr. Marion A. Cowell, Jr. is Executive Vice President, Secretary and General Counsel of
First Union Corporation. His business address, and the address of First Union
Corporation, is One First Union Center, Charlotte, North Carolina 28288. The
principal business of First Union Corporation is a registered bank holding company.
Mr. Cowell has been employed with First Union Corporation for the preceding five
years.
Robert T. Atwood See Part 9 above.
</TABLE>
11. Andover. Set forth below are the name, business address and present
principal occupation or employment, and material occupations, positions, offices
or employments for the past five years of the director and executive officer of
Andover. The director and executive officer of Andover is a United States
citizen. The director and executive officer does not own any Units.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL OCCUPATIONS,
NAME POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
---- -----------------------------------------------------------------
<S> <C>
A. John Knapp, Jr. A. John Knapp, Jr. is the President and Secretary of Andover. His business
address, and the address of Andover, is 910 Travis Street, Suite 2205, Houston,
Texas 77002. The principal business of Andover is real estate development. The
principal employment of Mr. Knapp for the preceding five years has been acting as
President of Andover.
</TABLE>
12. O'Sullivan Oil. Set forth below are the name, business address and
present principal occupation or employment, and material occupations, positions,
offices or employments for the past five years of the director and executive
officer of O'Sullivan Oil. The director and executive officer does not own any
Units.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL OCCUPATIONS,
NAME POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
---- -----------------------------------------------------------------
<S> <C>
C. N. O'Sullivan C. N. O'Sullivan, a United States citizen, is the President and Secretary of
O'Sullivan Oil. His business address is 910 Travis Street, Suite 2150, Houston,
Texas 77002. The principal business of O'Sullivan Oil is oil and gas exploration
and production. The principal employment of Mr. O'Sullivan for the preceding five
years has been acting as President of O'Sullivan Oil.
</TABLE>
13. Smith Funding. Set forth below are the name, business address and
present principal occupation or employment, and material occupations, positions,
offices or employments for the past five years of each member and manager of
Smith Funding. The business address of each member and manager, unless otherwise
indicated below, is 1100 Louisiana Street, Suite 3150, Houston, Texas 77002.
Managers are indicated by an asterisk (*). None of the members or managers of
Smith Funding owns any Units.
I-10
<PAGE> 38
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL OCCUPATIONS,
NAME POSITIONS, OFFICES OR EMPLOYMENTS FOR THE PAST FIVE YEARS
---- -----------------------------------------------------------------
<S> <C>
Scott W. Smith* Scott W. Smith, a United States citizen, is a consultant to O'Sullivan Oil, and
his business address and the business address of O'Sullivan Oil is 910 Travis
Street, Suite 2150, Houston, Texas 77002. The principal business of O'Sullivan
Oil is oil and gas exploration and production. From 1990 to 1996, Mr. Smith acted
as land manager for Triad Energy Corporation, and from 1997 to present he has
been Manager of Land/Marketing for O'Sullivan Oil. The business address of Triad
Energy Corporation is 1616 Voss, Suite 650, Houston, Texas, 77057, and its
principal business is oil and gas exploration and production.
A. John Knapp, Jr.* See Part 11 above.
R. Randall Grace* R. Randall Grace, a United States citizen has been an investment associate at
Chilton Capital Management since 1997. Chilton Capital Management is a registered
investment advisory firm. The business address of Chilton Capital Management, and
Mr. Grace's business address, is 910 Travis Street, Suite 2200, Houston, Texas
77002. From September 1994 to January 1997, Mr. Grace was employed with
Willowbrook Riding Stables, Inc., a New York corporation. The business address of
Willowbrook Riding Stables, Inc. is Rural Route 1, Box 143, Clinton Corners, New
York 12514, and its principal business is training and selling horses. Prior to
September 1994, Mr. Grace was a student.
Locke Investments, Locke Investments, L.P. is a Texas limited partnership with its principal
L.P. executive offices at 910 Travis Street, Suite 2206, Houston, Texas 77002, and its
principal business is real estate development. The general partner of Locke
Investments, L.P. is James L. Goettee, Jr. Mr. Goettee, a United States citizen,
is a principal in Andover Development, LLC, which is engaged in real estate
development. His business address, and the address of Andover Development, LLC,
is 910 Travis Street, Suite 2206, Houston, Texas 77002. Prior to joining Andover
Development, LLC in 1996, Mr. Goettee was a student.
Allen R. Schubert Allen R. Schubert, a United States citizen, is a principal of Schubert
Properties, a real estate development company. His business address, and the
address of Schubert Properties, is 1300 Post Oak Boulevard, Suite 1100, Houston,
Texas 77056. Mr. Schubert has been engaged in real estate development for the
past five years.
Christopher L. Knapp Christopher L. Knapp, a United States citizen, is a partner in Chilton Capital
Management, an investment advisory firm. His business address, and the address of
Chilton Capital Management, is 910 Travis Street, Suite 2200, Houston, Texas
77002. Prior to joining Chilton Capital Management in 1996, Mr. Knapp had been
employed since 1985 by Brown Brothers Harriman, an investment firm. The business
address of Brown Brothers Harriman is 4900 Trammell Crow Center, 2001 Ross
Avenue, Dallas, Texas.
Breckinridge L. Knapp Breckinridge L. Knapp, a United States citizen, is an associate of Heritage
Finance and Trust, an investment management firm. His business address, and the
address of Heritage Finance and Trust, is 12 Cours des Bastions, 1205 Geneva,
Switzerland. Prior to joining Heritage Finance and Trust in 1997, Mr. Knapp was
employed by Citibank, #16 KQUAI, General Guissuu #1204, Geneva, Switzerland. The
principal business of Citibank is commercial banking.
</TABLE>
I-11
<PAGE> 39
SCHEDULE II
TRANSACTIONS IN UNITS DURING THE PAST
SIXTY DAYS BY THE ACQUIRORS
(1) The following acquisitions were open-market transactions:
<TABLE>
<CAPTION>
TRANSACTION SHARES PRICE PER
IDENTITY OF PERSON DATES ACQUIRED SHARE
------------------ ----------- -------- ---------
<S> <C> <C> <C>
San Juan Partners, L.L.C. .................................. 1/12/98 10,000 6.175
1/12/98 8,000 6.30
1/13/98 500 6.30
1/13/98 5,800 6.175
1/14/98 1,500 6.4375
1/15/98 1,000 6.55
A. John Knapp, Jr. ......................................... 11/25/97 1,500 7.875
Andover Group, Inc. ........................................ 12/08/97 5,000 6.375
12/11/97 5,000 6.25
12/05/97 4,000 6.8125
12/05/97 2,000 6.875
12/04/97 2,000 7
12/04/97 2,000 7.0625
12/03/97 2,000 7.1875
12/02/97 3,900 7.5
12/02/97 5,000 7.5625
12/01/97 1,100 7.5
12/24/97 200 5.5
Dr. Antonio Moure........................................... 11/25/97 3,000 7.5
Charles T. McCord III....................................... 11/28/97 10,000 7.4375
12/02/97 9,100 7.5
12/08/97 10,000 6.5625
12/09/97 10,000 6.25
12/16/97 8,300 6.1875
12/17/97 1,700 6.1875
12/17/97 10,000 6.1875
12/18/98 10,000 6.125
12/19/98 5,000 5.875
12/22/98 10,000 5.1875
12/23/97 10,000 5.75
C. N. O'Sullivan............................................ 12/05/97 10,000 6.243
12/05/97 10,000 6.228
12/16/97 2,000 6.125
12/16/97 5,000 6
12/16/97 5,000 5.875
12/17/97 6,000 5.8125
O'Sullivan 1993 Children's Trust............................ 11/24/97 5,000 7.55
12/02/97 2,000 6.927
12/02/97 3,000 6.863
12/03/97 1,400 6.312
12/03/97 3,000 6.676
12/03/97 1,600 6.471
12/04/97 2,000 6.239
</TABLE>
II-1
<PAGE> 40
<TABLE>
<CAPTION>
TRANSACTION SHARES PRICE PER
IDENTITY OF PERSON DATES ACQUIRED SHARE
------------------ ----------- -------- ---------
<S> <C> <C> <C>
12/04/97 3,000 6.301
12/11/97 5,000 6.363
12/16/97 3,000 6.176
Christopher P. Scully....................................... 11/24/97 5,000 7.5
12/02/97 5,000 6.93
12/05/97 20,000 6.243
12/09/97 2,200 6.25
12/10/97 10,000 6.315
12/16/97 10,000 5.875
12/17/97 10,000 5.93
12/18/97 7,800 5.75
Scott W. Smith Funding, L.L.C. ............................. 1/07/98 500 6.0625
1/08/98 200 6.125
1/09/98 1,000 6.125
1/09/98 2,300 6.0625
1/09/98 3,000 6.125
1/12/98 1,000 6.125
1/12/98 700 6.0625
John V. Whiting............................................. 12/05/97 3,000 6.228
12/10/97 10,000 6.375
12/16/97 4,000 5.75
12/19/97 40 5.5625
12/19/97 700 5.625
12/19/97 1,000 5.5625
</TABLE>
(2) On January 13, 1998, the Knapp's Children's Trust, a Texas trust, Chris
Knapp, trustee, sold 1,100 Units to Smith Funding at price of $7.20 per Unit,
pursuant to a private transaction. The Knapp's Children's Trust is an associate
of A. John Knapp, Jr., who is the controlling shareholder and President of
Andover, an Acquiror.
(3) On January 15, 1998, the Alfred J. Knapp, Jr. Trust, a Texas trust,
David H. Knapp, trustee, sold 1,000 Units to Andover at a price of $7.20 per
Unit, pursuant to a private transaction. The Alfred J. Knapp, Jr. Trust is an
associate of A. John Knapp, Jr., who is the controlling shareholder and
President of Andover, an Acquiror.
(4) On January 14, 1998, Dr. Antonio Moure sold 9,000 Units to Smith
Funding at a price of $7.20 per Unit, pursuant to a private transaction. Dr.
Moure is an associate (father-in-law) of A. John Knapp, Jr., who is the
controlling shareholder and President of Andover, an Acquiror.
(5) On January 13, 1998, A. John Knapp, Jr. sold 24,500 Units to Smith
Funding at a price of $7.20 per Unit, pursuant to a private transaction. A. John
Knapp, Jr. is the controlling shareholder and President of Andover, an Acquiror.
(6) On January 13, 1998, C. N. O'Sullivan sold 38,000 Units to O'Sullivan
Oil at a price of $7.13 per Unit, pursuant to a private transaction. C. N.
O'Sullivan is the sole shareholder, officer and director of O'Sullivan Oil,
which is one of the Acquirors.
(7) On January 13, 1998, the O'Sullivan 1993 Children's Trust, a Texas
trust, C. N. O'Sullivan, trustee, sold 62,000 Units to O'Sullivan Oil at a price
of $7.13 per Unit, pursuant to a private transaction. The O'Sullivan 1993
Children's Trust is an associate of C. N. O'Sullivan, who is the sole
shareholder, officer and director of O'Sullivan Oil, which is one of the
Acquirors.
II-2
<PAGE> 41
(8) On January 15, 1998, in connection with the capitalization of the
Purchaser, each of the following entities transferred the number of Units listed
below to the Purchaser in return for units of interest in the Purchaser,
pursuant to a private transaction:
<TABLE>
<CAPTION>
ENTITY UNITS TRANSFERRED TO THE PURCHASER
------ ----------------------------------
<S> <C>
Andover................................... 34,300
Charles T. McCord III..................... 124,100
O'Sullivan Oil............................ 100,000
Christopher P. Scully..................... 100,000
Smith Funding............................. 42,200
John V. Whiting........................... 21,740
</TABLE>
II-3
<PAGE> 42
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal, certificates for Units and any other required documents should
be sent or delivered by each Unit holder or his broker, dealer, commercial bank,
trust company or other nominee to the Depositary at one of the addresses set
forth below:
THE DEPOSITARY FOR THE OFFER IS:
THE BANK OF NEW YORK
<TABLE>
<C> <C> <C>
By Hand Delivery
or Overnight: Facsimile Transmission: By Mail:
Tender & Exchange (212) 815-6213 Tender & Exchange
Department (For Eligible Institutions Department
101 Barclay Street Only) P.O. Box 11248
Receive and Delivery Window Church Street Station
New York, New York 10286 Confirm by Telephone: New York, New York
(800) 507-9357 10286-1248
</TABLE>
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Manager at their respective
telephone numbers and locations listed below. You may also contact your broker,
dealer, commercial bank, trust company or nominee for assistance concerning the
Offer.
The Information Agent for the Offer is:
MORROW & CO., INC.
909 Third Avenue, 20th Floor
New York, New York 10022
(212) 754-8000
Toll Free (800) 566-9061
Banks and Brokerage Firms please call:
(800) 662-5200
The Dealer Manager for the Offer is:
JEFFERIES & COMPANY, INC.
909 Fannin Street
Suite 3100
Houston, Texas 77002
(713) 658-1100
Toll Free (800) 533-0072
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER UNITS OF BENEFICIAL INTEREST
OF
BURLINGTON RESOURCES COAL SEAM GAS ROYALTY TRUST
PURSUANT TO THE OFFER TO PURCHASE DATED JANUARY 20, 1998
BY
SAN JUAN PARTNERS, L.L.C.
THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY,
FEBRUARY 17, 1998, UNLESS EXTENDED
(AS EXTENDED, THE "EXPIRATION DATE")
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<C> <C> <C>
By Hand Delivery
or Overnight: Facsimile Transmission: By Mail:
Tender & Exchange (212) 815-6213 Tender & Exchange
Department (For Eligible Institutions Only) Department
101 Barclay Street P.O. Box 11248
Receive and Delivery Window Confirm by Telephone: Church Street Station
New York, New York 10286 New York, New York
(800) 507-9357 10286-1248
</TABLE>
---------------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTION VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE
APPROPRIATE SPACE PROVIDED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 INCLUDED
HEREIN.
THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by holders of Units (as
defined below) either if (1) certificates evidencing Units are to be forwarded
herewith or (2) unless an Agent's Message (as defined in the Offer to Purchase
(as defined below)) is utilized, delivery of Units is to be made by book-entry
transfer to the Depositary's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in "THE
TENDER OFFER -- 2. Procedures for Tendering Units" of the Offer to Purchase.
Unit holders whose certificates are not immediately available, or who are unable
to deliver the Units and all other documents required hereby to the Depositary
on or prior to the Expiration Date or who cannot comply with the book-entry
transfer procedures on a timely basis, may nevertheless tender their Units
pursuant to the guaranteed delivery procedures set forth in "THE TENDER
OFFER -- 2. Procedures for Tendering Units" of the Offer to Purchase. See
Instruction 2.
<PAGE> 2
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF UNITS TENDERED
- ----------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED OWNER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON UNITS TENDERED
CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- ----------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER OF
UNITS REPRESENTED NUMBER
CERTIFICATE BY OF UNITS
NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2)
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
Total Units
- ----------------------------------------------------------------------------------------------------------------------
(1) Need not be completed by Unit holders tendering by book-entry transfer.
(2) Unless otherwise indicated, it will be assumed that all Units described above are being tendered. See Instruction
4.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The names and addresses of the registered holders should be printed, if not
already printed above, exactly as they appear on the certificates representing
Units tendered hereby. The certificates and number of Units that the undersigned
wishes to tender should be indicated in the appropriate boxes.
<TABLE>
<S> <C>
[ ] CHECK HERE IF TENDERED UNITS ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE DEPOSITARY'S ACCOUNT THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
------------------------------------------------------------
Account Number:
------------------------------------------------------------
Transaction Code Number:
------------------------------------------------------------
[ ] CHECK HERE IF TENDERED UNITS ARE BEING DELIVERED PURSUANT TO
A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE
DEPOSITARY AND COMPLETE THE FOLLOWING:
Transaction Code Number:
------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
------------------------------------------------------------
Name of Institution that Guaranteed Delivery:
------------------------------------------------------------
If Delivered by book-entry transfer, complete the following:
Name of Tendering Institution:
------------------------------------------------------------
Account Number:
------------------------------------------------------------
Transaction Code Number:
------------------------------------------------------------
</TABLE>
2
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to San Juan Partners, L.L.C., a Texas
limited liability company (the "Purchaser"), the above-described Units of
Beneficial Interest (the "Units") of Burlington Resources Coal Seam Gas Royalty
Trust, a Delaware business trust (the "Trust"), pursuant to the Purchaser's
offer to purchase 5,446,860 Units at a price of $8.25 per unit, net to the
seller in cash, without interest thereon (the "Purchase Price"), upon the terms
and subject to the conditions set forth in the Purchaser's Offer to Purchase
dated January 20, 1998 (the "Offer to Purchase"), receipt of which is hereby
acknowledged, and this Letter of Transmittal (which, together with any
amendments or supplements to such documents, constitute the "Offer").
Subject to, and effective upon, the acceptance for payment of, and
payment for, the Units tendered herewith in accordance with the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to, or upon the order of, the
Purchaser all right, title and interest in and to all the Units that are being
tendered hereby (and any and all other Units, other securities, rights or
distributions issued or issuable in respect to such Units on or after the date
of the Offer to Purchase, other than regular cash distributions declared by the
Trust having a record date prior to the date of transfer to the Purchaser or its
nominees or assignees on the Trust's transfer records of the Units tendered
herewith as provided in the Offer to Purchase (such Units or other securities,
rights or distributions other than such regular cash distributions being
referred to herein as "Distributions")) and irrevocably constitutes and appoints
the Depositary the true and lawful agent and attorney-in-fact of the undersigned
with respect to such Units (and any Distributions), with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to: (a) deliver certificates for such Units (and any
Distributions) or transfer ownership of such Units (and any Distributions) on
the account books maintained by the Book-Entry Transfer Facility together, in
either such case, with all accompanying evidences of transfer and authenticity,
to, or upon the order of, the Purchaser, (b) present such Units (and any
Distributions) for transfer on the Trust transfer records and (c) receive all
benefits and otherwise exercise all rights of beneficial ownership of such Units
(and any Distributions), all in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints C. N. O'Sullivan and Scott
W. Smith, and each of them, and any other designees of the Purchaser, the
attorneys-in-fact and proxies of the undersigned, each with full power of
substitution, to exercise all voting and other rights of the undersigned,
including the execution of any written consent, in such manner as each such
attorney-in-fact and proxy or his substitute shall, in his sole discretion, deem
proper with respect to all of the Units tendered hereby (and any Distributions)
which have been accepted for payment by the Purchaser prior to the time of any
vote or other action at any meeting of Unit holders of the Trust. This power of
attorney and proxy are irrevocable, and are granted in consideration of, and are
effective upon, the acceptance for payment of such Units in accordance with the
terms of the Offer. Such acceptance for payment shall, without further action,
revoke all prior powers of attorney and proxies appointed by the undersigned at
any time with respect to such Units (and any Distributions) and no subsequent
powers of attorney or proxies will be appointed by the undersigned (and if given
or executed, will not be deemed effective). The Purchaser expressly reserves the
right to require that, in order for Units (and any Distributions) to be validly
tendered, immediately upon the acceptance for payment of such Units (and any
Distributions), the Purchaser must be able to exercise full voting rights with
respect to such Units (and any Distributions).
The undersigned hereby represents and warrants that the undersigned
has full power and authority to tender, sell, assign and transfer the Units
tendered hereby (and any Distributions), the tender of the tendered Units
complies with Rule 14e-4 under the Securities Exchange Act of 1934, as amended,
and, when the same are accepted for payment by the Purchaser, the Purchaser will
acquire good, marketable and unencumbered title thereto, free and clear of all
liens, restrictions, charges and encumbrances, and the same will not be subject
to any adverse claim. The undersigned will, upon request, execute and deliver
any additional documents deemed by the Depositary or the Purchaser to be
necessary or desirable to complete or confirm the sale, assignment and transfer
of the Units tendered hereby (and any Distributions).
3
<PAGE> 4
All authority conferred or agreed to be conferred pursuant to this
Letter of Transmittal shall be binding upon the personal representatives,
successors, assigns, heirs, executors, administrators, trustees in bankruptcy
and legal representatives of the undersigned and shall not be affected by, and
shall survive, the death or incapacity of the undersigned. Except as stated in
the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Units pursuant to any one
of the procedures described in "THE TENDER OFFER -- 2. Procedures for Tendering
Units" of the Offer to Purchase and in the instructions hereto will constitute
an agreement between the undersigned and the Purchaser upon the terms and
subject to the conditions of the Offer. Without limiting the foregoing, if the
Offer Price is amended in accordance with the Offer, the price to be paid to the
undersigned will be the amended price notwithstanding the fact that a different
price is stated in this Letter of Transmittal. The undersigned recognizes that,
under certain circumstances set forth in the Offer to Purchase, the Purchaser
may not be required to accept for payment any of the Units tendered hereby.
The undersigned acknowledges that, subject to the applicable rules of
the Securities and Exchange Commission (the "Commission"), the Purchaser
expressly reserves the right, in its sole discretion, at any time or from time
to time and regardless of whether or not any of the events set forth in "THE
TENDER OFFER -- 14. Certain Conditions of the Offer" of the Offer to Purchase
shall have occurred or shall have been determined by the Purchaser to have
occurred, (i) to extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, and the payment for, all Units validly
tendered by giving oral or written notice of such extension to the Depositary
and (ii) to amend the Offer in any respect, by giving oral or written notice of
such extension or amendment to the Depositary. The undersigned acknowledges that
these rights reserved by the Purchaser are in addition to the Purchaser's rights
to terminate the Offer pursuant to "THE TENDER OFFER -- 14. Certain Conditions
of the Offer" of the Offer to Purchase. UNDER NO CIRCUMSTANCES WILL INTEREST BE
PAID ON THE PURCHASE PRICE FOR TENDERED UNITS, WHETHER OR NOT THE PURCHASER
EXERCISES ITS RIGHTS TO EXTEND THE OFFER.
The undersigned also acknowledges that, subject to the applicable
rules of the Commission, if the Minimum Condition (as defined in the Offer to
Purchase) is not satisfied, or if any or all of the other events set forth in
"THE TENDER OFFER -- 14. Certain Conditions of the Offer" of the Offer to
Purchase shall have occurred prior to the Expiration Date, the Purchaser
reserves the right (but shall not be obligated) in its sole discretion to (i)
decline to purchase any of the Units tendered in the Offer, terminate the Offer
and return all tendered Units to the tendering Unit holders, (ii) waive or
reduce the Minimum Condition, or waive or amend any or all other conditions to
the Offer to the extent permitted by applicable law and, subject to complying
with applicable rules and regulations of the Commission, purchase all Units
validly tendered, (iii) extend the Offer and, subject to the right of the Unit
holders to withdraw Units until the Expiration Date, retain the Units that have
been tendered during the period or periods for which the Offer is extended or
(iv) amend the Offer.
Unless otherwise indicated herein under "Special Payment
Instructions," please issue the check for the Purchase Price of any Units
purchased, and return any certificates for Units not tendered or not purchased,
in the name(s) of the undersigned (and, in the case of Units tendered by
book-entry transfer, by credit to the account at the Book-Entry Transfer
Facility). Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the Purchase Price for any Units
purchased, and return any certificates for Units not tendered or not purchased
(and accompanying documents, as appropriate), to the undersigned at the address
shown below the undersigned's signature(s). In the event that both the Special
Delivery Instructions and the Special Payment Instructions are completed, please
issue the check for the Purchase Price of any Units purchased, and return any
certificates for Units not tendered or not purchased, in the name(s) of, and
mail said check and any certificates to, the person(s) so indicated. Unless
otherwise indicated under "Special Payment Instructions," please credit any
Units tendered herewith by book-entry transfer that are not accepted for payment
by crediting the account at the Book-Entry Transfer Facility. The undersigned
recognizes that the Purchaser has no obligation, pursuant to the Special Payment
Instructions, to transfer any Units from the name of the registered holder(s)
thereof if the Purchaser does not accept for payment any of the Units so
tendered.
4
<PAGE> 5
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the Purchase Price of Units purchased
and/or certificates for Units not tendered or not purchased are to be issued in
the name of someone other than the undersigned, or if Units tendered by
book-entry transfer that are not purchased are to be returned by credit to an
account at the Book-Entry Transfer Facility other than the account designated
above.
Issue check and/or certificate(s) to:
Name:
- --------------------------------------------------------------------------------
(Please Print)
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
(Tax Identification or Social Security Number)
(See Substitute Form W-9)
[ ] Credit unpurchased Units tendered by book-entry transfer to the account set
forth below:
Name of Account Party:
- --------------------------------------------------------------------------------
Account Number:
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Units purchased
and/or certificates for Units not tendered or not purchased are to be mailed to
someone other than the undersigned or to the undersigned at an address other
than that shown below the undersigned's signature.
Issue check and/or certificate(s) to:
Name:
- --------------------------------------------------------------------------------
(Please Print)
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
(Tax Identification or Social Security Number)
(See Substitute Form W-9)
5
<PAGE> 6
SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9) BELOW)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Signature(s) of Unit holder(s)*)
Dated:
- --------------------------------------------------------------------------------
* Must be signed by registered holder(s) as name(s) appear(s) on the
certificate(s) for the Units or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, please provide the following information
and see Instruction 5.
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print)
Name of Firm (if applicable):
- --------------------------------------------------------------------------------
Capacity (Full Title):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Daytime Area Code and Telephone Number:
- ----------------------------------------------------------------------------
Taxpayer Identification or Social Security No.:
- ---------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(If Required -- See Instructions 1 and 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY. PLACE MEDALLION GUARANTEE IN SPACE
BELOW.
Authorized Signature:
- --------------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------------
(Please Print)
Name of Firm:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
Dated:
- --------------------------------------------------------------------------------
6
<PAGE> 7
PAYER'S NAME: THE BANK OF NEW YORK
<TABLE>
<S> <S> <C>
- -----------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- PLEASE PROVIDE YOUR TIN Social Security Number or
FORM W-9 IN THE BOX AT RIGHT AND CERTIFY BY Employer Identification Number
INTERNAL REVENUE SERVICE SIGNING AND DATING BELOW.
----------------------------------
(If awaiting TIN, write "Applied
For")
PART II -- Certifications: Under penalties of perjury, I certify that:
(1) the number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me) and
(2) I am not subject to backup withholding either because (a) I am
exempt from backup withholding, or (b) I have not been notified by the
Internal Revenue Service (the "IRS") that I am subject to backup
withholding as a result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
Payer's Request for Taxpayer Certification Instructions -- You must cross out
Identification Number ("TIN") item (2) above if you have been notified by the IRS PART 3 --
that you are currently subject to backup withholding
because of under-reporting interest or dividends on Awaiting TIN [ ]
your tax return. However, if after being notified by
the IRS that you were subject to backup withholding,
you received another notification from the IRS that
you are no longer subject to backup withholding, do
not cross out such Item (2). (Also see instructions
in the enclosed Guidelines.)
Signature
---------------------------------------------------
Date
---------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM W-9 MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF
SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalty of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or
delivered an application to receive a taxpayer identification number to
the appropriate IRS Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by
the time of payment, 31% of all payments pursuant to the Offer made to me
thereafter will be withheld until I provide a number.
--------------------------------------------------------------------------
------------------------------------
Signature Date
- --------------------------------------------------------------------------------
7
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, signatures
on all Letters of Transmittal must be guaranteed by a firm that is a bank,
broker, dealer, credit union, savings association or other entity that is a
member in good standing of the Securities Transfer Agent's Medallion Program
("STAMP"), the Stock Exchange Medallion Program ("SEMP") or the New York Stock
Exchange, Inc. Medallion Signature Program ("MSP") (each of the foregoing
constituting an "Eligible Institution") unless the Units are tendered (i) by a
registered holder of the Units who has not completed either the box labeled
"Special Payment Instructions" or the box labeled "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instruction 5. If the certificates are registered in
the name of a person or persons other than the signer of this Letter of
Transmittal, or if payment is to be made or delivered to, or certificates
evidencing unpurchased Units are to be issued or returned to, a person other
than the registered owner or owners, then the tendered certificates must be
endorsed or accompanied by duly executed stock powers, in either case signed
exactly as the name or names of the registered owner or owners appear on the
certificates or stock powers, with the signatures on the certificate or stock
powers guaranteed by an Eligible Institution as provided herein. See Instruction
5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed by Unit holders either
if certificates are to be forwarded herewith or, unless an Agent's Message is
utilized, if delivery of Units is to be made by book-entry pursuant to the
procedures set forth in "THE TENDER OFFER -- 2. Procedures for Tendering Units"
of the Offer to Purchase. Certificates for all physically delivered Units, or a
confirmation of a book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility of all Units delivered electronically, as well as a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other documents required by this Letter of Transmittal, or the
Agent's Message in the case of a book-entry transfer, must be received by the
Depositary at its address set forth on the front page of this Letter of
Transmittal on or prior to the Expiration Date.
Unit holders whose certificates for Units are not immediately available or
who cannot deliver their certificates and all other required documents to the
Depositary or complete the procedures for book-entry transfer prior to the
Expiration Date must tender their Units pursuant to the guaranteed delivery
procedures set forth in "THE TENDER OFFER -- 2. Procedures for Tendering Units"
of the Offer to Purchase. Pursuant to such procedures: (a) such tender must be
made by or through an Eligible Institution; (b) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form provided by
the Purchaser, must be received by the Depositary on or prior to the Expiration
Date; and (c) the certificates for all tendered Units, in proper form for
tender, or Book-Entry Confirmation of a transfer into the Depositary's account
at the Book-Entry Transfer Facility of all Units delivered electronically, as
well as a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), and any other documents required by this Letter of
Transmittal, or an Agent's Message in the case of a book-entry transfer, must be
received by the Depositary within three New York Stock Exchange ("NYSE") trading
days after the date of execution of such Notice of Guaranteed Delivery, all as
provided in "THE TENDER OFFER -- 2. Procedures for Tendering Units" of the Offer
to Purchase.
THE METHOD OF DELIVERY OF UNITS, THIS LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY,
IS AT THE OPTION AND RISK OF THE TENDERING UNIT HOLDER. UNITS WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, AMPLE TIME SHOULD BE ALLOWED FOR SUCH DOCUMENTS TO REACH THE
DEPOSITARY.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Units will be purchased. All tendering Unit holders, by execution of
this Letter of Transmittal (or facsimile thereof), waive any right to receive
any notice of the acceptance of their Units for payment.
8
<PAGE> 9
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Units should be listed on a separate
signed schedule attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO UNIT HOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Units evidenced by any certificate submitted
are to be tendered, fill in the number of Units that are to be tendered in the
box entitled "Number of Units Tendered." In such a case, new certificate(s) for
the remainder of the Units that were evidenced by the old certificate(s) will be
sent to the person(s) signing this Letter of Transmittal, unless otherwise
provided in the appropriate box on this Letter of Transmittal, as soon as
practicable after the expiration of the Offer. All Units represented by
certificates delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated.
5. SIGNATURES ON LETTERS OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Units
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificate(s) without alteration, enlargement or any change
whatsoever.
If any of the Units tendered hereby are owned of record by two or more
persons, all such owners must sign this Letter of Transmittal.
If any tendered Units are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Purchaser of such authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered holder(s) of
Units listed and transmitted hereby, no endorsements of certificates or separate
stock powers are required unless payment is to be made to, or certificates for
Units not tendered or accepted for payment are to be issued to, a person other
than the registered holder(s). Signatures on such certificates or stock powers
must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of certificates listed, the certificates must be endorsed
or accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered owner or owners appear on the certificates.
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the
Purchaser will pay any stock transfer taxes with respect to the transfer and
sale of Units to it, or to its order, pursuant to the Offer. If, however,
payment of the Purchase Price is to be made to, or if certificates for Units not
tendered or accepted for payment are to be registered in the name of, any person
other than the registered holder(s), or if tendered certificates are registered
in the name of any person other than the person(s) signing this Letter of
Transmittal, the amount of any stock transfer taxes (whether imposed on the
registered holder(s) or such other person or otherwise) payable on account of
the transfer to such person will be deducted from the Purchase Price unless
satisfactory evidence of the payment of such taxes, or exemption therefrom, is
submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTION. If a check for the Purchase
Price of any Units purchased is to be issued, or any Units not tendered or not
purchased are to be returned, in the name of a person other than the person(s)
signing this Letter of Transmittal, or if the check or any certificates for
Units not tendered or not purchased are to be mailed to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal at an address other than that shown above, the appropriate
boxes on this Letter of Transmittal should be completed. Unit holders tendering
Units by book-entry transfer may request that Units not purchased be credited to
such account at the Book-Entry Transfer Facility as such
9
<PAGE> 10
Unit holder may designate under "Special Payment Instructions." If no such
instructions are given, any such Units not purchased will be returned by
crediting the account at the Book-Entry Transfer Facility designated above.
8. REQUEST FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance may
be directed to the Information Agent or the Dealer Manager at their respective
addresses set forth below. Additional copies of the Offer to Purchase, this
Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from
the Information Agent or the Dealer Manager at their respective addresses set
forth below or from your broker, dealer, commercial bank, trust company or other
nominee.
9. WAIVER OF CONDITIONS. Subject to the applicable rules and regulations of
the Commission, the conditions of the Offer may be waived by the Purchaser, in
whole or in part, at any time and from time to time in the Purchaser's sole
discretion, in the case of any Units tendered.
10. SUBSTITUTE FORM W-9. Under U.S. federal income tax law, a Unit holder
whose tendered Units are accepted for payment is required to provide the
Depositary with such Unit holder's correct taxpayer identification number
("TIN") on Substitute Form W-9 above. If such Unit holder is an individual, the
TIN is such Unit holder's social security number. If the Depositary is not
provided with the correct TIN, the Internal Revenue Service may subject the Unit
holder or other payee to a $50 penalty. In addition, payments that are made to
such Unit holder or other payee with respect to Units purchased pursuant to the
Offer may be subject to 31% backup withholding.
Certain Unit holders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that Unit holder must submit a statement, signed under penalty of
perjury, attesting to that individual's exempt status. Such statements may be
obtained from the Depositary. All exempt recipients (including foreign persons
wishing to qualify as exempt recipients) should see the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments made to the Unit holder or other payee. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
The box in Part III of the Substitute Form W-9 may be checked if the
tendering Unit holder or other payee has not been issued a TIN and has applied
for a TIN or intends to apply for a TIN in the near future. If the box in Part
III is checked, the Unit holder or other payee must also complete the
Certificate of Awaiting Taxpayer Identification Number below in order to avoid
backup withholding. Notwithstanding that the box in Part III is checked and the
Certificate of Awaiting Taxpayer Identification Number is completed, the
Depositary will withhold 31% on all payments made prior to the time a properly
certified TIN is provided to the Depositary. However, such amounts will be
refunded to such Unit holder if a TIN is provided to the Depositary within 60
days.
The Unit holder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record holder of the
Units or of the last transferee appearing on the transfers attached to, or
endorsed on, the Units. If the Units are in more than one name or are not in the
name of the actual holder, consult the enclosed "Guidelines for certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE COPY THEREOF (TOGETHER
WITH CERTIFICATES FOR, OR A BOOK-ENTRY CONFIRMATION WITH RESPECT TO, TENDERED
UNITS WITH ANY REQUIRED SIGNATURE GUARANTEES AND ALL OTHER REQUIRED DOCUMENTS)
MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE DEPOSITARY, PRIOR TO THE EXPIRATION DATE.
10
<PAGE> 11
Questions and request for assistance or additional copies of the Offer to
Purchase, this Letter of Transmittal and other tender offer materials may be
directed to the Information Agent or the Dealer Manager as set forth below.
The Information Agent for the Offer is:
MORROW & CO., INC.
909 Third Avenue, 20th Floor
New York, New York 10022
(212) 754-8000
Toll Free (800) 566-9061
Banks and Brokerage Firms please call:
(800) 662-5200
The Dealer Manager for the Offer is:
JEFFERIES & COMPANY, INC.
909 Fannin Street
Suite 3100
Houston, Texas 77002
(713) 658-1100
Toll Free (800)533-0072
11
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF UNITS OF BENEFICIAL INTEREST
OF
BURLINGTON RESOURCES COAL SEAM GAS ROYALTY TRUST
As set forth in the "THE TENDER OFFER -- 2. Procedures for Tendering Units"
of the Offer to Purchase (as defined below), this Notice of Guaranteed Delivery,
or one substantially equivalent hereto, must be used to accept the Offer (as
defined below) if certificates representing Units of Beneficial Interest (the
"Units") of Burlington Resources Coal Seam Gas Royalty Trust, a Delaware
business trust (the "Trust"), are not immediately available or if the procedures
for book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Depositary prior to the Expiration
Date (as defined in "THE TENDER OFFER -- 1. Terms of the Offer" of the Offer to
Purchase). This Notice of Guaranteed Delivery may be delivered by hand or
transmitted by telegram or facsimile transmission or mailed to the Depositary
and must include a guarantee by an Eligible Institution (as defined in "THE
TENDER OFFER -- 2. Procedures for Tendering Units" of the Offer to Purchase).
See "THE TENDER OFFER -- 2. Procedures for Tendering Units" of the Offer to
Purchase.
The Depositary for the Offer is
THE BANK OF NEW YORK
<TABLE>
<C> <C> <C>
By Hand Delivery By Mail:
or Overnight: Facsimile Transmission: Tender & Exchange
Tender & Exchange (212) 815-6213 Department
Department (For Eligible Institutions P.O. Box 11248
101 Barclay Street Only) Church Street Station
Receive and Delivery Window Confirm by Telephone: New York, New York
New York, New York 10286 (800) 507-9357 10286-11248
</TABLE>
---------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE NUMBER, OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for the Units to the Depositary within the time period shown
herein. Failure to do so could result in a financial loss to such Eligible
Institution.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to San Juan Partners, L.L.C., a Texas
limited liability company (the "Purchaser"), upon the terms and subject to the
conditions set forth in the Purchaser's Offer to Purchase dated January 20, 1998
(the "Offer to Purchase") and in the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer"), receipt of which is hereby acknowledged, the number of Units shown
below pursuant to the guaranteed delivery procedures set forth in "THE TENDER
OFFER -- 2. Procedures for Tendering Units" of the Offer to Purchase.
<TABLE>
<S> <C>
Number of Units Name(s) of Record Holder(s)
- ----------------------------------------------------- -----------------------------------------------------
-----------------------------------------------------
(Please Type or Print)
Certificate Nos. For Units (if available) Address(es) ----------------------------------------
- ----------------------------------------------------- -----------------------------------------------------
(Including Zip Code)
- ----------------------------------------------------- -----------------------------------------------------
Area Code and Telephone Number(s)
Complete if Units will be tendered by book-entry Sign Here
transfer:
-----------------------------------------------------
-----------------------------------------------------
Account Number ---------------------------------- Signature(s)
Dated ----------------------------------------, 1998
</TABLE>
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
2
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings association
or other entity which is a member in good standing of the Securities Transfer
Agent's Medallion Program, hereby (a) represents that the tender of Units
effected hereby complies with Rule 14e-4 under the Securities Exchange Act of
1934, as amended, and (b) guarantees to deliver to the Depositary either the
certificates representing the Units tendered hereby, in proper form for
transfer, or a Book-Entry Confirmation (as defined in "THE TENDER OFFER -- 2.
Procedures for Tendering Units" of the Offer to Purchase) of a transfer of such
Units, in any such case together with a properly competed and duly executed
Letter of Transmittal, or a manually signed facsimile thereof, with any required
signature guarantees, and any other documents required by the Letter of
Transmittal within three New York Stock Exchange, Inc. trading days after the
date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Units to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
<TABLE>
<CAPTION>
<C> <C>
- ----------------------------------------------------- -----------------------------------------------------
(Name of Firm) (Address)
- ----------------------------------------------------- -----------------------------------------------------
(Area Code and Telephone Number) (Authorized Signature)
-----------------------------------------------------
(Name)
Dated: ---------------------------------------, 1998 -----------------------------------------------------
(Title)
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR UNITS WITH THIS NOTICE. UNIT
CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
<PAGE> 1
OFFER TO PURCHASE FOR CASH
5,446,860 UNITS OF BENEFICIAL INTEREST
OF
BURLINGTON RESOURCES COAL SEAM GAS ROYALTY TRUST
AT
$8.25 NET PER UNIT
BY
SAN JUAN PARTNERS, L.L.C.
THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY,
FEBRUARY 17, 1998, UNLESS EXTENDED
(AS EXTENDED, THE "EXPIRATION DATE").
January 20, 1998
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by San Juan Partners, L.L.C., a Texas limited
liability company (the "Purchaser"), to act as Dealer Manager in connection with
the Purchaser's offer to purchase 5,446,860 Units of Beneficial Interest (the
"Units") of Burlington Resources Coal Seam Gas Royalty Trust, a Delaware
Business Trust (the "Trust"), at $8.25 per Unit, net to the seller in cash, upon
the terms and subject to the conditions set forth in the Purchaser's Offer to
Purchase dated January 20, 1998 (the "Offer to Purchase"), and the related
Letter of Transmittal (which, together with any supplements or amendments
thereto, collectively constitute the "Offer").
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED, AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION DATE 5,446,860
UNITS, OR SUCH GREATER OR LESSER NUMBER OF UNITS THAT, TOGETHER WITH THE UNITS
OWNED BY THE PURCHASER, WOULD CONSTITUTE 67% OF THE OUTSTANDING UNITS AS OF THE
DATE THE UNITS ARE ACCEPTED FOR PAYMENT BY THE PURCHASER. SEE "INTRODUCTION,"
"THE TENDER OFFER -- 1. TERMS OF OFFER" AND "THE TENDER OFFER -- 14. CERTAIN
CONDITIONS OF THE OFFER" OF THE OFFER TO PURCHASE. THE OFFER IS ALSO SUBJECT TO
THE OTHER TERMS AND CONDITIONS THAT ARE CONTAINED IN "THE TENDER OFFER -- 14.
CERTAIN CONDITIONS OF THE OFFER" OF THE OFFER TO PURCHASE.
Please furnish copies of the enclosed materials to those of your clients
for whom you hold Units registered in your name or in the name of your nominee.
Enclosed herewith for your information and forwarding to your clients are copies
of the following documents:
1. Offer to Purchase, dated January 20, 1998;
2. Letter of Transmittal to tender Units for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal
may be used to tender Units;
3. A printed form of letter that may be sent to your clients for whose
account you hold Units in your name or in the name of a nominee, including
an instruction form for obtaining such client's instructions with regard to
the Offer;
4. Notice of Guaranteed Delivery for Units to be used to accept the
Offer if certificates for Units are not immediately available or if such
certificates and all other required documents cannot be delivered to the
Depositary on or prior to the Expiration Date or if the procedure for
book-entry transfer cannot be completed on a timely basis on or prior to
the Expiration Date;
<PAGE> 2
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
6. Return envelope addressed to the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, FEBRUARY 17, 1998,
UNLESS EXTENDED.
Subject to the applicable rules of the Securities and Exchange Commission
(the "Commission"), the Purchaser expressly reserves the right, in its sole
discretion, at any time or from time to time and regardless of whether or not
any of the events set forth in "THE TENDER OFFER -- 14. Certain Conditions of
the Offer" of the Offer to Purchase shall have occurred or shall have been
determined by the Purchaser to have occurred, (i) to extend the period of time
during which the Offer is open and thereby delay acceptance for payment of, and
the payment for, all Units validly tendered by giving oral or written notice of
such extension to the Depositary and (ii) to amend the Offer in any respect, by
giving oral or written notice of such extension or amendment to the Depositary.
These rights reserved by the Purchaser are in addition to the Purchaser's rights
to terminate the Offer pursuant to "THE TENDER OFFER -- 14. Certain Conditions
of the Offer" of the Offer to Purchase. UNDER NO CIRCUMSTANCES WILL INTEREST BE
PAID ON THE PURCHASE PRICE FOR TENDERED UNITS, WHETHER OR NOT THE PURCHASER
EXERCISES ITS RIGHTS TO EXTEND THE OFFER.
Subject to the applicable rules of the Commission, if the Minimum Condition
(as defined in the Offer to Purchase) is not satisfied, or if any or all of the
other events set forth in "THE TENDER OFFER -- 14. Certain Conditions of the
Offer" of the Offer to Purchase shall have occurred prior to the Expiration
Date, the Purchaser reserves the right (but shall not be obligated) in its sole
discretion to (i) decline to purchase any of the Units tendered in the Offer,
terminate the Offer and return all tendered Units to the tendering Unit holders,
(ii) waive or reduce the Minimum Condition, or waive or amend any or all other
conditions to the Offer to the extent permitted by applicable law and, subject
to complying with applicable rules and regulations of the Commission, purchase
all Units validly tendered, (iii) extend the Offer and, subject to the right of
the Unit holders to withdraw Units until the Expiration Date, retain the Units
that have been tendered during the period or periods for which the Offer is
extended or (iv) amend the Offer.
In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal (or facsimile thereof) and any required
signature guarantees, or an Agent's Message (as defined in the Offer to
Purchase) in connection with a book-entry delivery of Units, and any other
required documents should be sent to the Depositary, and (ii) either
certificates for Units should be delivered to the Depositary, or such Units
should be tendered by book-entry transfer into the Depositary's account
maintained at the Book-Entry Transfer Facility (as described in the Offer to
Purchase), all in accordance with the instructions set forth in the Letter of
Transmittal and the Offer to Purchase.
If holders of Units wish to tender, but it is impracticable for them to
forward their certificates for Units or other required documents on or prior to
the Expiration Date or to comply with the book-entry transfer procedures on a
timely basis, a tender may be effected by following the guaranteed delivery
procedures specified in "THE TENDER OFFER -- 2. Procedures for Tendering Units"
of the Offer to Purchase.
The Purchaser will not pay any fees or commissions to any broker, dealer or
any other person for soliciting tenders of Units pursuant to the Offer (other
than to the Dealer Manager and to the Information Agent). The Purchaser will,
however, upon request, reimburse you for customary mailing and handling expenses
incurred by you in forwarding any of the enclosed materials to your customers.
The Purchaser will pay or cause to be paid any stock transfer taxes payable on
the transfer of Units to it, except as otherwise provided in Instruction 6 of
the Letter of Transmittal.
Each Unit holder should make his own determination as to whether to tender
Units pursuant to the Offer. Holders of Units should read the Offer to Purchase
carefully before making any decision with regard to the Offer.
2
<PAGE> 3
Questions and requests for additional copies of the enclosed material may
be directed to the Information Agent or to the Dealer Manager at their
respective addresses and telephone numbers set forth on the back cover of the
enclosed Offer to Purchase.
Very truly yours,
JEFFERIES & COMPANY, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR
ANY OTHER PERSON THE AGENT OF THE PURCHASER, THE DEPOSITARY, THE INFORMATION
AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR
ANY OTHER PERSON TO GIVE ANY INFORMATION OR USE ANY DOCUMENT OR MAKE ANY
STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE> 1
OFFER TO PURCHASE FOR CASH
5,446,860 UNITS OF BENEFICIAL INTEREST
OF
BURLINGTON RESOURCES COAL SEAM GAS ROYALTY TRUST
AT
$8.25 NET PER UNIT
BY
SAN JUAN PARTNERS, L.L.C.
THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY,
FEBRUARY 17, 1998, UNLESS EXTENDED
(AS EXTENDED, THE "EXPIRATION DATE").
January 20, 1998
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated January 20,
1998 (the "Offer to Purchase") and a related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer") relating to the offer by San Juan Partners, L.L.C., a Texas limited
liability company (the "Purchaser"), to purchase 5,446,860 Units of Beneficial
Interest (the "Units") of Burlington Resources Coal Seam Gas Royalty Trust, a
Delaware business trust (the "Trust"), at $8.25 per Unit, net to the seller in
cash, without interest, upon the terms and subject to the conditions set forth
in the Offer. This material is being forwarded to you as the beneficial owner of
Units carried by us in your account but not registered in your name.
WE ARE THE HOLDER OF RECORD OF UNITS HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH UNITS CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED TO TENDER UNITS HELD BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to tender any
or all of the Units held by us for your account, pursuant to the terms and
conditions set forth in the Offer.
Your attention is invited to the following:
1. The tender price is $8.25 per Unit, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in
the Offer.
2. The Offer is being made for 5,446,860 Units.
3. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING
VALIDLY TENDERED, AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION DATE
5,446,860 UNITS, OR SUCH GREATER OR LESSER NUMBER OF UNITS THAT, TOGETHER
WITH THE UNITS OWNED BY THE PURCHASER, WOULD CONSTITUTE 67% OF THE
OUTSTANDING UNITS AS OF THE DATE THE UNITS ARE ACCEPTED FOR PAYMENT BY THE
PURCHASER. SEE "INTRODUCTION," "THE TENDER OFFER -- 1. TERMS OF OFFER" AND
"THE TENDER OFFER -- 14. CERTAIN CONDITIONS OF THE OFFER" OF THE OFFER TO
PURCHASE. THE OFFER IS ALSO SUBJECT TO THE OTHER TERMS AND CONDITIONS THAT
ARE CONTAINED IN "THE TENDER OFFER -- 14. CERTAIN CONDITIONS OF THE OFFER"
OF THE OFFER TO PURCHASE.
<PAGE> 2
4. Each Unit holder should make his or her own determination as to
whether to tender Units pursuant to the Offer. Holders of Units should read
the Offer to Purchase carefully before making any decision with regard to
the Offer.
5. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, FEBRUARY 17, 1998, UNLESS
EXTENDED.
6. Tendering Unit holders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the transfer of Units pursuant to the
Offer.
Subject to the applicable rules of the Securities and Exchange Commission
(the "Commission"), the Purchaser expressly reserves the right, in its sole
discretion, at any time or from time to time and regardless of whether or not
any of the events set forth in "THE TENDER OFFER -- 14. Certain Conditions of
the Offer" of the Offer to Purchase shall have occurred or shall have been
determined by the Purchaser to have occurred, (i) to extend the period of time
during which the Offer is open and thereby delay acceptance for payment of, and
the payment for, all Units validly tendered by giving oral or written notice of
such extension to the Depositary and (ii) to amend the Offer in any respect, by
giving oral or written notice of such extension or amendment to the Depositary.
These rights reserved by the Purchaser are in addition to the Purchaser's rights
to terminate the Offer pursuant to "THE TENDER OFFER -- 14. Certain Conditions
of the Offer" of the Offer to Purchase. UNDER NO CIRCUMSTANCES WILL INTEREST BE
PAID ON THE PURCHASE PRICE FOR TENDERED UNITS, WHETHER OR NOT THE PURCHASER
EXERCISES ITS RIGHTS TO EXTEND THE OFFER.
Subject to the applicable rules of the Commission, if the Minimum Condition
(as defined in the Offer to Purchase) is not satisfied, or if any or all of the
other events set forth in "THE TENDER OFFER -- 14. Certain Conditions of the
Offer" of the Offer to Purchase shall have occurred prior to the Expiration
Date, the Purchaser reserves the right (but shall not be obligated) in its sole
discretion to (i) decline to purchase any of the Units tendered in the Offer,
terminate the Offer and return all tendered Units to the tendering Unit holders,
(ii) waive or reduce the Minimum Condition, or waive or amend any or all other
conditions to the Offer to the extent permitted by applicable law and, subject
to complying with applicable rules and regulations of the Commission, purchase
all Units validly tendered, (iii) extend the Offer and, subject to the right of
the Unit holders to withdraw Units until the Expiration Date, retain the Units
that have been tendered during the period or periods for which the Offer is
extended or (iv) amend the Offer.
If you wish to have us tender any of or all of your Units, please so
instruct us by completing, executing, detaching and returning to us the
instruction form set forth below. An envelope to return your instructions to us
is enclosed. If you authorize tender of your Units, all such Units will be
tendered unless otherwise specified below. PLEASE FORWARD YOUR INSTRUCTIONS TO
US AS SOON AS POSSIBLE TO ALLOW US AMPLE TIME TO TENDER YOUR UNITS ON YOUR
BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
The Offer is made solely pursuant to the Offer to Purchase and the related
Letter of Transmittal, and any supplements or amendments thereto. The Offer is
not being made to (nor will tenders be accepted from or on behalf of) holders of
Units residing in any jurisdiction in which the making of the Offer or the
acceptance thereof would not be in compliance with the securities, blue sky or
other laws of such jurisdiction. In any jurisdiction where the securities, blue
sky or other laws require the Offer to be made by a licensed broker or dealer,
the Offer will be deemed to be made on behalf of the Purchaser by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment (and thereby purchased) Units validly tendered and not withdrawn as,
if and when the Purchaser gives oral or written notice to the Depositary of the
Purchaser's acceptance of such Units for payment pursuant to the Offer. Upon the
terms and subject to the conditions of the Offer, payment for Units purchased
pursuant to the Offer will be made by deposit of the Purchase Price therefor
with the Depositary, which will act as agent for tendering Unit holders for the
purpose of receiving payment from the Purchaser and transmitting payment to
tendering Unit holders. Under no circumstances will interest on the Purchase
Price be paid by the Purchaser by reason of any delay in making such payment. In
all cases, payment for Units purchased pursuant to the Offer will be made
2
<PAGE> 3
only after timely receipt by the Depositary of (i) certificates for such Units
or timely confirmation of a book-entry transfer of such Units into the
Depositary's account at the Book-Entry Transfer Facility (as defined in the
Offer to Purchase) pursuant to the procedures set forth in "THE TENDER
OFFER -- 2. Procedures for Tendering Units" of the Offer to Purchase, (ii) the
Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or an Agent's Message (as
defined in the Offer to Purchase) in connection with a book-entry transfer, and
(iii) any other documents required by the Letter of Transmittal.
Tear Here Tear Here
................................................................................
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH 5,446,860 UNITS OF
BENEFICIAL INTEREST OF BURLINGTON RESOURCES COAL SEAM GAS ROYALTY TRUST AT $8.25
NET PER UNIT
The undersigned acknowledges receipt of your letter enclosing the Offer to
Purchase dated January 20, 1998 of San Juan Partners, L.L.C., a Texas limited
liability company, and the related Letter of Transmittal, relating to Units of
Beneficial Interest (the "Units") of Burlington Resources Coal Seam Gas Royalty
Trust, a Delaware business trust.
You are instructed to tender the number of Units indicated below (or, if no
number is indicated below, all Units) held by you for the account of the
undersigned, upon the terms and conditions set forth in such Offer to Purchase
and the related Letter of Transmittal.
<TABLE>
<S> <C>
Number of Units to be Tendered* Sign Here
- ----------------------------------------------- Units -----------------------------------------------------
-----------------------------------------------------
Signature(s)
Name(s) -------------------------------------------
-----------------------------------------------------
(Please print name(s)
Address(es) ----------------------------------------
-----------------------------------------------------
(Include Zip Code)
Dated: ---------------------------------------, 1998 Area Code and Telephone Number(s) ------------
Tax Identification or
Social Security Number(s) -----------------------
</TABLE>
* Unless otherwise indicated, it will be assumed that all your Units are to be
tendered.
3
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the
Payer. -- Social Security numbers have nine digits separated by two hyphens
(i.e. 000-00-0000). Employer identification numbers have nine digits separated
by only one hyphen (i.e. 000-000000). The table below will help determine the
number to give the payer.
<TABLE>
<S> <S> <C>
- ------------------------------ -------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF --
============================== =========================
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF --
- ------------------------------ -------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, any one of the
individuals(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the minor
6. Account in the name of The ward, minor, or
guardian or committee for incompetent person(3)
a designated ward, minor,
or incompetent person
7. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also
trustee)
b. So-called trust The actual owner(1)
account that is not a
legal or valid trust
under State law
8. Sole proprietorship The owner(4)
9. A valid trust, estate, or Legal entity (Do not
pension trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held The partnership
in the name of the
business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the Depart- The public entity
ment of Agriculture in
the name of a public
entity (such as a State
or local government,
school district, or
prison) that receives
agricultural program
payments
</TABLE>
- ---------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: if no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under section 501(a), or an individual
retirement plan.
- - The United States or any agency or instrumentality thereof.
- - A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign government, or
agency or instrumentality thereof.
- - An international organization or any agency, or instrumentality thereof.
- - A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- - A real estate investment trust.
- - A common trust fund operated by a bank under section 584(a).
- - An exempt charitable remainder trust or a non-exempt trust described in
section 4947(a)(1).
- - An entity registered at all times under the Investment Company Act of 1940.
- - A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in trade or business in the U.S. and
which have at least one nonresident partner.
- - Payments of patronage dividends where the amount received is not paid in
money.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- - Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer:
- - Payments of tax-exempt interest (including exempt interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to nonresident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER, IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS. ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend and certain other payments to a payee
who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
2
<PAGE> 1
Exhibit (a)(7)
FOR IMMEDIATE RELEASE
From: Contact:
San Juan Partners, L.L.C. Morrow & Co. Inc
c/o O'Sullivan Oil & Gas 909 Third Avenue
Company, Inc. 20th Floor
910 Travis Street New York, New York 10022
Suite 2150 (212) 754-8000
Houston, Texas 77002 Banks and Brokerage Firms
Contact: Scott W. Smith please call: (800) 662-5200
(713) 759-2030 Toll Free: (800) 566-9061
SAN JUAN PARTNERS, L.L.C. ANNOUNCES COMMENCEMENT OF CASH TENDER
OFFER FOR 5,446,860 UNITS OF BENEFICIAL INTEREST OF
BURLINGTON RESOURCES COAL SEAM GAS ROYALTY TRUST
HOUSTON, TX, January 20, 1998 -- San Juan Partners, L.L.C., a Texas limited
liability company ("San Juan"), announced that it has commenced a tender offer
(the "Offer") today for 5,446,860 Units of Beneficial Interest of Burlington
Resources Coal Seam Gas Royalty Trust (NYSE:BRU) (the "Trust") at $8.25 per Unit
net in cash to the seller, without interest. The Offer will expire at 12:00
midnight New York City time on February 17, 1998, unless extended.
The Offer is conditioned upon, among other things, there being validly tendered
and not withdrawn prior to the expiration of the Offer 5,446,860 Units, or such
greater or lesser number of Units that, together with the Units owned by San
Juan, would constitute 67% of the outstanding Units as of the date the Units are
accepted for payment by San Juan pursuant to the Offer.
San Juan has previously acquired 449,140 Units, representing approximately 5.1%
of the 8.8 million Units currently outstanding.
The purpose of the Offer is to acquire, together with Units already owned by San
Juan, 67% of the outstanding Units as the first step in effecting the
termination of the Trust, at which time the assets of the Trust would be
liquidated and sold as then required by the terms of the Trust Agreement, among
Meridian Oil Production Inc., Burlington Resources Inc., Mellon Bank (DE)
National Association and NationsBank of Texas, N.A., dated May 1, 1993 (the
"Trust Agreement"), and the eventual distribution to the Unit holders of the
proceeds from the sale of the assets of the Trust. Pursuant to the Trust
Agreement, the affirmative vote by the holders of not less than 66-2/3% of all
of the Units outstanding shall be required to terminate the Trust.
Jefferies & Company, Inc. will act as Dealer Manager for the Offer. Offering
materials will be available from Jefferies & Company, Inc. or from Morrow & Co.,
Inc., the Information Agent.
<PAGE> 1
EXHIBIT (a)(8)
================================================================================
- --------------------------------------------------------------------------------
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell the Units. The Offer is made solely by the Offer to Purchase
dated January 20, 1998, and the related Letter of Transmittal and any
amendments or supplements thereto, and is not being made to (nor will
tenders be accepted from or on behalf of) holders of Units in any
jurisdiction in which the making of the Offer or the acceptance thereof
would not be in compliance with the laws of such jurisdiction. In any
jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed
to be made on behalf of the Purchaser by Jefferies & Company, Inc. or one
or more registered brokers or dealers that are licensed under the laws of
such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
5,446,860 UNITS OF BENEFICIAL INTEREST
OF
BURLINGTON RESOURCES COAL SEAM GAS ROYALTY TRUST
BY
SAN JUAN PARTNERS, L.L.C.
AT
$8.25 NET PER UNIT
San Juan Partners, L.L.C., a Texas limited liability company
(the "Purchaser"), is offering to purchase 5,446,860 Units of Beneficial
Interest (the "Units") of Burlington Resources Coal Seam Gas Royalty Trust
(the "Trust"), at a price of $8.25 per Unit, net to the seller in cash,
without interest (the "Purchase Price"), upon the terms and subject to the
conditions set forth in the Offer to Purchase dated January 20, 1998 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively
constitute the "Offer").
The members of the Purchaser are EnCap Energy Capital Fund III,
L.P., a Texas limited partnership, EnCap Energy Acquisition III-B, Inc., a
Texas corporation, ECIC Corporation, a Texas corporation, BOCP Energy
Partners, L.P., a Texas limited partnership, First Union Investors, Inc.,
a North Carolina corporation, Andover Group, Inc., a Texas corporation,
Charles T. McCord III, O'Sullivan Oil & Gas Company, Inc., a Texas
corporation, Christopher P. Scully, Scott W. Smith Funding, L.L.C., a
Texas limited company, and John V. Whiting.
The purpose of the Offer is to acquire, together with Units
already owned by the Purchaser, 67% of the outstanding Units as the first
step in effecting the termination of the Trust, at which time the assets
of the Trust would be liquidated and sold as then required by the terms of
the Trust Agreement, among Meridian Oil Production Inc., Burlington
Resources Inc., Mellon Bank (DE) National Association and NationsBank of
Texas, N.A., dated May 1, 1993 (the "Trust Agreement"), and the eventual
distribution to the Unit holders of the proceeds from the sale of the
assets of the Trust. Pursuant to the Trust Agreement, the affirmative vote
by the holders of not less than 66 2/3% of all of the Units outstanding
shall be required to terminate the Trust.
--------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, FEBRUARY 17, 1998, UNLESS THE OFFER IS
EXTENDED (AS EXTENDED, THE "EXPIRATION DATE").
--------------------------------------------------------------------------
The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the expiration of the offer
5,446,860 Units, or such greater or lesser number of Units that, together
with the Units owned by the Purchaser, would constitute 67% of the
outstanding Units as of the date the Units are accepted for payment by the
Purchaser pursuant to the Offer (the "Minimum Number"). The Offer is also
subject to the other terms and conditions that are contained in the Offer
to Purchase.
Each Unit holder should make his own determination as to whether
to tender Units pursuant to the Offer. Holders of Units are urged to read
the Offer to Purchase carefully before making any decision with regard to
the Offer.
Upon the terms and subject to the conditions of the Offer, if
more than the Minimum Number of Units is validly tendered in accordance
with the procedures specified in the Offer to Purchase and not properly
withdrawn in accordance with the procedures specified in the Offer to
Purchase, the Purchaser will, upon the terms and subject to the conditions
of the Offer, take into account the number of Units so tendered, accept
for payment and pay for the Minimum Number of Units, pro rata, according
to the number of Units validly tendered by each Unit holder and not
properly withdrawn on or prior to the Expiration Date, with appropriate
adjustments to avoid purchases of fractional Units. Because of the
difficulty of determining the precise number of Units validly tendered and
not withdrawn, if proration of the tendered Units is required, Purchaser
does not expect to be able to announce the final results of the proration
until at least approximately seven business days after the Expiration
Date. The Purchaser does not intend to pay for any Units accepted for
payment pursuant to the Offer until the final proration or other
adjustment results are known.
Purchaser reserves the right (but shall not be obligated) to
accept for payment more than the Minimum Number of Units pursuant to the
Offer. Purchaser has no present intention of exercising such right. If,
prior to the Expiration Date, Purchaser should decide to increase or
decrease the number of Units being sought or to increase or decrease the
consideration being offered in the Offer, subject to any requirement to
extend the period of time during which the Offer is opened, such increase
or decrease in the number of Units being sought or such increase or
decrease in the consideration being offered will be applicable to all Unit
holders whose Units are accepted for payment pursuant to the Offer.
For purposes of the Offer, the Purchaser shall be deemed to have
accepted for payment (and thereby purchased) Units validly tendered and
not withdrawn as, if and when the Purchaser gives oral or written notice
to The Bank of New York (the "Depositary") of the Purchaser's acceptance
of such Units for payment pursuant to the Offer. Upon the terms and
subject to the conditions of the Offer, payment for Units purchased
pursuant to the Offer will be made by deposit of the Purchase Price
therefor with the Depositary, which will act as the agent for tendering
Unit holders for the purpose of receiving payments from the Purchaser and
transmitting such payments to tendering Unit holders. Under no
circumstances will interest on the Purchase Price be paid by the Purchaser
by reason of any delay in making such payment. In all cases, payment for
Units purchased pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) certificates for such Units or timely
confirmation of a book-entry transfer of such Units into the Depositary's
account at the Book-Entry Transfer Facility (as defined in the Offer to
Purchase) pursuant to the procedures set forth in the Offer to Purchase,
(ii) the Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees, or an Agent's
Message (as defined in the Offer to Purchase) in connection with a
book-entry transfer, and (iii) and other documents required by the Letter
of Transmittal.
Except as otherwise provided in the Offer to Purchase, tenders
of Units made pursuant to the Offer are irrevocable, provided that Units
tendered pursuant to the Offer may be withdrawn pursuant to the procedures
set forth in the Offer to Purchase at any time prior to the Expiration
Date and, unless theretofore accepted for payment by the Purchaser, may
also be withdrawn at any time after March 20, 1998, or at such later time
as may apply if the Offer is extended. For a withdrawal to be effective, a
written telegraphic or facsimile transmission notice of withdrawal must be
timely received by the Depositary at one of its addresses specified on the
back cover of the Offer to Purchase. Any such notice of withdrawal must
specify the name of the person who tendered the Units to be withdrawn, the
number of Units to be withdrawn, and (if certificates for Units have been
tendered) the name of the registered holder of the Units as set forth in
the certificate for the Unit, if different from the name of the person who
tendered such Units. If certificates for Units to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the
release of such certificates, the serial numbers shown on such
certificates must be submitted to the Depositary and, unless such Units
have been tendered by an Eligible Institution (as defined in the Offer to
Purchase), the signatures on the notice of withdrawal must be guaranteed
by an Eligible Institution. If Units have been tendered pursuant to the
procedure for book-entry transfer as set forth in the Offer to Purchase,
any notice of withdrawal must also specify the name and number of the
account at the Book-Entry Transfer Facility (as defined in the Offer to
Purchase) to be credited with the withdrawn Units and otherwise comply
with the Book-Entry Transfer Facility's procedures. Withdrawals of tenders
of Units may not be rescinded, and any Units properly withdrawn will
thereafter be deemed not validly tendered for any purposes of the Offer.
However, withdrawn Units may be retendered by again following one of the
procedures described in the Offer to Purchase at any time prior to the
Expiration Date. All questions as to the form and validity (including time
of receipt) of notices of withdrawal will be determined by the Purchaser,
in its sole discretion, whose determination will be final and binding.
The Purchaser expressly reserves the right, in its sole
discretion, at any time or from time to time and regardless of whether or
not any of the events set forth in the Offer to Purchase shall have
occurred or shall have been determined by the Purchaser to have occurred,
(i) to extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, and the payment for, all Units
validly tendered by giving oral or written notice of such extension to the
Depositary and (ii) to amend the Offer in any respect, by giving oral or
written notice of such extension or amendment to the Depositary. The
rights reserved by the Purchaser in this paragraph are in addition to the
Purchaser's rights to terminate the Offer pursuant to the Offer to
Purchase. Under no circumstances will interest be paid on the Purchase
Price for tendered Units, whether or not the Purchaser exercises its right
to extend the Offer.
Subject to the applicable rules of the Securities and Exchange
Commission (the "Commission"), if the Minimum Condition is not satisfied,
or if any or all of the other conditions set forth in the Offer to
Purchase are not satisfied prior to the Expiration Date, the Purchaser
reserves the right (but shall not be obligated) in its sole discretion to
(i) decline to purchase any of the Units tendered in the Offer, terminate
the Offer and return all tendered Units to the tendering Unit holders,
(ii) waive or reduce the Minimum Condition, or waive or amend any or all
other conditions to the Offer to the extent permitted by applicable law
and, subject to complying with applicable rules and regulations of the
Commission, purchase all Units validly tendered, (iii) extend the Offer
and, subject to the right of the Unit holders to withdraw Units until the
Expiration Date, retain the Units that have been tendered during the
period or periods for which the Offer is extended or (iv) amend the Offer.
The information required to be disclosed by paragraph
(e)(1)(vii) of Rule 14d-6 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended, is contained in the Offer to
Purchase and is incorporated herein by reference.
A request has been made to the Trustee for the use of the
Trust's Unit holder list and security position listings for the purpose of
disseminating the Offer to holders of Units. Once the Trust has provided
such list and listings or otherwise complied with such request, the Offer
to Purchase and the related Letter of Transmittal and other relevant
materials will be mailed to record holders of Units and will be furnished
to brokers, dealers, commercial banks, trust companies and similar persons
whose names, or the name of whose nominees, appear on the Unit holder list
or, if applicable, who are listed as participants in a clearing agency's
security position listing for subsequent transmittal to beneficial owners
of Units.
The Offer to Purchase and the Letter of Transmittal contain
important information which should be read carefully before any decision
is made with respect to the Offer.
Questions and requests for copies of the Offer to Purchase and
the related Letter of Transmittal and other tender offer materials may be
directed to the Information Agent or the Dealer Manager at their
respective addresses and telephone numbers set forth below, and copies
will be furnished promptly at the Purchaser's expense.
The Information Agent for the Offer is:
MORROW & CO., INC.
909 Third Avenue
20th Floor
New York, New York 10022
(212) 754-8000
Banks and Brokerage Firms please call:
(800) 662-5200
Toll Free (800) 566-9061
The Dealer Manager for the Offer is:
JEFFERIES & COMPANY, INC.
909 Fannin Street
Suite 3100
Houston, Texas 77002
(713) 658-1100
Toll Free (800) 533-0072
January 20, 1998
================================================================================
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT(b)
ADVANCING TERM CREDIT AGREEMENT
$25,000,000.00
SECURED ADVANCING TERM CREDIT
FROM
BANK ONE, TEXAS, N.A.
TO
SAN JUAN PARTNERS, L.L.C.
January 15, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.01 The Line of Credit . . . . . . . . . . . . . . . . . . . . . 8
2.02 Advances and Payments of Principal Under the Note . . . . . 9
2.03 Prepayment and Conversion . . . . . . . . . . . . . . . . . 9
2.04 Interest Rate and Payments of Interest . . . . . . . . . . . 10
2.05 Increased Cost of Loans . . . . . . . . . . . . . . . . . . 12
2.06 Substitute Rate . . . . . . . . . . . . . . . . . . . . . . 13
2.07 Change of Law . . . . . . . . . . . . . . . . . . . . . . . 14
2.08 Borrowing Base Determination . . . . . . . . . . . . . . . . 14
2.09 Advances to Satisfy Obligations of Borrower . . . . . . . . 16
2.10 Prepayment Upon Occurrence of a Loan Excess . . . . . . . . 16
2.11 Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . 16
2.12 Extended Maturity Date . . . . . . . . . . . . . . . . . . . 16
ARTICLE III. CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.01 Receipt of Note, Agreement, and Certificate of Compliance . 17
3.02 Completion of Equity Investment in Borrower . . . . . . . . 17
3.03 Receipt of Organizational Documents . . . . . . . . . . . . 17
3.04 Receipt of Certified Copy of Corporate Proceedings and
Certificates of Incumbency . . . . . . . . . . . . . . . . . 17
3.05 Receipt of Certificates of Authority and Certificates
of Good Standing . . . . . . . . . . . . . . . . . . . . . . 17
3.06 UCC Search . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.07 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . 18
3.08 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.09 Request for Advance . . . . . . . . . . . . . . . . . . . . 18
3.10 Cash Collateral Account . . . . . . . . . . . . . . . . . . 18
3.11 Acquisition and/or Ownership of Borrowing Base Property . . 18
3.12 Title to Trust Royalty Interest . . . . . . . . . . . . . . 18
3.13 Accuracy of Representations and Warranties and No
Event of Default . . . . . . . . . . . . . . . . . . . . . . 18
3.14 Legal Matters Satisfactory to Counsel to Bank . . . . . . . 19
3.15 No Material Adverse Change . . . . . . . . . . . . . . . . . 19
3.16 Security Instruments . . . . . . . . . . . . . . . . . . . . 19
3.17 Legal Fees . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 19
4.01 Existence and Good Standing . . . . . . . . . . . . . . . . 19
4.02 Due Authorization . . . . . . . . . . . . . . . . . . . . . 19
4.03 Valid and Binding Obligations . . . . . . . . . . . . . . . 20
. . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.04 Scope and Accuracy of Financial Statements . . . . . . . . . 20
4.05 Liabilities, Litigation and Restrictions . . . . . . . . . . 20
4.06 Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . 20
4.07 Authorizations and Consents . . . . . . . . . . . . . . . . 20
</TABLE>
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<TABLE>
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4.08 Compliance with Laws, Rules, Regulations and Orders . . . . 20
4.09 Proper Filing of Tax Returns and Payment of Taxes Due . . . 21
4.10 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.11 Investment Company Act Compliance . . . . . . . . . . . . . 21
4.12 Public Utility Holding Company Act Compliance . . . . . . . 21
4.13 Environmental Laws . . . . . . . . . . . . . . . . . . . . . 21
4.14 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 22
4.15 Existing Indebtedness . . . . . . . . . . . . . . . . . . . 22
4.16 Material Commitments . . . . . . . . . . . . . . . . . . . . 22
4.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.18 Ownership of Borrowing Base Property . . . . . . . . . . . . 23
4.19 Material Misstatements and Omissions . . . . . . . . . . . . 23
ARTICLE V. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . 23
5.01 Use of Funds . . . . . . . . . . . . . . . . . . . . . . . . 23
5.02 Maintenance and Access to Records . . . . . . . . . . . . . 23
5.03 Quarterly Unaudited Financial Statements of Borrower . . . . 23
5.04 Annual Audited Financial Statements of Borrower . . . . . . 24
5.05 Compliance Certificate . . . . . . . . . . . . . . . . . . . 24
5.06 Weekly Status and Monthly Production Reports . . . . . . . . 24
5.07 Statement of Material Adverse Change in Condition . . . . . 24
5.08 Additional Information . . . . . . . . . . . . . . . . . . . 24
5.09 Compliance with Laws and Payment of Assessments and Charges 24
5.10 Maintenance of Existence and Good Standing . . . . . . . . . 24
5.11 Further Assurances . . . . . . . . . . . . . . . . . . . . . 25
5.12 Initial Expenses of Bank . . . . . . . . . . . . . . . . . . 25
5.13 Subsequent Expenses of Bank . . . . . . . . . . . . . . . . 25
5.14 Maintenance of Tangible Property . . . . . . . . . . . . . . 25
5.15 Maintenance of Insurance . . . . . . . . . . . . . . . . . . 25
5.16 Inspection/Right of Audit . . . . . . . . . . . . . . . . . 26
5.17 Payment of Note and Performance of Obligations . . . . . . . 26
5.18 ERISA Reports . . . . . . . . . . . . . . . . . . . . . . . 26
5.19 Average Trust Distributions. . . . . . . . . . . . . . . . . 26
5.20 Trust Unit Distributions/Tax Credit Monetization . . . . . . 26
5.21 Compliance with Environmental Laws . . . . . . . . . . . . . 27
5.22 Hazardous Substances Indemnification . . . . . . . . . . . . 27
5.23 Changes in Management . . . . . . . . . . . . . . . . . . . 28
5.24 Payment of Taxes, Etc . . . . . . . . . . . . . . . . . . . 28
5.25 Notice of Litigation . . . . . . . . . . . . . . . . . . . . 28
5.26 Notice of Change of Principal Offices . . . . . . . . . . . 29
5.27 Payment of Accounts Payable . . . . . . . . . . . . . . . . 29
5.28 Lien on Royalty Interest . . . . . . . . . . . . . . . . . . 29
5.29 Deposit of Trust Units in Brokerage Account . . . . . . . . 29
ARTICLE VI. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . 29
6.01 Other Indebtedness . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
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6.02 Guaranty of Payment or Performance . . . . . . . . . . . . . 29
6.03 Loans or Advances . . . . . . . . . . . . . . . . . . . . . 29
6.04 Mortgages or Pledges of Assets . . . . . . . . . . . . . . . 30
6.05 Nature of Business . . . . . . . . . . . . . . . . . . . . . 30
6.06 Sales of Assets . . . . . . . . . . . . . . . . . . . . . . 30
6.07 Dividends and Distributions . . . . . . . . . . . . . . . . 30
6.08 Payment of Accounts Payable . . . . . . . . . . . . . . . . 30
6.09 Cancellation of Insurance . . . . . . . . . . . . . . . . . 30
6.10 Investments . . . . . . . . . . . . . . . . . . . . . . . . 30
6.11 Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . 30
6.12 Changes in Business Structure . . . . . . . . . . . . . . . 30
6.13 Changes in Ownership . . . . . . . . . . . . . . . . . . . . 30
6.14 Transactions with Affiliates . . . . . . . . . . . . . . . . 30
ARTICLE VII. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . 31
7.01 Enumeration of Events of Default . . . . . . . . . . . . . . 31
7.02 Rights Upon Unmatured Event of Default . . . . . . . . . . . 32
7.03 Rights Upon Default . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 33
8.01 Security Interests in Deposits and Right of Offset or
Banker's Lien . . . . . . . . . . . . . . . . . . . . . . . 33
8.02 Survival of Representations, Warranties and Covenants . . . 33
8.03 Notices and Other Communications . . . . . . . . . . . . . . 33
8.04 Parties in Interest . . . . . . . . . . . . . . . . . . . . 35
8.05 Renewals and Extensions . . . . . . . . . . . . . . . . . . 35
8.06 No Waiver by Bank . . . . . . . . . . . . . . . . . . . . . 35
8.07 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 35
8.08 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . 35
8.09 Incorporation of Exhibits . . . . . . . . . . . . . . . . . 36
8.10 Survival Upon Unenforceability . . . . . . . . . . . . . . . 36
8.11 Rights of Third Parties . . . . . . . . . . . . . . . . . . 36
8.12 Amendments or Modifications of this Agreement . . . . . . . 36
8.13 Agreement Construed as an Entirety . . . . . . . . . . . . . 36
8.14 Number and Gender . . . . . . . . . . . . . . . . . . . . . 36
8.15 AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS . . . . . . . . . 36
8.16 Controlling Provision Upon Conflict . . . . . . . . . . . . 37
8.17 Time, Place and Method of Payments . . . . . . . . . . . . . 37
8.18 Non-Application of Chapter 15 of Texas Credit Code . . . . . 37
8.19 Counterpart Execution . . . . . . . . . . . . . . . . . . . 37
</TABLE>
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EXHIBITS
- --------
EXHIBIT A Note
EXHIBIT B Compliance Certificate
EXHIBIT C Security Instruments
EXHIBIT D Form of Request for Advance
</TABLE>
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ADVANCING TERM CREDIT AGREEMENT
THIS ADVANCING TERM CREDIT AGREEMENT, is entered into as of the
15th day of January 1998, by and between SAN JUAN PARTNERS, L.L.C., a Texas
limited liability company ("Borrower"), and BANK ONE, TEXAS, N.A., a national
banking association (the "Bank").
W I T N E S S E T H
WHEREAS, Borrower desires to institute an advancing term credit
with Bank for purposes of satisfying Borrower's working capital needs and for
general corporate purposes;
WHEREAS, Bank is willing to institute such advancing term credit
for Borrower in accordance with the terms and provisions hereof;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, and the mutual benefits to be derived herefrom,
Bank and Borrower agree as follows:
ARTICLE I. DEFINITIONS
As used in this Agreement, the following terms shall have the
meanings indicated:
"Accounts," "Account Debtor," "Chattel Paper," "Contracts,"
"Documents," "Equipment," "Fixtures," "General Intangibles," "Goods,"
"Instruments," and "Inventory" shall have the same respective meanings as are
given to those terms in the Uniform Commercial Code as presently adopted and in
effect in the State of Texas.
"Affiliate" means, as applied to any Person, any other Person,
directly or indirectly, controlling, controlled by, or under common control
with, that Person. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by", and "under
common control with"), as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person, whether through the ownership of voting
securities, by contract, or otherwise.
"Agreement" means this Advancing Term Credit Agreement, as the
same may be amended or supplemented from time to time.
"Bank" has the meaning set forth in the preamble hereof.
"Base Rate" means, at any time, the rate of interest per annum
then most recently established and published by the Bank as its Base Rate,
which is eight and one-half percent (8.50%) as of the date of this Agreement.
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<PAGE> 7
"Base Rate Loan" means any Loan for which interest thereon is to
be computed at the Floating Rate in accordance with this Agreement.
"Borrower" has the meaning set forth in the preamble hereof.
"Borrowing Base" means, at any time, the maximum loan amount, as
determined by the Bank from time to time in accordance with Section 2.08,
supported by a fraction of the Trust Royalty Interest, which fraction shall be
equal to the number of Trust Units owned by Borrower that have been included in
the Borrowing Base Property, divided by the total authorized, issued and
outstanding of the Trust Units.
"Borrowing Base Property" means, those Trust Units owned by
Borrower that have been made subject to the liens created by the Security
Instruments to secure the Obligations.
"Business Day" shall mean: (a) for all purposes, a day other than
a Saturday, Sunday or legal holiday for commercial banks under the laws of the
State of Texas or the laws of the United States of America, and (b) in
addition, for purposes of any LIBOR Loan, a day that satisfies the requirements
of clause (a) and is a day on which commercial banks in London, England are
open for domestic or international business.
"Cash Collateral Account" shall have the meaning set forth in
Section 3.10.
"Closing" means the date on which this Agreement is executed and
delivered by Bank and Borrower.
"Commitment" means the obligation of Bank, subject to the
provisions of this Agreement and existing only through the last Business Day
prior to the Maturity Date, to advance to Borrower funds, not to exceed at any
one time outstanding an amount equal to the lesser of: (a) the Borrowing Base
then in effect, or (b) $25,000,000.00.
"Compliance Certificate" means the certificate of the president
or vice president of Borrower required to be submitted to Bank from time to
time pursuant to this Agreement, which certificate shall be in the form
attached hereto as Exhibit "B."
"Defensible Title" means good and indefeasible title and
ownership, free and clear of all mortgages, liens and encumbrances, except for
Permitted Encumbrances.
"Environmental Laws" means (a) the following federal laws as they
may be cited, referenced and amended from time to time: the Clean Air Act, the
Clean Water Act, the Safe Drinking Water Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Endangered Species Act, the
Resource Conservation and Recovery Act, the Occupational Safety and Health Act,
the Hazardous Materials Transportation Act, the Superfund Amendments and
Reauthorization Act, and the Toxic Substances Control Act; (b) any and all
environmental statutes of any state in which property of Borrower is situated,
as they may be
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<PAGE> 8
cited, referenced and amended from time to time; (c) any rules or regulations
promulgated under or adopted pursuant to the above federal and state laws; and
(d) any other federal, state or local statute or any requirement, rule,
regulation, code, ordinance or order adopted pursuant thereto, including,
without limitation, those relating to the generation, transportation,
treatment, storage, recycling, disposal, handling or release of Hazardous
Substances.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations and published
interpretations thereof.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which together with Borrower would be treated as a single
employer under Section 4001 of ERISA.
"Event of Default" means any of the events specified in Section
7.01 of this Agreement.
"Financial Statements" means the statements of the financial
condition of the indicated Person, as at the point in time and for the period
indicated and consisting of at least a consolidated balance sheet, income
statement and statement of cash flows, and, when the foregoing are audited,
accompanied by the certification of such Person's independent certified public
accountants and footnotes to any of the foregoing, all of which shall be
prepared in accordance with GAAP applied on a basis consistent with that of the
preceding year.
"Floating Rate" means the Base Rate in effect from time to time.
"GAAP" means generally accepted accounting principles, applied on
a consistent basis, as set forth in Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants and/or in statements
of the Financial Accounting Standards Board and/or their respective successors
and which are applicable in the circumstances as of the date in question.
Accounting principles are applied on a "consistent basis" when the accounting
principles observed in a current period are comparable in all material respects
to those accounting principles applied in a preceding period.
"Hazardous Substances" means flammables, explosives, radioactive
materials, hazardous wastes, asbestos or any material containing asbestos,
polychlorinated biphenyls (PCBs), toxic substances or related materials,
petroleum and petroleum products and associated oil or natural gas exploration,
production and development wastes or any substances defined as "hazardous
substances", "hazardous materials", "hazardous wastes" or "toxic substances"
under the Comprehensive Environmental Response, Compensation and Liability Act,
as amended, the Superfund Amendments and Reauthorization Act, as amended, the
Hazardous Materials Transportation Act, as amended, the Resource Conservation
and Recovery Act, as amended, the Toxic Substances Control Act, as amended, or
any other Environmental Laws now or hereafter enacted or promulgated by any
regulatory authority or governmental body.
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<PAGE> 9
"Indebtedness" means, as to any Person, (a) all items of
indebtedness or liability (other than capital, surplus, deferred credits and
reserves, as such) which in accordance with GAAP would be included in
determining total liabilities as shown on the liability side of a balance sheet
as at the date as of which Indebtedness is to be determined, (b) indebtedness
secured by any mortgage, pledge or lien existing on or encumbering property
owned by the Person whose Indebtedness is being determined, whether or not the
indebtedness secured thereby shall have been assumed (provided that if the
indicated Person is not liable for payment of such indebtedness, the amount
thereof shall be deemed not to exceed the book value of the encumbered
property), and (c) all indebtedness of others which such Person has directly or
indirectly guaranteed, endorsed (otherwise than for collection or deposit in
the ordinary course of business), discounted with recourse, agreed
(contingently or otherwise) to purchase or repurchase or otherwise acquire, or
in respect of which such Person has agreed to supply or advance funds (whether
by way of loan, purchase of securities or capital contribution, through a
commitment to pay for property or services regardless of the nondelivery of
such property or the nonfurnishing of such services or otherwise), or in
respect of which such Person has otherwise become directly or indirectly
liable, contingently or otherwise, whether now existing or hereafter arising.
"Interest Rate(s)" means the Floating Rate or the LIBOR Rate, as
applicable.
"Interest Period" means as to any LIBOR Loan the period
commencing on and including the date of such Loan (or on the effective date of
the election pursuant to Section 2.04(B) by which such Loan became a LIBOR
Loan) and ending on and including the day preceding the same day (or if there
is no such same day, the day preceding the last day) in the 1st, 2nd or 3rd
calendar month thereafter, as selected by Borrower in accordance with Section
2.04(B), and thereafter such period commencing on and including the day
immediately following the last day of the then ending Interest Period for such
Loan and ending on and including the day preceding the day corresponding to the
first day of such Interest Period (or if there is no such corresponding day,
the day preceding the last day), in the 1st, 2nd or 3rd calendar month
thereafter, as so selected by Borrower; provided, however, that if any such
Interest Period would otherwise end on a day prior to a day that is not a
Business Day it shall be extended so as to end on the day prior to the next
succeeding Business Day unless the same would fall in a different calendar
month, in which case such Interest Period shall end on the day preceding the
first Business Day preceding such next succeeding Business Day.
"Investment" in any Person means any stock, bond, note or other
evidence of Indebtedness or any other security (other than current trade and
customer accounts) of, or loan to, such Person.
"LIBOR" means, in respect to any Interest Period, the rate per
annum determined by the Bank to be the quotient of (a) the rate quoted, on an
immediately available funds basis, to the Bank, at approximately 10:00 a.m.
local time in Houston, Texas on the date one (1) Business Day prior to the
first day of such Interest Period, for the offering by leading banks in the
London interbank market of Dollars for deposit with the Bank for a period
comparable to such Interest Period and in an amount comparable to the amount of
the Loan determined by the
4
<PAGE> 10
Bank to be outstanding during such Interest Period and as to which the LIBOR
Rate is to be determined, divided by (b) 1.0, minus the Reserve Percentage
expressed as a decimal, for such Interest Period.
"LIBOR Loan" means any Loan from time to time for which interest
thereon is to be computed on the basis of the LIBOR Rate.
"LIBOR Rate" means a rate per annum equal to the sum of LIBOR for
the Interest Period for which interest is to be determined at the LIBOR Rate,
plus two percent (2.0%).
"Limitation Period" means any period while any amount remains
owing on the Note and interest on such amount calculated at the Floating Rate,
plus any fees payable hereunder and deemed to be interest under applicable law,
would exceed the Maximum Rate.
"LLC" means limited liability company.
"Loan" means, singly, any advance by Bank to Borrower pursuant to
this Agreement and "Loans" means, cumulatively, the aggregate sum of all money
advanced by Bank to Borrower pursuant to this Agreement.
"Loan Documents" means this Agreement and all promissory notes,
security agreements, guaranties, and other instruments, documents, and
agreements executed and delivered pursuant to or in connection with this
Agreement, as such instruments, documents, and agreements may be amended,
modified, renewed, extended, or supplemented from time to time.
"Loan Excess" means, at any point in time, the amount, if any, by
which the outstanding balance on the Loans evidenced by the Note exceeds the
lesser of: (a) the Commitment in effect from time to time, or (b) seventy
percent (70%) of the per Trust Unit price at which the Trust Units are trading,
from time to time, times the number of Trust Units owned by Borrower that have
been included in the Borrowing Base Property.
"Maturity Date" means January 2, 1999; provided that upon
satisfaction of the conditions stated in Section 2.12, such date shall be July
1, 1999.
"Maximum Rate" means the maximum non-usurious interest rate
permissible under applicable laws of the State of Texas or those of the United
States of America applicable to Bank.
"Multi-employer Plan" means a plan described in Section
4001(a)(3) of ERISA which covers employees of Borrower or any ERISA Affiliate.
"Note" means that certain promissory note in the original face
amount of $25,000,000.00, dated of even date herewith, made by Borrower payable
to the order of Bank, in the form attached hereto as Exhibit "A," together with
all deferrals, renewals, extensions,
5
<PAGE> 11
amendments, modifications or rearrangements thereof, which promissory note
shall evidence the advances to Borrower by Bank pursuant to Section 2.01
hereof.
"Obligations" means all obligations, indebtedness, and
liabilities of Borrower to Bank, now existing or hereafter arising, including,
but not limited to, the indebtedness evidenced by the Note, whether direct,
indirect, related, unrelated, fixed, contingent, specified, unspecified, joint,
several, or joint and several, and all interest and fees accruing thereon and
all attorneys' fees and other expenses incurred in the enforcement or
collection thereof.
"Oil and Gas Properties" means fee, leasehold or other interests
in or under mineral estates or oil, gas and other liquid or gaseous hydrocarbon
leases with respect to properties situated in the United States, including,
without limitation, overriding royalty and royalty interests, leasehold estate
interests, net profits interests, production payment interests and mineral fee
interests, together with all contracts executed in connection therewith, all
oil, gas and other minerals produced and to be produced therefrom, all proceeds
thereof, and all tenements, hereditaments, appurtenances and properties, real
or personal, appertaining, belonging, affixed or incidental thereto.
"Pass Through Brokerage Account" means that certain Brokerage
Account No. 7900386512 maintained by Borrower with Jefferies & Company.
"Permanent Brokerage Account" means that certain Brokerage
Account No. 029-102287-105 maintained by Borrower with Banc One Securities
Corporation.
"Permitted Encumbrances" means:
(A) Liens for taxes, assessments, or similar charges, incurred
in the ordinary course of business that are not yet due and
payable;
(B) Claims or liens for taxes, assessments, or similar
charges, that are due and remain unpaid, if the validity or
amount thereof is being contested in good faith by appropriate
and lawful proceedings, so long as levy and execution thereon
have been stayed and continue to be stayed, and in Bank's sole
judgment they do not, in the aggregate, materially detract from
the value of the property of Borrower, or materially impair the
use thereof in the operation of its business; and
(C) Liens in favor of Bank.
"Person" means an individual, company, corporation, partnership,
limited partnership, joint venture, trust, association, unincorporated
organization or a government or any agency or political subdivision thereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
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<PAGE> 12
"Prohibited Transaction" means any transaction set forth in
Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1954, as
amended from time to time.
"Proved Reserves" means the estimated quantities of crude oil,
condensate, natural gas liquids and natural gas which geological and
engineering data demonstrate with reasonable certainty in accordance with
guidelines then generally being applied by Bank in its evaluation of the value,
for lending purposes, of Oil and Gas Properties, to be recoverable by primary
producing mechanisms in future years from known reservoirs underlying lands or
interests therein constituting Oil and Gas Properties, under existing economic
and operating conditions.
"Reportable Event" means any of the events set forth in Section
4043 of ERISA.
"Request for Advance" means the written request by Borrower for
an advance by Bank pursuant to this Agreement, which Request for Advance shall
be in a form, and shall include the information and accompanying supporting
documentation, as prescribed in Exhibit "D" attached hereto.
"Required Number" means: in the case of notices hereunder (i)
relative to borrowings, prepayments, elections of the LIBOR Rate, selections of
Interest Periods for, or other transactions in respect of, LIBOR Loans: two
(2) Business Days; or (ii) relative to all transactions in respect of Base Rate
Loans: one (1) Business Day; it being understood, however, that in the case of
notices involving transactions in respect of more than one type of Loan (such
as a change in type of Loan in accordance with Section 2.04(B)), "Required
Number" means that number of days, as indicated above in respect of the Loans
involved, which would constitute the longest applicable period of time.
"Reserve Percentage" means for any Interest Period, the average
(for such Interest Period) maximum rate at which reserves (including any
marginal, supplemental, or emergency reserves) are required to be maintained
during such Interest Period under Regulation D of the Federal Reserve Board by
member banks of the Federal Reserve System as it applies to the Bank against
"Eurocurrency liabilities" (as such term is used in Regulation D). Without
limiting the effect of the foregoing, the Reserve Percentage shall reflect any
other reserves required to be maintained by member banks by reason of any
regulatory change against (i) any category of liabilities that includes
deposits by reference to which the interest rate for LIBOR Loans is to be
determined as provided in this Agreement or (ii) any category of extensions of
credit or other assets that include LIBOR Loans. As of the date of this
Agreement the Reserve Percentage is zero.
"Security Instruments" means the security instruments described
on Exhibit "C," in form and substance satisfactory to Bank, to be executed by
Borrower pursuant to Section 3.16, and any and all other instruments or
documents hereafter executed in connection with or as security for the payment
of the Note.
"Subsidiary" means (a) any corporation in which Borrower,
directly, or indirectly through its Subsidiaries, owns more than fifty percent
(50%) of the stock of any class or classes
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<PAGE> 13
having by the terms thereof the ordinary voting power to elect a majority of
the directors of such corporation; and (b) any partnership, association, joint
venture, or other entity in which Borrower, directly or indirectly through its
Subsidiaries, has more than a fifty percent (50%) equity interest at the time.
"Tax Credit Monetization" shall have the meaning set forth in
Section 5.20.
"Trust" means the Burlington Resources Coal Seam Gas Royalty
Trust, as more fully described in the Trust Prospectus.
"Trust Agreement" shall have the meaning set forth in Section
2.12.
"Trust Prospectus" means that certain Prospectus dated May 1993
pursuant to which 8,800,000 Trust Units in the Burlington Resources Coal Seam
Gas Royalty Trust were publicly offered for purchase.
"Trust Royalty Interest" means Royalty Interests conveyed to the
Trust with respect to Coal Seam Gas to be produced and sold from Meridian Oil
Production, Inc.'s interest in the Underlying Properties, as more fully
described in the Trust Prospectus.
"Trust Unit Acquisition Program" shall have the meaning set forth
in Section 5.01.
"Trust Units" means the Units, as defined in the Trust
Prospectus.
"Underlying Properties" means those certain Oil and Gas
Properties defined and described as Underlying Properties in the Trust
Prospectus.
"Unmatured Event of Default" means any event or occurrence which
solely with the lapse of time or the giving of notice or both will ripen into
an Event of Default.
Undefined financial accounting terms used in this Agreement shall
be defined in accordance with GAAP.
ARTICLE II. THE LOAN
2.01 The Line of Credit. Upon the terms and conditions
(including, without limitation, the right of Bank to terminate the Commitment
hereunder upon an Event of Default or to suspend the Commitment upon an
Unmatured Event of Default) and relying on the representations and warranties
contained in this Agreement, Bank agrees, for a period from and after the date
hereof through the last Business Day prior to the Maturity Date, to make
advances for the account of Borrower from time to time following receipt of a
Request for Advance; provided, however, that the aggregate principal amount of
all Loans at any one time outstanding shall not exceed the Commitment. Once
any part of the availability of the Commitment has been advanced to Borrower,
although Borrower shall have the right to prepay the portion of the Loan
8
<PAGE> 14
evidenced by such advance, Borrower shall not be permitted to reborrow that
portion of the Commitment, but shall have the right to request and receive
subsequent advances of any remaining unfunded portion of the Commitment. The
borrowings made by Borrower pursuant to the Commitment shall be made at the
principal office of Bank and shall be evidenced by the Note. The entire
outstanding principal amount of the Note is due on the Maturity Date.
2.02 Advances and Payments of Principal Under the Note. Each
time an advance is made against or payment is made on the Note, Bank is hereby
irrevocably authorized by Borrower to make appropriate entries of such in its
records in accordance with the usual and customary practices of accounting for
advances and payments on notes; provided, however, the failure of Bank to do so
shall not relieve Borrower of its correct liability hereunder or under the
Note.
The aggregate unpaid amount of advances reflected by the
notations by Bank on its records or the ledger sheets affixed to the Note shall
be deemed rebuttably presumptive evidence of the principal amount owing on the
Note. The liability for payment of principal and interest evidenced by the
Note shall be limited to principal amounts actually advanced to Borrower and
outstanding under this Agreement and interest on such amounts calculated in
accordance with this Agreement. Interest provided for in the Note and herein
shall be calculated on unpaid sums actually advanced and outstanding under the
Note pursuant to the terms of this Agreement and only for the period from the
date or dates of such advances until repayment.
2.03 Prepayment and Conversion. Upon the Required Number of
days notice to the Bank, Borrower may: (a) without the payment of penalty or
premium, prepay the principal of the Loans, or (b) voluntarily convert the
applicable Interest Rate of any Loan prior to the termination of the applicable
Interest Period in whole or in part, from time to time; any partial payment or
conversion to be made in the sum of not less than $500,000 or any $100,000
increment in addition thereto; provided that, with respect to any such
prepayment or conversion of any Loan upon which interest is being calculated at
the LIBOR Rate, Borrower shall reimburse the Bank on demand and following
receipt of the certificate referenced, below, for any costs, including
administrative costs, incurred by the Bank as a result of such prepayment or
conversion and any loss incurred or to be incurred by the Bank in the
redeployment of the funds released by any such prepayment. Such loss shall be
the difference, as reasonably determined by Bank, between (i) Bank's gross
return hereunder with respect to that portion of the Loans which is prepaid,
based on the applicable Interest Rate for such portion of the Loans and (ii)
any lesser amount realized by Bank in deploying the funds received in
repayment, or otherwise realized from that portion of the Loans so prepaid,
during the period from the date of the prepayment until the end of the Interest
Period for that portion of the Loans prepaid; provided that Bank shall use its
best efforts to redeploy such funds in a commercially reasonable manner, and
the Bank shall give Borrower, within ninety (90) days of incurring any such
loss or cost, a certificate identifying the amount of such loss or costs and
showing the calculations used in determining such loss or costs.
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2.04 Interest Rate and Payments of Interest.
(A) Interest on Base Rate Loans shall be calculated on the
basis of a year of 365 or 366 days, as appropriate. Interest on
LIBOR Loans shall be calculated on the basis of a 360-day year,
counting the actual number of days elapsed. Interest on the
outstanding principal balance of the Loans shall accrue for each
day at either the Floating Rate for such day or the LIBOR Rate
for the Interest Period which includes such day, all as elected
and specified (including specification as to length of Interest
Period, as permitted by the definition of that term, with respect
to any election of the LIBOR Rate) by Borrower in accordance with
Section 2.04(B); provided that:
(i) In the absence of an election by Borrower of the
LIBOR Rate, or, having made such election but upon the
Required Number of days prior to the end of the then
current Interest Period Borrower fails or is not entitled
under the terms of this Agreement to elect to continue
such Interest Rate and specify the applicable Interest
Period therefor, then upon the expiration of such then
current Interest Period, interest on the Loans shall
accrue for each day at the Floating Rate for such day,
until Borrower, pursuant to Section 2.04(B), elects a
different Interest Rate and specifies the Interest Period
for the Loans.
(ii) Interest accruing on any LIBOR Loan during any
Interest Period shall be payable on the last Business Day
of such then current Interest Period; provided, however,
that all accrued interest on any LIBOR Loan converted or
prepaid pursuant to Section 2.03 shall be paid immediately
upon such prepayment or conversion.
(B) By at least the Required Number of days prior to the
advance of any Loan hereunder, Borrower shall select the initial
Interest Rate to be charged on such Loan, and from time to time
thereafter Borrower may elect, on at least the Required Number of
days' irrevocable prior written (or telephoned, promptly
confirmed by written) notice to the Bank, to change the Interest
Rate on any Loan to any other Interest Rate (including, when
applicable, the selection of the Interest Period); provided that;
(i) Borrower shall not select an Interest Period that extends
beyond the Termination Date; (ii) except as otherwise provided in
Section 2.03 no such change from the LIBOR Rate to another
Interest Rate shall become effective on a day other than the day,
which must be a Business Day, next following the last day of the
Interest Period last effective for such LIBOR Loan; (iii) any
elections made by Borrower pursuant to this Section 2.04(B) shall
be in the amount of $100,000, plus any additional increment of
$100,000; (iv) notwithstanding anything herein to the contrary,
Borrower may not make any election under this Section 2.04(B)
that would result in Loans outstanding at more than three (3)
different LIBOR Rates without the written agreement of the Bank
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to do so; and (v) the first day of each Interest Period as to a
LIBOR Loan shall be a Business Day.
(C) Interest on Base Rate Loans shall be paid quarterly in
arrears on the first Business Day of each calendar quarter
commencing on the first day of the calendar quarter following the
quarter in which interest begins to accrue at the Floating Rate,
as elected by Borrower pursuant to Section 2.04(B), and on the
date the principal of such Loans shall be due (at stated
maturity, on acceleration, or otherwise).
(D) Interest on past-due principal shall accrue at the greater
of the applicable Floating Rate plus three percent (3.00%) or
LIBOR plus five percent (5.00%) until such principal is paid in
full, and shall be payable upon demand by the Bank.
(E) The Bank shall notify Borrower of the current Base Rate
and of the current LIBOR Rate from time to time upon request by
Borrower.
(F) It is the intention of the parties hereto to conform
strictly to applicable usury laws as in effect from time to time.
Accordingly, if any transactions contemplated hereby would be
usurious under applicable Law (including the laws of the United
States of America, or of any other jurisdiction whose laws may be
mandatorily applicable), then, in that event, notwithstanding
anything to the contrary in this Agreement, or any other
agreement entered into in connection with this Agreement, it is
agreed the aggregate of all consideration that constitutes
interest under applicable law that is contracted for, charged, or
received under this Agreement, or under any of the other
aforesaid agreements or otherwise in connection with this
Agreement shall under no circumstances exceed the Maximum Rate,
and any excess shall be credited to Borrower by Bank (or, if such
consideration shall have been paid in full, such excess refunded
to Borrower by Bank). All sums paid, or agreed to be paid, to
the Bank for use, forbearance, and detention of the indebtedness
of Borrower by the Bank shall, to the extent permitted by
applicable laws, be amortized, pro rated, allocated, and spread
throughout the full term of such indebtedness until such
indebtedness is paid in full so that the actual rate of interest
is uniform, but does not exceed the Maximum Rate, throughout the
full term thereof. If at any time the applicable Interest Rate,
which shall be deemed for purposes of this Section 2.04(F), only,
to include any other fees, charges, or other forms of
consideration which constitute interest under applicable law that
is contracted for, charged, or received under this Agreement or
any other agreement entered into in connection with this
Agreement, exceeds the Maximum Rate, the rate of interest to
accrue pursuant to this Agreement shall be limited,
notwithstanding anything to the contrary in this Agreement, to
the Maximum Rate, but any subsequent reductions in the Interest
Rate otherwise provided for herein shall not reduce the interest
to accrue pursuant to this Agreement below the Maximum Rate until
the total amount of
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interest accrued pursuant to this Agreement equals the amount of
interest that would have accrued if a varying rate per annum
equal to the otherwise applicable Interest Rate had at all times
been in effect. If the total amount of interest paid or accrued
pursuant to this Agreement under the foregoing provisions is less
than the total amount of interest that would have accrued if a
varying rate per annum equal to the otherwise applicable Interest
Rate had at all times been in effect, then Borrower agrees to pay
upon final maturity of the Loans an amount equal to the
difference between (a) the lesser of (i) the amount of interest
that would have accrued if the Maximum Rate had at all times been
in effect or (ii) the amount of interest that would have accrued
if a varying rate per annum equal to the otherwise applicable
Interest Rate had at all times been in effect, and (b) the amount
of interest accrued in accordance with the other provisions of
this Agreement.
2.05 Increased Cost of Loans.
(A) Notwithstanding any other provisions herein, if as a
result of any regulatory change occurring after the date hereof
(i) the basis of taxation of payments to Bank of the
principal of, or interest on, any LIBOR Loan or any other
amounts due under this Agreement in respect of any such
LIBOR Loan (except for taxes imposed on the overall net
income or receipts of Bank, and franchise or other taxes
imposed generally on Bank), by the jurisdiction (or any
political subdivision therein) in which Bank has its
principal office is changed;
(ii) any reserve, special deposit, or similar requirement
(including without limitation any reserve requirement
under regulations of the Board of Governors of the Federal
Reserve System) against assets of, deposits with, or for
the account of, or credit extended by Bank, is imposed,
increased, modified, or deemed applicable; or
(iii) any other condition affecting this Agreement or any
LIBOR Loan is imposed on Bank or (in the case of LIBOR
Loans) the London interbank market;
and the result of any of the foregoing is to increase the actual
direct cost to Bank of making or maintaining any such LIBOR Loan
or to reduce the amount of any sum received by Bank hereunder in
respect thereof (and such increase or reduction shall not have
been compensated by a corresponding increase in the interest rate
applicable to the respective Loans), by an amount deemed by Bank
to be material (such increases in cost and reductions in amounts
receivable being herein called "Increased Costs"), then Borrower
shall pay to Bank, within thirty (30) days after its demand, such
additional amount or amounts as will compensate
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Bank for those Increased Costs. The Bank will not demand to be
compensated by Borrower for such Increased Costs unless the Bank
generally makes such demands to its other LIBOR Loan customers
who are similarly situated. A certificate of Bank setting forth
the basis for the determination of such amount necessary to
compensate the Bank as aforesaid, accompanied by documentation
showing reasonable support for such increased costs or reduced
sums received by Bank, shall be delivered to Borrower within 180
days of the events giving rise to such Increased Costs and shall
be conclusive, save for manifest error, as to such determination
and such amount.
(B) Notwithstanding the foregoing provisions of this Section
2.05, in the event that by reason of any regulatory change the
Bank either (i) incurs Increased Costs based on, or measured by,
the excess above a specified level of the amount of a category of
deposits or other liabilities of Bank that includes deposits by
reference to which the interest rate on LIBOR Loans is determined
as provided in this Agreement or a category of extensions of
credit or other assets of such Bank that includes LIBOR Loans or
(ii) becomes subject to restrictions on the amount of such a
category of liabilities or assets that it may hold, then, if Bank
so elects by notice to Borrower, the obligation of Bank to make
or convert Loans of any other type into LIBOR Loans hereunder
shall be suspended until the earlier of the date such regulatory
change ceases to be in effect or the date Borrower and Bank agree
upon an alternative method of determining the interest rate
payable by Borrower on LIBOR Loans, and all LIBOR Loans of Bank
then outstanding shall either be repaid or be converted into a
Base Rate Loan (if not otherwise prohibited under the terms of
this Agreement) at Borrower's option.
(C) Bank agrees that upon the occurrence of any regulatory
change giving rise to the operation of the first paragraph of
this Section 2.05, it will, if requested by Borrower and to the
extent permitted by law or by the relevant government authority,
for a period of thirty (30) days endeavor in good faith to avoid
or minimize the increase in cost or reduction in amount
receivable resulting from such regulatory change; provided,
however, that such change can be made in such a manner that Bank,
in its sole determination, suffers no economic, legal,
regulatory, or other disadvantage. Any expense incurred by Bank
in so doing shall be paid by Borrower on delivery to Borrower of
a certificate as to the amount of such expense, which certificate
shall be conclusive in the absence of manifest error. Nothing in
this paragraph shall affect or postpone the obligations of
Borrower set forth in any other paragraph of this Section 2.05.
2.06 Substitute Rate. Anything herein to the contrary
notwithstanding, if within two (2) Business Days prior to the first day of any
Interest Period for a LIBOR Loan the Bank is not, for any reason whatsoever,
quoted rates for the offering of Dollars for deposit with it in the London
interbank market for a period and amount relevant to the computation of the
rate of interest on LIBOR Loans for such Interest Period, the Bank shall give
Borrower prompt notice thereof and, if Borrower elects to obtain a Loan for the
amount previously requested as
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a LIBOR Loan, then on what would otherwise have been the first day of such
Interest Period such Loans shall be made as Base Rate Loans (if not otherwise
prohibited under the terms of this Agreement), in accordance with the election
procedures set forth in Section 2.04(B); provided, however, that prior to the
effective date of such election, interest shall be calculated at the Floating
Rate.
2.07 Change of Law. Notwithstanding any other provision
herein, in the event that any change in any applicable law, rule or regulation
or in the interpretation or administration thereof shall make it unlawful for
the Bank to (i) honor any commitment it may have hereunder to make any LIBOR
Loan, then such commitment shall terminate, or (ii) maintain any LIBOR Loan,
then all LIBOR Loans of the Bank then outstanding shall be repaid or, if
Borrower so elects, converted to Base Rate Loans (if not otherwise prohibited
under the terms of this Agreement) in accordance with the election procedures
set forth in Section 2.04(B); provided, however, that prior to the effective
date of such election, interest shall be calculated at the Floating Rate. Any
remaining commitment of Bank hereunder to make LIBOR Loans (but not other
Loans) shall terminate forthwith. Upon the occurrence of any such change, the
Bank shall promptly notify Borrower thereof, and shall furnish to Borrower in
writing evidence thereof certified by the Bank.
Any repayment or conversion of any LIBOR Loan which is required
under this Section 2.07 or under 2.05(B) shall be effected by payment thereof,
together with accrued interest thereon, on demand, and concurrently there shall
occur the borrowing of the corresponding Base Rate Loan as provided herein.
If any repayment to Bank of any LIBOR Loan (including conversions
thereof) is made under this Section 2.07 on a day other than a day otherwise
scheduled for a payment of principal of or interest on such Loan, Borrower
shall pay to Bank upon its request such amount or amounts as will compensate it
for the amount by which the rate of interest on such Loan immediately prior to
such repayment exceeds the stated rate of interest on relending or reinvesting
the funds received in connection with such prepayment, in each case for the
period from the date of such prepayment to the Business Day next succeeding the
last day of such then current Interest Period, all as determined by Bank in its
good faith discretion.
2.08 Borrowing Base Determination. The Borrowing Base is
hereby established as being (i) the lessor of: (a) four dollars and twenty-
five cents ($4.25), or (b) one-half of the price at which each Trust Unit is
purchased, from time to time, times (ii) the number of Trust Units owned by
Borrower and included in the Borrowing Base Property, not to exceed a maximum
of $25,000,000.00 as of January 15, 1998. The maximum component of the
Borrowing Base per Trust Unit and the maximum, aggregate amount of the
Borrowing Base shall be redetermined by Bank, from time to time, pursuant to
the provisions of this Section. Bank's determination of the aggregate
Borrowing Base and the component of the Borrowing Base on a per Trust Unit
basis shall be made in accordance with Bank's prevailing credit process, as in
effect from time to time, including its Oil and Gas Property evaluation
criteria, risk factors, and hydrocarbon price forecast, as in effect from time
to time, as well as factors that may reasonably impact the future performance
or credit worthiness of Borrower.
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<PAGE> 20
On or before the first day of each May and November, beginning
with May 1, 1998, Borrower shall furnish to Bank a petroleum engineering report
and geological data relative to the Proved Reserves that are attributable to
the Underlying Properties, as well as such other information as Bank may
reasonably request regarding volumes of production produced and sold,
contracts, pricing, gross revenues, expenses, and other information and
engineering and geological data as may relate to the Underlying Properties
(collectively the "Borrowing Base Property Data"). Upon receipt of such
Borrowing Base Property Data, Bank shall, in the normal course of business and
in accordance with Bank's standard practices in effect from time to time,
redetermine the aggregate Borrowing Base and per Trust Unit component of the
Borrowing Base, which redetermination shall become effective upon written
notification from Bank to Borrower, and which, subject to the other provisions
of this Agreement, shall be the basis on which the Borrowing Base shall
thereafter be calculated until the effective date of the next redetermination
of the Borrowing Base. Each semi-annual review shall be a complete report
relating to the Underlying Properties, prepared by an independent petroleum
engineer or firm of engineers satisfactory to Bank.
Beginning with the delivery of the Borrowing Base Property Data
due by May 1, 1998, and continuing as and when Borrower is required to provide
Bank each semi-annual report, as required by the provisions of this Section,
Borrower shall contemporaneously pay Bank a fee equal to $5,000.00 for its
analysis of such report and redetermination of Borrowing Base. At any time
engineering reviews are requested by Borrower in connection with a Borrowing
Base redetermination, other than semi-annual reviews required by Bank, an
additional fee of $5,000.00 shall be paid to Bank for its analysis of such
report and redetermination of the Borrowing Base.
The Borrowing Base shall represent the Bank's determination, in
accordance with its customary lending practices in effect from time to time, of
the maximum loan amount that may be supported by the Borrowing Base Property.
Borrower and Bank acknowledge that (a) due to the uncertainties of the oil and
gas extraction process, the Underlying Properties are not subject to an
evaluation with a high degree of accuracy and are subject to potential rapid
deterioration in value and (b) for this reason and the difficulties and
expenses involved in liquidating and collecting against the Borrowing Base
Property, Bank's determination of the maximum loan amount with respect to the
Borrowing Base Property contains an equity cushion, which equity cushion is
acknowledged by Borrower as essential for the adequate protection of Bank.
In addition to scheduled redeterminations of the Borrowing Base,
Bank may redetermine the Borrowing Base at any time and from time to time, in
accordance with the foregoing procedures and Bank's standard practices in
effect from time to time, which redetermination shall become effective upon
written notification from Bank to Borrower and which, subject to the other
provisions of this Agreement, shall be the basis on which the Borrowing Base
shall thereafter be calculated until the effective date of the next
redetermination of the Borrowing Base.
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2.09 Advances to Satisfy Obligations of Borrower. Bank may,
but shall not be obligated to, make advances hereunder and apply same to the
satisfaction of any condition, warranty, representation or covenant of Borrower
contained in this Agreement, and the funds so advanced and applied shall be
part of the Loan proceeds advanced under this Agreement and evidenced by the
Note. Bank shall endeavor to give written notice to Borrower at least five (5)
Business Days prior to making any such advance pursuant to this Section,
provided that Bank shall not be obligated to give any such notice if, in good
faith, it has determined that a delay in making any such advance would have a
material adverse effect on the business, operations or financial condition of
Borrower or on the collateral value to Bank of any material portion of the
Borrowing Base Property.
2.10 Prepayment Upon Occurrence of a Loan Excess. Borrower
acknowledges that Bank will periodically, and in any event no less frequently
than once per month, make a determination regarding whether a Loan Excess
exists, and following any such determination it shall have the right, but not
the obligation, to notify Borrower of such Loan Excess. Upon receipt of notice
from Bank that a Loan Excess exists, or upon Borrower having, itself, made a
determination that a Loan Excess exists, Borrower shall immediately, but in no
event later than fifteen (15) days following the earlier of either: (a)
Borrower becoming aware that a Loan Excess exists, or (b) notice from Bank of
any such determination, (i) prepay the principal of the Note in an aggregate
amount at least equal to such Loan Excess or (ii) add to the Borrowing Base
additional Borrowing Base Property sufficient to increase the Borrowing Base to
an amount equal the unpaid principal amount of the Note.
2.11 Facility Fee. As consideration for the commitment of Bank
to make Loans to Borrower pursuant to this Agreement, Borrower shall pay to
Bank at Closing a fee ("Facility Fee") equal to five-tenths of one percent
(.5%) of $25,000,000.00; and at the time of funding of each advance of the Loan
pursuant to Section 2.01 (including any advance made at Closing), Borrower
shall contemporaneously pay to Bank a fee equal to three-fourths of one percent
(.75%) of the amount of such advance. If the Maturity Date is to be
automatically extended as provided in Section 2.12, then on the date of such
automatic extension, Borrower shall pay to Bank an additional fee in the amount
of one fourth of one percent (.25%) of the amount of the Commitment then in
effect.
2.12 Extended Maturity Date. On January 2, 1999, the Maturity
Date shall be automatically extended to July 1, 1999, if, but only if, all of
the following conditions have been satisfied:
(a) there has been an affirmative vote of the owners of sixty-
six and sixty-seven one hundredths percent (66.67%) of the Trust Units
to liquidate the Trust in accordance with the terms of the Trust
Agreement of Burlington Resources Coal Seam Gas Royalty Trust dated May
1, 1993, among Meridian Oil Production Inc., et al., as amended (the
"Trust Agreement");
(b) the Trustee has taken the actions specified in Section
9.03(b) of the Trust Agreement;
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(c) no Event of Default or Unmatured Event of Default shall
have occurred and be continuing; and
(d) the additional Facility Fee required by the last sentence
of Section 2.11 shall have been paid or shall be contemporaneously paid.
ARTICLE III. CONDITIONS
The obligation of Bank to make advances of the Loans referred to
in Article II of this Agreement is subject to the prior or contemporaneous
satisfaction of the following conditions precedent stated in this Article III,
provided, however, that for purposes of Sections 3.13 and 3.15 hereof, any
conversion of the applicable Interest Rate of any Loan pursuant to Section 2.03
shall not be deemed to be an "advance" of a Loan hereunder.
3.01 Receipt of Note, Agreement, and Certificate of Compliance.
Bank shall have received the Note, multiple counterparts of this Agreement, as
requested by Bank, and the Certificate of Compliance, all duly executed by an
authorized officer of Borrower.
3.02 Completion of Equity Investment in Borrower. Bank shall
have received evidence satisfactory to Bank, in its sole discretion, that
Borrower has closed, or has enforceable commitments to close, one or more
transactions pursuant to which Borrower has been or will be capitalized with at
least Twenty-Four Million Dollars ($24,000,000.00) in common equity from one or
more equity providers acceptable to Bank, and in form and on terms acceptable
to Bank, in its discretion.
3.03 Receipt of Organizational Documents. Bank shall have
received from Borrower its Articles of Organization and its regulations,
certified as being true and correct by the secretary or an assistant secretary
of Borrower.
3.04 Receipt of Certified Copy of Corporate Proceedings and
Certificates of Incumbency. Bank shall have received from Borrower copies of
all resolutions of its managers and members authorizing the transactions set
forth in this Agreement, and the execution of this Agreement, the Note, and the
Security Instruments, such copy or copies to be certified by the secretary or
an assistant secretary as being true and correct and in full force and effect
as of the date hereof. In addition, Bank shall have received from Borrower a
certificate of incumbency signed by the secretary or an assistant secretary of
Borrower setting forth (a) the names of the officers executing this Agreement,
the Note, and the Security Instruments, (b) the office(s) to which such Persons
have been elected and in which they presently serve and (c) an original
specimen signature of each such person.
3.05 Receipt of Certificates of Authority and Certificates of
Good Standing. Bank shall have received certificates, as of the most recent
dates practicable, of the Secretary of State of the jurisdiction in which
Borrower was formed attesting to Borrower's existence, and of each state in
which Borrower is qualified to do business as a foreign LLC attesting to such
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qualification, and from the department of revenue or taxation of each of the
foregoing states or governmental authorities, as to the good standing of
Borrower.
3.06 UCC Search. The results of a Uniform Commercial
Code/security interest search showing all financing statements and other
documents or instruments on file against Borrower in the Offices of the
Secretaries of State of the State of Texas, such searches to be as of a date no
more than ten (10) days prior to the date of the Closing.
3.07 Opinion of Counsel. Bank shall have received a
satisfactory legal opinion from the firm of Haynes & Boone, LLP, counsel for
Borrower, confirming the representations of Borrower set forth in Sections 4.01
through 4.03, 4.11 and 4.12, such opinion to be subject to such customary
assumptions, qualifications and exceptions as are reasonably satisfactory to
the Bank.
3.08 Fees. Bank shall have contemporaneously received the fees
required by Section 2.13.
3.09 Request for Advance. Bank shall have received from
Borrower a Request for Advance.
3.10 Cash Collateral Account. Borrower shall have established
with Bank an account (the "Cash Collateral Account"), which is account No.
1560185793, into which the deposits required by Section 5.20 shall be made.
3.11 Acquisition and/or Ownership of Borrowing Base Property.
Bank shall have been satisfied, in its sole discretion, that Borrower has
become, or contemporaneously with such advance, will become, the owner of the
Trust Units on which the Borrowing Base has been calculated, and that such
Trust Units are, or promptly following their acquisition by Borrower will be,
held for the benefit of Borrower in the Permanent Brokerage Account or the Pass
Through Brokerage Account, in accordance with Section 5.29, and that Bank has
received from the broker that maintains the Permanent Brokerage Account and the
broker that maintains the Pass Through Brokerage Account an executed
Confirmation of Pledge in form satisfactory to Bank, in which such broker
acknowledges receipt of the notice of Bank's security interest therein and
agrees, among other customary provisions, not to effect any transfer of
Borrower's interest in any of the securities in such account without the prior
written consent of Bank.
3.12 Title to Trust Royalty Interest. The Bank shall be
satisfied that the Trust has Defensible Title to the Royalty Interest, and that
there has been no material, adverse change in, or termination, interruption of
performance, or default under the Gas Purchase Contract and Gas Gathering
Contract, as described and defined in the Glossary attached as Exhibit "B" to
the Trust Prospectus.
3.13 Accuracy of Representations and Warranties and No Event of
Default. The representations and warranties contained in Article IV of this
Agreement shall be true and correct in all material respects on the date of the
making of such Loans or advances with the
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same effect as though such representations and warranties had been made on such
date; and no Event of Default shall have occurred and be continuing or will
have occurred at the completion of the making of such Loans or advances.
3.14 Legal Matters Satisfactory to Counsel to Bank. All legal
matters incident to the consummation of the transactions hereby contemplated
shall be satisfactory to counsel for Bank.
3.15 No Material Adverse Change. No material adverse change
shall have occurred since the date of this Agreement in the condition,
financial or otherwise, of Borrower or the Trust.
3.16 Security Instruments. As security for the payment of the
Note and the performance of the Obligations of Borrower under this Agreement,
Bank shall have received the Security Instruments, duly executed by Borrower,
that are necessary or appropriate, in the opinion of Bank, to perfect Bank's
security interests in the Borrowing Base Property and other assets of Borrower.
3.17 Legal Fees. All legal fees and disbursements owed to
Bank's special counsel who provided representation to the Bank in connection
with this Agreement or any amendment hereto shall have been paid.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
To induce Bank to enter into this Agreement and to make the Loans
hereunder, Borrower represents and warrants to Bank (which representations and
warranties will survive the delivery of the Note) that:
4.01 Existence and Good Standing. Borrower is an LLC duly
organized, legally existing and in good standing under the laws of its
jurisdiction of formation and is duly qualified and in good standing as a
foreign LLC in all jurisdictions wherein the property owned or the business
transacted by it makes such qualification necessary, other than those
jurisdictions wherein the failure to so qualify does not have a material
adverse effect on Borrower.
4.02 Due Authorization. The execution and delivery by Borrower
of this Agreement and the borrowings hereunder; the execution and delivery by
Borrower of the Note and the Security Instruments; and the repayment by
Borrower of Indebtedness evidenced by the Note and interest and fees provided
in the Note and this Agreement (a) are within the LLC power of Borrower; (b)
have been duly authorized by all necessary LLC action; and (c) do not and will
not (i) require the consent of any regulatory authority, governmental body, or
any other Person, (ii) violate any provision of law, the certificate of
incorporation, the articles of incorporation, or the bylaws of Borrower, (iii)
cause a default to occur under the terms and provisions of any indenture,
instrument or other agreement to which Borrower is a party or by which its
property may be presently bound or encumbered, or (iv) result in or require the
creation or imposition of any mortgage, lien, pledge, security interest, charge
or other
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encumbrance in, upon or of any of the properties or assets of Borrower under
any such indenture, instrument or other agreement, other than under any of the
Security Instruments.
4.03 Valid and Binding Obligations. This Agreement, the Note,
and the Security Instruments are the legal, valid and binding obligations of
and enforceable against Borrower in accordance with their respective terms
(subject to any applicable bankruptcy, insolvency or other laws of general
application affecting creditors' rights and judicial decisions interpreting any
of the foregoing).
4.04 Scope and Accuracy of Financial Statements. All Financial
Statements submitted and to be submitted to Bank hereunder are and will be
complete and correct in all material respects; are and will be prepared in
accordance with GAAP and practices consistently applied; and do and will fairly
reflect the financial condition and the results of the operations of Borrower
in all material respects as of the dates and for the period stated therein
(subject only to normal year-end audit adjustments with respect to such
unaudited interim statements); and no material adverse change has since
occurred in the condition, financial or otherwise, of Borrower.
4.05 Liabilities, Litigation and Restrictions. Except as
disclosed in the Financial Statements, Borrower has no liabilities, direct or
contingent, which may materially and adversely affect its business or assets.
There is no litigation or other action of any nature pending before any court,
governmental instrumentality, regulatory authority or arbitral body or, to the
knowledge of Borrower, threatened against or affecting Borrower, which might
reasonably be expected to result in any material, adverse change in the
business or assets of Borrower. No unusual or unduly burdensome restriction,
restraint or hazard exists by contract, law, governmental regulation or
otherwise relative to the business or material properties of Borrower which
might reasonably be expected to result in any material, adverse change in the
business or assets of Borrower other than such as relate generally to Persons
engaged in the business activities conducted by Borrower.
4.06 Margin Stock. None of the proceeds of the Loans will be
used for the purpose of buying or carrying margin stock, except as expressly
permitted herein.
4.07 Authorizations and Consents. No authorization, consent,
approval, exemption, franchise, permit or license of, or filing with, any
governmental or public authority or any third party is required to authorize,
or is otherwise required in connection with the valid execution and delivery by
Borrower of this Agreement, the Note, and the Security Instruments or any
instrument contemplated hereby, the repayment by Borrower of advances against
the Note and interest and fees provided in the Note and this Agreement, or the
performance by Borrower of its obligations under any of the foregoing.
4.08 Compliance with Laws, Rules, Regulations and Orders. To
the best of the knowledge and belief of Borrower, neither the business nor any
of the activities of Borrower, as presently conducted, violates any law or any
rule, regulation or directive of any applicable judicial, administrative or
other governmental instrumentality (including, but not by way of limitation,
any law or any rule, regulation or directive of any judicial, administrative or
other
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governmental instrumentality relating to zoning, to any Environmental Law, or
to the stabilization of wages or prices the result of which violation would
have a material adverse effect on Borrower, and Borrower possess all licenses,
approvals, registrations, permits and other authorizations necessary to enable
it to carry on its respective business in all material respects as now
conducted, and all such licenses, approvals, registrations, permits and other
authorizations are in full force and effect; and Borrower has no reason to
believe that it will be unable to obtain the renewal of any such licenses,
approvals, registrations, permits and other authorizations.
4.09 Proper Filing of Tax Returns and Payment of Taxes Due.
Borrower has duly and properly filed all United States Income Tax returns and
all other tax returns which are required to be filed, and has paid all taxes
due pursuant to said returns or pursuant to any assessment received, except
such taxes, if any, as are being contested in good faith and as to which
adequate provisions and disclosures have been made; and the respective charges
and reserves on the books of Borrower with respect to any taxes or other
governmental charges are adequate.
4.10 ERISA. Borrower is in compliance in all material respects
with all applicable provisions of ERISA. Neither a Reportable Event nor a
Prohibited Transaction has occurred and is continuing with respect to any plan;
no notice of intent to terminate a plan has been filed, nor has any plan been
terminated; no circumstances exist which constitute grounds under Section 4042
of ERISA entitling the PBGC to institute proceedings to terminate, or appoint a
trustee to administrate a plan, nor has the PBGC instituted any such
proceedings; neither Borrower nor any ERISA Affiliate has completely or
partially withdrawn under Sections 4201 or 4204 of ERISA from a Multi-employer
plan; Borrower and each ERISA Affiliate have met their minimum funding
requirements under ERISA with respect to all of their plans and the present
value of all vested benefits under each plan exceeds the fair market value of
all plan assets allocable to such benefits, as determined on the most recent
valuation date of the plan and in accordance with the provisions of ERISA and
the regulations thereunder for calculating the potential liability of Borrower
or any ERISA Affiliate to the PBGC or the plan under Title IV of ERISA; and
neither Borrower nor any ERISA Affiliate has incurred any liability to the PBGC
under ERISA.
4.11 Investment Company Act Compliance. Borrower is not, nor
is it directly or indirectly controlled by or acting on behalf of any person or
entity which is, an investment company or an "affiliated person" of an
investment company within the meaning of the Investment Company Act of 1940.
4.12 Public Utility Holding Company Act Compliance. Borrower
is not a "holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
4.13 Environmental Laws. To the best of the knowledge and
belief of Borrower:
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(a) no property of Borrower is currently on, or has ever been
on, any federal or state list of superfund sites as listed on the
Environmental Protection Agency National Priority List or any comparable
state registries or list in any state of the United States (collectively
"Superfund Sites");
(b) no Hazardous Substances have in the past been generated,
transported, and or disposed of, by Borrower at any Superfund Site;
(c) except in accordance with a valid permit, license,
certificate or approval of the relevant regulatory authority or
governmental body, there has been no emission, spill, release, disposal
or discharge of any Hazardous Substance into or upon (i) the air, (ii)
soils or any improvements located thereon, (iii) surface water or
groundwater, or (iv) the sewer, septic system or waste treatment,
storage or disposal system servicing any property of Borrower; and
(d) no complaint, order, directive, claim, citation, notice of
environmental report, notice of investigation or other notice by any
regulatory authority or governmental body or any other Person with
respect to (i) air emissions, (ii) spills, releases or discharges to
soils or any improvements located thereon, surface water, groundwater or
the sewer, septic system or waste treatment, storage or disposal systems
servicing any property of Borrower, (iii) solid or liquid waste
disposal, (iv) the use, generation, storage, transportation or disposal
of any Hazardous Substance, or (v) other environmental, health or safety
matters affecting any property of Borrower, any improvements located
thereon, or the business thereon conducted, has been received by
Borrower, nor has Borrower been given oral or written notice thereof;
provided, however, that the representations and warranties set forth in
subparagraphs (c) and (d) above shall apply only to events and conditions which
either resulted in (i) a continuing lien or encumbrance on the property of
Borrower or (ii) otherwise materially affect Borrower's use or operation of its
property or Borrower's ability to repay the Indebtedness evidenced by the Note.
4.14 Subsidiaries. Borrower has no Subsidiaries.
4.15 Existing Indebtedness. Borrower has no existing
Indebtedness, other than accounts payable incurred in the ordinary course of
business that are not more than 30 days overdue.
4.16 Material Commitments. (A) Borrower has no material
leases, contracts or commitments of any kind (including, without limitation,
employment agreements; collective bargaining agreements; powers of attorney;
distribution arrangements; patent license agreements; contracts for future
purchase or delivery of goods or rendering of services; bonuses, pension and
retirement plans; or accrued vacation pay, insurance and welfare agreements)
requiring aggregate expenditure by Borrower in excess of $500,000 per year; (B)
to the best of Borrower's knowledge, all parties to all such material leases,
contracts, and other commitments to which Borrower is a party have materially
complied with the provisions of such leases, contracts, and
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other commitments; and (C) to the best of Borrower's knowledge, no party is in
material default under any thereof and no event has occurred that but for the
giving of notice or the passage of time, or both, would constitute a material
default.
4.17 Insurance. Borrower maintains insurance with respect to
the properties and business of Borrower providing coverage for such
liabilities, casualties, risks and contingencies and in such amounts as is
customary for entities owning similar properties and conducting business
similar to that of Borrower, and all premiums due thereon have been paid.
4.18 Ownership of Borrowing Base Property. Borrower is the
sole beneficial owner of all Trust Units comprising the Borrowing Base
Property, free and clear of all liens, claims and encumbrances other than
Permitted Encumbrances, and all of such Borrowing Base Properties are held for
the benefit of Borrower in the name of Banc One Securities Corporation in a
brokerage account maintained by Borrower with Banc One Securities Corporation.
4.19 Material Misstatements and Omissions. No express
representation or warranty by or with respect to Borrower contained herein or
in any certificate or other document required by this Agreement and furnished
by Borrower contains any untrue statement of a material fact or omits to state
a material fact necessary to make such representation or warranty not
misleading in light of the circumstances under which it was made.
ARTICLE V. AFFIRMATIVE COVENANTS
Borrower covenants, so long as any Indebtedness of Borrower to
Bank remains unpaid under this Agreement or Bank remains obligated to make
advances hereunder, to:
5.01 Use of Funds. Use the proceeds advanced under the Loan
solely as bridge financing to support a tender offer and purchase of up to
sixty-six point sixty-seven percent (66.67%) of the Trust Units (the "Trust
Unit Acquisition Program").
5.02 Maintenance and Access to Records. Keep adequate records
in accordance with good accounting practices, of all of Borrower's transactions
so that at any time, and from time to time, its true and complete financial
condition may be readily determined and, at Bank's reasonable request, make all
financial records and records relating to the Borrowing Base Property,
available for Bank's inspection and permit Bank to make and take away copies
thereof.
5.03 Quarterly Unaudited Financial Statements of Borrower.
Deliver to Bank, on or before the forty-fifth (45th) day after the end of each
of the first three calendar quarters of each fiscal year, unaudited Financial
Statements of Borrower as at the end of such period and from the beginning of
such fiscal year to the end of the respective period, as applicable, which
Financial Statements shall be certified by the president or chief financial
officer of Borrower as being true and correct, subject to changes resulting
from year-end audit adjustments.
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5.04 Annual Audited Financial Statements of Borrower. Deliver
to Bank, on or before the ninetieth (90th) day after the close of each fiscal
year of Borrower the annual audited Financial Statements of Borrower.
5.05 Compliance Certificate. Deliver to Bank a Compliance
Certificate: (a) at the time of Borrower's execution of this Agreement, and (b)
on the first day of each month subsequent to the execution of this Agreement.
5.06 Weekly Status and Monthly Production Reports. Deliver to
Bank: (a) within five (5) Business Days after Friday of each week a detailed
report which summarizes the activity and results of the Trust Unit Acquisition
Program that occurred during the preceding week, and (b) within fifteen (15)
days after the end of each month, a detailed report setting out information
relating to the production of oil and gas from the Underlying Properties during
the second calendar month preceding the date of such report, including
quantities and/or volumes of oil of gas produced, the prices at which such oil
and gas were sold, and the resulting revenues paid to the Trust with respect to
its Royalty Interests.
5.07 Statement of Material Adverse Change in Condition.
Deliver to Bank, promptly upon any officer of Borrower having knowledge of any
material adverse change in the condition, financial or otherwise, of Borrower
and/or the Trust (or any event or circumstance that would reasonably be
anticipated to result in any such material adverse change in condition
including, but not limited to, litigation and changes in business), a statement
of the president or vice president of Borrower, setting forth the change in
condition or event or circumstance likely to result in any such change and the
steps being taken by Borrower with respect to such change in condition or event
or circumstance.
5.08 Additional Information. Furnish to Bank all information,
if any: (a) filed with the SEC by Borrower, (b) routinely provided by Borrower
to its members, generally, and (c) received by Borrower from or with respect to
the Trust. Furnish to the Bank, promptly upon the Bank's reasonable request,
such additional financial or other information concerning the assets,
liabilities, operations, and transactions of Borrower and/or the Trust.
5.09 Compliance with Laws and Payment of Assessments and
Charges. Comply with all applicable statutes and government regulations,
including, without limitation, ERISA, and pay all taxes, assessments,
governmental charges, claims for labor, supplies, rent, and other obligations
which, if unpaid, might become a lien against its property, except any of the
foregoing being contested in good faith and as to which satisfactory accruals
have been provided, unless failure to comply or pay would not have a material
adverse effect on the assets of Borrower or the value of any Borrowing Base
Property.
5.10 Maintenance of Existence and Good Standing. Maintain
Borrower's LLC existence and good standing in the jurisdiction of its
formation, and in all jurisdictions wherein the property now owned or hereafter
acquired or business now or hereafter conducted necessitates same, other than
those jurisdictions wherein the failure to so qualify will not have a material
adverse effect on Borrower.
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5.11 Further Assurances. Promptly cure any defects in the
execution and delivery of this Agreement, the Note, the Security Instruments,
or any other instrument referred to herein or executed in connection with the
Note, and upon notice, immediately execute and deliver to Bank, all such other
and further instruments as may be reasonably required or desired by Bank from
time to time in compliance with the covenants and agreements made in this
Agreement.
5.12 Initial Expenses of Bank. Pay all fees and expenses of
Hutcheson & Grundy, L.L.P., special legal counsel for Bank, incurred in
connection with the negotiation and preparation of this Agreement, the Note,
the Security Instruments, or any other instrument referred to herein or
executed in connection with the Note, the satisfaction of the conditions
precedent set forth in Article III of this Agreement and the consummation of
the transactions contemplated in this Agreement.
5.13 Subsequent Expenses of Bank. Upon request, promptly
reimburse Bank for all reasonable amounts expended, advanced or incurred by
Bank to collect the Note or to enforce the rights of Bank under this Agreement,
the Note, the Security Instruments, or any other instrument referred to herein
or executed in connection with the Note, which amounts shall be deemed
compensatory in nature and liquidated as to amount upon notice to Borrower by
Bank and which amounts will include, but not be limited to, (a) all court
costs, (b) attorneys' fees, (c) out-of-pocket fees of auditors and accountants,
(d) out-of-pocket investigation expenses, (e) internal fees of Bank's in-house
legal counsel, (f) fees and expenses incurred in connection with Bank's
participation as a member of the creditors' committee in a case commenced under
Title 11 of the United States Code or other similar law of the United States,
the State of Texas or any other jurisdiction, (g) fees and expenses incurred in
connection with lifting the automatic stay prescribed in Section Section 362
Title 11 of the United States Code, and (h) fees and expenses incurred in
connection with any action pursuant to Section Section 1129 Title 11 of the
United States Code, incurred by Bank in connection with the collection of any
sums due under this Agreement, together with interest at the Floating Rate per
annum, calculated on a basis of a year of three hundred sixty-five (365) or
three hundred sixty-six (366) days, on each such amount from the date of
notification to Borrower that the same was expended, advanced or incurred by
Bank until the date it is repaid to Bank, with the obligations under this
Section 5.13, surviving the non-assumption of this Agreement in a case
commenced under Title 11 of the United States Code or other similar law of the
United States, the State of Texas or any other jurisdiction and being binding
upon Borrower or a trustee, receiver or liquidator of any such party appointed
in any such case.
5.14 Maintenance of Tangible Property. Maintain all of
Borrower's tangible property that is material to the conduct of Borrower's
business in good repair and condition and make all necessary replacements
thereof and operate such property in a good and workmanlike manner in
accordance with standard industry practices.
5.15 Maintenance of Insurance. Continue to maintain, or cause
to be maintained, insurance with respect to the properties and business of
Borrower against such liabilities, casualties, risks and contingencies and in
such amounts as is customary in the
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industry, in an amount and form, and underwritten by an insurer or insurers, as
are reasonably acceptable to Bank, and furnish to Bank, at the execution of
this Agreement and annually thereafter, certificates evidencing such insurance.
5.16 Inspection/Right of Audit. Permit (or cause to be
permitted) any authorized representative of Bank, to visit and inspect (at the
risk of Bank and/or such representative) any tangible asset of Borrower, and/or
to audit the books and records of Borrower, during normal business hours
following prior written notice from Bank to Borrower.
5.17 Payment of Note and Performance of Obligations. Pay the
Note according to the reading, tenor and effect thereof, and do and perform
every act and discharge all of the obligations provided to be performed and
discharged hereunder.
5.18 ERISA Reports. Promptly after the filing or receiving
thereof, copies of all reports, including annual reports, and notices which
Borrower files with or receives from the PBGC or the U.S. Department of Labor
under ERISA; and promptly after Borrower knows or has reason to know that any
Reportable Event or Prohibited Transaction has occurred with respect to any
plan or that the PBGC or Borrower has instituted or will institute proceedings
under Title IV of ERISA to terminate any plan, Borrower will deliver to Bank a
certificate of the chief financial officer of Borrower setting forth details as
to such Reportable Event or Prohibited Transaction or plan termination and the
action Borrower proposes to take with respect thereto.
5.19 Average Trust Distributions. Receive distributions from
the Trust to Borrower during the quarter ending March 31, 1998, with respect to
each Trust Unit owned by Borrower during such quarter equal to at least twelve
cents ($0.12) per Trust Unit; and thereafter, maintain average year-to-date
distributions from the Trust to Borrower (including those received during the
quarter ending March 31, 1998) with respect to each Trust Unit owned by
Borrower equal to at least fifteen cents ($0.15) per Trust Unit per calendar
quarter.
5.20 Trust Unit Distributions/Tax Credit Monetization.
(a) Borrower shall cause all distributions from the Trust to
Borrower with respect to the Trust Units owned by Borrower to be deposited
directly into the Cash Collateral Account.
(b) If an affirmative vote on behalf of the holders of at
least sixty-six and sixty-seven one hundredths percent (66.67%) of the Trust
Units, as determined according to Article VIII of the Trust Agreement, electing
to terminate the Trust pursuant to the first sentence of Section 9.02 of the
Trust Agreement, has not occurred by September 1, 1998, then on or before
November 30, 1998, Borrower shall have completed a transaction pursuant to
which it has monetized, on terms and conditions satisfactory to the Bank, the
Section 29 Tax Credits (as more fully defined, described and discussed in the
Trust Prospectus) that it receives and/or is entitled to receive by virtue of
its ownership of Trust Units (herein called the "Tax Credit Monetization"), and
thereafter, one hundred percent (100%) of the net proceeds realized by
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Borrower as the result of such Tax Credit Monetization shall be placed into the
Cash Collateral Account.
(c) The funds maintained in the Cash Collateral Account shall
be used by Borrower solely for the purpose of paying accrued, unpaid interest
and the unpaid principal balance of the Loans, not to exceed the amounts
necessary to fully pay and discharge all such accrued, unpaid interest and
principal; provided, however, that at any time Borrower may send a written
request to Bank seeking Bank's consent to receive a distribution from the Cash
Collateral Account to be used for other purposes, which shall be described in
such written request, and upon receipt of such written request Bank shall
conduct a redetermination of the Borrowing Base in accordance with Section 2.08
(which shall be deemed a request by Borrower for redetermination of the
Borrowing Base for purposes of the fees required by Section 2.08), and if, as
the result of such Borrowing Base redetermination, Bank determines, in its sole
discretion, that it will consent to such requested distribution from the Cash
Collateral Account, Bank may notify Borrower in writing of such consent,
whereupon Borrower shall be permitted to obtain the requested distributions
from the Cash Collateral Account; and provided further, however, Borrower shall
be permitted to withdraw not more than $25,000 per calendar quarter from the
Cash Collateral Account, subject to the prior, written consent of Bank, in its
sole discretion, for purposes of paying third-party professional fees and fees
payable to Bank under the terms of this Agreement.
5.21 Compliance with Environmental Laws. Comply in all
material respects with any and all requirements of law, including, without
limitation, Environmental Laws, (a) related to any natural or environmental
resource or media located on, above, within, in the vicinity of, related to or
affected by any property of Borrower, or (b) required for the performance or
conduct of its operations, including, without limitation, all permits,
licenses, registrations, approvals and authorizations, and, in this regard,
comply fully and in a timely manner with, and cause all employees, crew
members, agents, contractors, subcontractors and future lessees (pursuant to
appropriate lease provisions) of Borrower while such Persons are acting within
the scope of their relationship with Borrower, to so comply with, all
requirements of law, including, without limitation, Environmental Laws, and
other requirements with respect to the property of Borrower and the operation
thereof necessary or appropriate to enable Borrower to fulfill its obligations
under all requirements of law, including, without limitation, Environmental
Laws, applicable to the use, generation, handling, storage, treatment,
transport and disposal of any Hazardous Substances now or hereafter located or
present on or under any such property.
5.22 Hazardous Substances Indemnification. Indemnify and hold
Bank harmless from and against any and all claims, losses, damages,
liabilities, fines, penalties, charges, administrative and judicial proceedings
and orders, judgments, remedial actions, requirements and enforcement actions
of any kind, and all costs and expenses incurred in connection therewith
(including, without limitation, attorneys' fees and expenses), arising directly
or indirectly, in whole or in part, out of (a) the presence of any Hazardous
Substances on, under or from the property of Borrower, whether prior to or
during the term hereof, or (b) any activity carried on or undertaken on or off
such property, whether prior to or during the
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term hereof, and whether by Borrower or any predecessor in title or any
employees, agents, contractors or subcontractors of Borrower or any predecessor
in title, or any third Persons at any time occupying or present on such
property, in connection with the handling, treatment, removal, storage,
decontamination, cleanup, transportation or disposal of any Hazardous
Substances at any time located or present on or under such property; with the
foregoing indemnity further applying to any residual contamination on or under
the property of Borrower, or any property of any other Person, or affecting any
natural resources, and to any contamination of any property or natural
resources arising in connection with the generation, use, handling, storage,
transportation or disposal of any Hazardous Substances, irrespective of whether
any of such activities were or will be undertaken in accordance with applicable
requirements of law, including, without limitation, Environmental Laws, and
surviving satisfaction of all Indebtedness of Borrower to Bank and the
termination of this Agreement, provided, further, that the claims and other
actions of any kind against Bank which give rise to such indemnity are not
barred by the applicable statute of limitations at the time such claims or
actions are instituted and such indemnity shall not extend to any act or
omission by Bank or any Affiliate of Bank or any of Bank's employees or agents
with respect to the relevant property subsequent to Bank becoming the owner of,
taking possession of to the exclusion of Borrower or assuming operations of any
property previously owned by Borrower and with respect to which property such
claim, loss, damage, liability, fine, penalty, charge, proceeding, order,
judgment, action or requirement arises subsequent to the acquisition of title
thereto, taking possession thereof or assumption of operations thereon by Bank
or any Affiliate of Bank or any of Bank's employees or agents. Notwithstanding
anything herein to the contrary, the provisions of this Section shall survive
any termination of this Agreement and shall survive the payment and performance
in full of all Obligations owed by Borrower to Bank.
5.23 Changes in Management. Notify Bank of any change in the
senior management of Borrower, as such management exists as of the date hereof.
5.24 Payment of Taxes, Etc. Borrower will pay or cause to be
paid when due, all taxes, assessments, and charges or levies imposed upon it or
on any of its property or which it is required to withhold and pay, except
where contested in good faith by appropriate proceedings with adequate reserves
therefor having been set aside on its books, provided, however, that Borrower
shall pay or cause to be paid all such taxes, assessments, charges, or levies
forthwith whenever foreclosure on any lien that may have attached (or security
therefor) appears imminent.
5.25 Notice of Litigation. Borrower will give notice to the
Bank within ten (10) Business Days of the occurrence of: (A) any litigation or
proceeding in which it is a party if an adverse decision therein might
reasonably be expected to require it to pay more than $25,000.00 or deliver (or
lose title to) assets the value of which exceeds such sum (whether or not the
claim is considered to be covered by insurance); and (B) the institution of any
other suit or proceeding involving Borrower that would reasonably be expected
to materially and adversely affect its operations, financial condition,
property, or business prospects.
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5.26 Notice of Change of Principal Offices. Borrower will
notify the Bank at least ten (10) Business Days in advance of any change in the
location of the principal office of Borrower.
5.27 Payment of Accounts Payable. Pay its accounts payable not
later than thirty (30) days after their due date, except such as are being
contested in good faith and as to which adequate provision or accrual has been
made.
5.28 Lien on Royalty Interest. If, as a consequence of
liquidation of the Trust, Borrower is to receive in-kind any undivided part of
the Royalty Interest owned by the Trust, then prior to Borrower's receipt of
such Royalty Interest, Borrower shall grant to Bank a lien and assignment of
production with respect to such Royalty Interest pursuant to the terms of a
Deed of Trust, Security Agreement, Financing Statement and Assignment of
Production on terms reasonably satisfactory to the Bank, which are not
inconsistent with the provisions of this Agreement, to secure full payment and
performance of all Borrower's Obligations to Bank, together with letters in
lieu of transfer orders applicable to such Royalty Interest on terms and
conditions reasonably satisfactory to Bank, in its discretion.
5.29 Deposit of Trust Units in Brokerage Account. Borrower
shall cause all Trust Units to be acquired in the name of Banc One Securities
Corporation and held in the Permanent Brokerage Account, provided that with
respect to any Trust Units acquired for the account of Borrower by Jefferies
Corporation, such Trust Units may be held in the name of Jefferies Corporation
in the Pass Through Brokerage Account for not more than seven days from the
date of acquisition until transferred to the Permanent Brokerage Account.
ARTICLE VI. NEGATIVE COVENANTS
Without the prior written consent of Bank and so long as any part
of the principal or interest on the Note shall remain unpaid or Bank remains
obligated to make advances hereunder, Borrower will not:
6.01 Other Indebtedness. Incur, create, assume or suffer to
exist any Indebtedness, whether by way of loan or the issuance or sale of
securities except (a) Loans hereunder, and (b) unsecured accounts payable
incurred in the ordinary course of business which are not overdue or if
overdue, are acceptable to Bank and are being contested in good faith by
appropriate proceedings.
6.02 Guaranty of Payment or Performance. Guaranty any contract
or obligation of any Person, and except that the foregoing restriction shall
not apply to endorsements of instruments for collection in the ordinary course
of business.
6.03 Loans or Advances. Make or agree to make or allow to
remain outstanding any loans or advances to any Person, including Affiliates of
Borrower, except advances or extensions of credit in the form of accounts
receivable incurred in the ordinary course of business.
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6.04 Mortgages or Pledges of Assets. Create, incur, assume or
permit to exist, any mortgage, pledge, security interest, lien or encumbrance
on any of its properties or assets (now owned or hereafter acquired), except
that the foregoing restrictions shall not apply to any matters that would
constitute or result in Permitted Encumbrances.
6.05 Nature of Business. Permit any material change to be made
in the character of its business as conducted as of the date hereof.
6.06 Sales of Assets. Sell, lease, assign, transfer or
otherwise dispose of, in one or any series of related transactions, all or any
part of its assets, if such transfer is material to Borrower's operations, nor
enter into any arrangement, directly or indirectly, with any Person to sell and
rent or lease back such assets or any part thereof which are intended to be
used for substantially the same purpose or purposes as the assets sold or
transferred.
6.07 Dividends and Distributions. Declare or pay any dividend
from Borrower or make any distribution on, or purchase, redeem or otherwise
acquire for value, any interest in Borrower.
6.08 Payment of Accounts Payable. Allow any account payable to
remain unpaid after its due date, except such as are overdue that are
acceptable to Bank, are being contested in good faith, and as to which adequate
provision or accrual has been made.
6.09 Cancellation of Insurance. Allow any insurance policy
required to be carried hereunder to be terminated or lapse or expire without
provision for adequate renewal thereof.
6.10 Investments. Make Investments in or purchase or otherwise
acquire all or substantially all of the assets of any Person other than the
Trust, or any shares of stock of, or similar interest in, any Person.
6.11 Margin Stock. Directly or indirectly apply any part of
the proceeds of the Loans to the purchasing or carrying of any "margin stock"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, or any regulations, interpretations or rulings thereunder,
except as expressly permitted by Section 5.01.
6.12 Changes in Business Structure. Consolidate or merge with,
or purchase (for cash or securities) all or substantially all of the assets or
all or any part of the capital stock of any corporation, firm, association or
enterprise, other than the Trust, or allow any such entity to be merged into
Borrower, nor shall Borrower dissolve or liquidate.
6.13 Changes in Ownership. Cause or permit any change in the
ownership of the legal or beneficial interests in Borrower.
6.14 Transactions with Affiliates. Enter into any transaction
between Borrower and any Affiliate on terms that are less favorable than could
be obtained in an arms-length transaction with a Person that is not an
Affiliate.
30
<PAGE> 36
ARTICLE VII. EVENTS OF DEFAULT
7.01 Enumeration of Events of Default. Any of the following
events shall be considered an Event of Default as that term is used herein:
(a) Default shall be made by Borrower in the payment of any
installment of principal on the Note,
(b) Default shall be made by Borrower in the payment of any
installment of interest on the Note, or any fees or other monetary
obligation payable hereunder, and such default shall remain unremedied
in excess of three (3) Business Days after notice being given by Bank,
(c) Default shall be made by Borrower in the due observance or
performance of any affirmative covenant required in this Agreement, the
Note, or any Security Instrument, and such default shall remain
unremedied for in excess of thirty (30) days after the earlier of: (i)
such default becoming known to Borrower, or (ii) notice being given by
Bank.
(d) Default shall be made by Borrower in the due observance or
performance of any negative covenant required in this Agreement, the
Note, or any Security Instruments.
(e) Any representation or warranty herein made by Borrower
proves to have been untrue in any material respect, or any
representation, statement (including Financial Statements), certificate
or data furnished or made by Borrower to Bank in connection herewith
proves to have been untrue in any material respect as of the date the
facts therein set forth were stated or certified;
(f) Default shall be made by Borrower (as principal or
guarantor or other surety) in payment or performance of any bond,
debenture, note or other evidence of Indebtedness for borrowed money, or
any other credit agreement, loan agreement, indenture, promissory note
or similar agreement or instrument executed in connection with any of
the foregoing; and such default shall remain unremedied for in excess of
the period of grace, if any, with respect thereto, with the effect of
accelerating the maturity of any such Indebtedness;
(g) Borrower applies for or consents to the appointment of a
receiver, trustee or liquidator of it or all or a substantial part of
its assets, or (ii) files a voluntary petition commencing a case under
Title 11 of the United States Code, seeking liquidation, reorganization
or rearrangement or taking advantage of any bankruptcy, insolvency,
debtor's relief or other similar law of the United States, the State of
Texas or any other jurisdiction, or (iii) makes a general assignment for
the benefit of creditors, or (iv) is unable, or admits in writing its
inability to pay its debts generally as they become due, or (v) files an
answer admitting the material allegations of a petition filed against it
in any case commenced under Title 11 of the United States Code or any
reorganization, insolvency, conservatorship or similar proceeding under
any bankruptcy, insolvency,
31
<PAGE> 37
debtor's relief or other similar law of the United States, the State of
Texas or any other jurisdiction;
(h) An order, judgment or decree shall be entered against
Borrower by any court of competent jurisdiction or by any other duly
authorized authority, on the petition of a creditor or otherwise,
granting relief under Title 11 of the United States Code or under any
bankruptcy, insolvency, debtor's relief or other similar law of the
United States, the State of Texas or any other jurisdiction, approving a
petition seeking reorganization or an arrangement of its debts or
appointing a receiver, trustee, conservator, custodian or liquidator of
it or all or any substantial part of its assets, and the failure to have
such order, judgment or decree dismissed within thirty (30) days of its
entry;
(i) Borrower has concealed, removed, or permitted to be
concealed or removed, any part of its property, with intent to hinder,
delay or defraud its creditors or any of them; or has made or suffered a
transfer of any of its property which are or would be fraudulent under
any bankruptcy, fraudulent conveyance or similar law; or has made any
transfer of its property to or for the benefit of a creditor at a time
when other creditors similarly situated have not been paid; or has
suffered or permitted, while insolvent, any creditor to obtain a lien
upon any of its property through legal proceedings or distraint which is
not vacated within thirty (30) days from the date thereof;
(j) Trustee shall breach any of its payment obligations to
Unitholders under the Trust, there shall have been any material, adverse
change in the Trust, its business or assets, there shall been a
termination, interruption in performance, or material default under
either the Gas Purchase Contract and/or the Gas Gathering Contract
defined and described in the Trust Prospectus; and/or Bank shall have
determined that the Trust does not have Defensible Title to the Royalty
Interest.
7.02 Rights Upon Unmatured Event of Default. At any time that
there exists an Unmatured Event of Default, any obligation of the Bank
hereunder to make advances to or for the benefit of Borrower shall be suspended
unless and until the Bank shall reinstate the same in writing, the Unmatured
Event of Default shall have been waived by the Bank or the relevant Unmatured
Event of Default shall have been remedied prior to ripening into an Event of
Default.
7.03 Rights Upon Default. Upon the happening of an Event of
Default specified in Subsections 7.01 (g) or (h), the entire aggregate
principal amount of all Indebtedness then outstanding hereunder and the
interest accrued thereon shall automatically become immediately due and
payable, and upon the happening and continuation of any other Event of Default,
Bank may declare the entire aggregate principal amount of all Indebtedness then
outstanding hereunder and the interest accrued thereon immediately due and
payable. In either case, the entire principal and interest shall thereupon
become immediately due and payable, without notice (including, without
limitation, notice of intent to accelerate maturity or notice of acceleration
of maturity) and without presentment, demand, protest, notice of protest or
other notice of default or dishonor of any kind, except as provided to the
contrary elsewhere herein, all of which are hereby expressly waived by
Borrower.
32
<PAGE> 38
Upon the happening and continuation of any Event of Default, all
obligations (if any) of Bank hereunder shall immediately cease and terminate
unless and until Bank shall reinstate the same in writing.
ARTICLE VIII. MISCELLANEOUS
8.01 Security Interests in Deposits and Right of Offset or
Banker's Lien. Borrower hereby transfers, assigns and pledges to Bank and/or
grants to Bank a security interest (as security for the payment and/or
performance of the obligations of Borrower under this Agreement and the Note,
with such interest of Bank to be retransferred, reassigned and/or released by
Bank at the expense of Borrower upon payment in full and/or complete
performance by Borrower of all such obligations) and the right, exercisable at
such time as any obligation hereunder shall mature, whether by acceleration of
maturity or otherwise of offset or banker's lien against all funds or other
property of Borrower now or hereafter or from time to time on deposit with or
in the possession of Bank, including, without limitation, all certificates of
deposit and other depository accounts.
8.02 Survival of Representations, Warranties and Covenants.
All representations and warranties of Borrower and all covenants and agreements
herein made shall survive the execution and delivery of the Note and this
Agreement and shall remain in force and effect so long as any debt is
outstanding under the Note, or any renewal or extension of this Agreement or
the Note, or Bank remains obligated to make advances hereunder.
8.03 Notices and Other Communications. Notices, requests and
communications hereunder shall be in writing and shall be sufficient in all
respects if delivered to the relevant address indicated below (including
delivery by registered or certified United States mail, telex, telegram or
hand):
(a) If to Bank:
BANK ONE, TEXAS, N.A.
910 Travis
Houston, Texas 77002
Attention: Energy Lending
Fax: (713) 751-3544
(b) Notices and/or reports sent to Bank pursuant to Sections
5.03, 5.04, and 5.05 shall also be sent to:
BANK ONE, TEXAS, N.A.
910 Travis
Houston, Texas 77002
Attention: Monitoring Unit
Telephone: (713) 751-4627
Fax: (713) 751-6239
33
<PAGE> 39
(c) If to Borrower:
SAN JUAN PARTNERS, L.L.C.
Bank One Center
910 Travis, Suite 2150
Houston, Texas 77002
Attention: Mr. C. N. O'Sullivan
Fax: (713) 759-2040
with a copy to:
HAYNES AND BOONE, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202-3789
Attention: Mr. Paul Amiel
Fax: (214) 651-5940
Any party may, by proper written notice hereunder to the other,
change the individuals or addresses to which such notices to it shall
thereafter be sent.
8.04 Parties in Interest. All covenants and agreements herein
contained by or on behalf of Borrower shall be binding upon Borrower and its
successors and assigns and inure to the benefit of Bank and its successors and
assigns.
8.05 Renewals and Extensions. All provisions of this Agreement
relating to the Note shall apply with equal force and effect to each and all
promissory notes hereafter executed which in whole or in part represent a
renewal, extension, amendment, modification or rearrangement of any part of the
Indebtedness originally represented by the Note.
8.06 No Waiver by Bank. No course of dealing on the part of
Bank, its officers or employees, nor any failure or delay by Bank with respect
to exercising any of its rights, powers or privileges under this Agreement, the
Note, the Security Instruments or any other instrument referred to herein or
executed in connection with the Note shall operate as a waiver thereof. The
rights and remedies of Bank under this Agreement, the Note, the Security
Instruments or any other instrument referred to herein or executed in
connection with the Note shall be cumulative and the exercise or partial
exercise of any such right or remedy shall not preclude the exercise of any
other right or remedy. In the event that Borrower is unable to satisfy any
covenant, warranty or condition herein, no advance of loan proceeds by Bank
shall have the effect of precluding Bank from thereafter declaring any such
continuing inability to be an Event of Default as hereinabove provided.
8.07 INDEMNIFICATION. BORROWER HEREBY RELEASES AND AGREES TO
INDEMNIFY AND HOLD BANK AND ITS OFFICERS, EMPLOYEES, DIRECTORS, AGENTS AND
ATTORNEYS (COLLECTIVELY THE "BANK PARTIES") HARMLESS, FROM AND AGAINST ALL
CLAIMS, DAMAGES, LIABILITIES AND EXPENSES, KNOWN OR UNKNOWN, ACCRUED AND
UNACCRUED, INCLUDING ANY OF THE FOREGOING ALLEGED TO HAVE RESULTED FROM
NEGLIGENCE
34
<PAGE> 40
OF ANY OF THE BANK PARTIES, UNLESS ATTRIBUTABLE TO BANK PARTIES' OWN GROSS
NEGLIGENCE OR WILFUL MISCONDUCT, THAT MAY NOW OR HEREAFTER BE ASSERTED AGAINST
ANY OF BANK PARTIES IN CONNECTION WITH OR ARISING OUT OF ANY INVESTIGATION,
LITIGATION OR PROCEEDING DIRECTLY OR INDIRECTLY RELATING TO OR ARISING OUT OF
ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
8.08 GOVERNING LAW. THIS AGREEMENT AND THE NOTE SHALL BE
DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
8.09 Incorporation of Exhibits. The Exhibits and Schedules
attached to this Agreement are incorporated herein for all purposes and shall
be considered a part of this Agreement.
8.10 Survival Upon Unenforceability. In the event any one or
more of the provisions contained in this Agreement, the Note, the Security
Instruments or in any other instrument referred to herein or executed in
connection with the Note shall, for any reason, be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof or of any other
instrument referred to herein or executed in connection herewith.
8.11 Rights of Third Parties. All provisions herein are
imposed solely and exclusively for the benefit of Bank and Borrower and no
other Person shall have standing to require satisfaction of such provisions in
accordance with their terms or be entitled to assume that Bank will refuse to
make advances in the absence of strict compliance with any or all thereof and
any or all of such provisions may be freely waived in whole or in part by Bank
at any time if in its sole discretion it deems it advisable to do so.
8.12 Amendments or Modifications of this Agreement. Neither
this Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination is
sought.
8.13 Agreement Construed as an Entirety. This Agreement, for
convenience only, has been divided into Articles and Sections and it is
understood that the rights, powers, privileges, duties and other legal
relations of the parties hereto shall be determined from this Agreement as an
entirety and without regard to the aforesaid division into Articles and
Sections and without regard to headings prefixed to said Articles or Sections.
8.14 Number and Gender. Whenever the context requires,
reference herein made to the single number shall be understood to include the
plural and likewise the plural shall be understood to include the singular.
Words denoting sex shall be construed to include the masculine, feminine, and
neuter, when such construction is appropriate, and specific enumeration shall
not exclude the general, but shall be construed as cumulative.
35
<PAGE> 41
8.15 AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS. THIS
AGREEMENT, TOGETHER WITH THE NOTE AND THE SECURITY INSTRUMENTS, CONSTRUED
TOGETHER WITH THE ADVANCING TERM CREDIT AGREEMENT AND ALL INSTRUMENTS EXECUTED
PURSUANT THERETO, REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT BETWEEN THE
PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES AND SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE
PARTIES HERETO, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
8.16 Controlling Provision Upon Conflict. In the event of a
conflict between the provisions of this Agreement and those of the Note, the
Security Instruments or any other instrument referred to herein or executed in
connection with the Note, the provisions of this Agreement shall control.
8.17 Time, Place and Method of Payments. All payments required
pursuant to this Agreement or the Note shall be made in immediately available
funds; shall be deemed received by Bank on the next Business Day following
receipt if such receipt is after 3:00 p.m., on any Business Day, and shall be
made at the principal banking quarters of Bank.
8.18 Non-Application of Chapter 15 of Texas Credit Code. The
provisions of Chapter 15 of the Texas Credit Code (Vernon's Texas Civil
Statutes, Article 5069-15) are specifically declared by the parties hereto not
to be applicable to this Agreement or any of the other Security Instruments or
to the transactions contemplated hereby.
8.19 Counterpart Execution. This Agreement may be executed as
one instrument signed by all parties or in separate counterparts hereof, each
of which counterparts shall be considered an original and all of which shall be
deemed to be one instrument, and any signed counterpart shall be deemed
delivered by the party signing it if sent to any other party hereto by
electronic facsimile transmission.
36
<PAGE> 42
IN WITNESS WHEREOF, this Agreement is executed as of the date
first above written.
BORROWER:
--------
SAN JUAN PARTNERS, L.L.C.
By: O'Sullivan Oil & Gas Company, Inc.
Its Sole Manager
By: /s/ C. N. O'Sullivan
------------------------------------
C. N. O'Sullivan
President
BANK:
----
BANK ONE, TEXAS, N.A.
By: /s/ Steve Shatto
------------------------------------
Steve Shatto
Vice President
37
<PAGE> 43
EXHIBIT "A"
ADVANCING TERM NOTE
$25,000,000.00 Houston, Texas January 15, 1998
On the dates hereinafter prescribed, for value received, SAN JUAN
PARTNERS, L.L.C., a Texas limited liability company ("Borrower"), having an
address at Bank One Center, 910 Travis, Suite 2150, Houston, Texas 77002
promises to pay to the order of BANK ONE, TEXAS, N.A. (herein called "Bank"),
at its principal offices at 910 Travis, Houston, Harris County, Texas 77002,
(i) the principal amount of TWENTY-FIVE MILLION AND NO/100 DOLLARS
($25,000,000.00) or the principal amount advanced pursuant to the terms of the
Credit Agreement (defined herein) as of the date of maturity hereof, whether by
acceleration or otherwise, whichever may be the lesser, and (ii) interest on
the principal balance from time to time advanced and remaining unpaid from the
date of the advance until maturity at a rate of interest equal to lesser of (a)
the "Interest Rate" (as defined in the Credit Agreement), or (b) the Maximum
Rate (as hereinafter defined). Any increase or decrease in interest rate
resulting from a change in the Maximum Rate shall be effective immediately when
such change becomes effective, without notice to Borrower, unless Applicable
Law (as defined below) requires that such increase or decrease not be effective
until a later time, in which event such increase or decrease shall be effective
at the earliest time permitted under the provisions of such law.
Notwithstanding the foregoing, if during any period the Interest Rate
exceeds the Maximum Rate, the rate of interest in effect on this Note shall be
limited to the Maximum Rate during each such period, but at all times
thereafter the rate of interest in effect on this Note shall be the Maximum
Rate until the total amount of interest accrued on this Note equals the total
amount of interest which would have accrued hereon if the Floating Rate had at
all times been in effect.
All payments on this Note shall be applied first to accrued interest and
the balance, if any, to principal.
This Note is an advancing term credit note and it is contemplated that
by reason of prepayments hereon there may be times when no indebtedness is
owing hereunder; but notwithstanding such occurrence, this Note shall remain
valid and in full force and effect as to each principal advance made hereunder
subsequent to each such occurrence. Each principal advance and each payment
hereof made pursuant to this Note shall be reflected by Bank's records and the
aggregate unpaid amounts reflected by such records shall constitute rebuttably
presumptive evidence of the principal and unpaid, accrued interest remaining
outstanding on this Note.
"Maximum Rate" means the Maximum Rate of non-usurious interest permitted
from day to day by applicable law, including as to Article 5069-1.04, Vernon's
Texas Revised Civil Statutes Annotated (and as the same may be incorporated by
reference in other Texas statutes), but otherwise without limitation, that rate
based upon the "indicated weekly rate ceiling."
"Applicable Law" means that law in effect from time to time and
applicable to this Note which lawfully permits the charging and collection of
the highest permissible lawful, non-usurious rate of interest on this Note,
including laws of the State of Texas and laws of the United States of America.
It is intended that Article 1.04, Title 79, Revised Civil Statutes of Texas,
1927, as amended (Article 5069-1.04, as amended, Vernon's Texas Civil Statutes)
shall be included in the laws of the State of Texas in determining Applicable
Law; and for the purpose of applying said Article 1.04 to this Note, the
interest ceiling applicable to this Note under said Article 1.04 shall be the
indicated weekly rate ceiling from time to time in effect. Borrower and Bank
hereby agree that Chapter 15 of Subtitle 3, Title 79, Revised Civil Statutes of
Texas, 1925, as amended, shall not apply to this Note or the loan transaction
evidenced by, and
______________
INITIAL FOR
1 IDENTIFICATION
<PAGE> 44
referenced in, the Credit Agreement (hereinafter defined) in any manner,
including without limitation, to any account or arrangement evidenced or
created by, or provided for in, this Note.
"Business Day" shall mean any day on which banks are open for general
banking business in the State of Texas, other than a Saturday, a Sunday, a
legal holiday or any other day on which banks in the State of Texas are
required or authorized by law or executive order to close.
The principal sum of this Note, after giving credit for unadvanced
principal, if any, remaining at final maturity, shall be due and payable on or
before the Maturity Date, as prescribed in the Credit Agreement defined below;
interest to accrue upon the principal sum from time to time owing and unpaid
hereunder shall be due and payable as and when provided in the Credit
Agreement; provided, however, the final installment of interest hereunder
shall be due and payable not later than the maturity of the principal sum
hereof, howsoever such maturity may be brought about.
In no event shall the aggregate of the interest on this Note, plus any
other amounts paid in connection with the loan evidenced by this Note which
would under Applicable Law be deemed "interest," ever exceed the maximum amount
of interest which, under Applicable Law, could be lawfully charged on this
Note. Bank and Borrower specifically intend and agree to limit contractually
the interest payable on this Note to not more than an amount determined at the
Maximum Rate. Therefore, none of the terms of this Note or any other
instruments pertaining to or securing this Note shall ever be construed to
create a contract to pay interest at a rate in excess of the Maximum Rate, and
neither Borrower nor any other party liable herefor shall ever be liable for
interest in excess of that determined at the Maximum Rate, and the provisions
of this paragraph shall control over all provisions of this Note or of any
other instruments pertaining to or securing this Note. If any amount of
interest taken or received by Bank shall be in excess of the maximum amount of
interest which, under Applicable Law, could lawfully have been collected on
this Note, then the excess shall be deemed to have been the result of a
mathematical error by the parties hereto and shall be refunded promptly to
Borrower. All amounts paid or agreed to be paid in connection with the
indebtedness evidenced by this Note which would under Applicable Law be deemed
"Interest" shall, to the extent permitted by Applicable Law, be amortized,
prorated, allocated and spread throughout the full term of this Note.
This Note is secured by all security agreements, collateral assignments,
mortgages and lien instruments executed by Borrower (or by any other party) in
favor of Bank, including those executed simultaneously herewith, those executed
heretofore and those hereafter executed, and including specifically and without
limitation the "Security Instruments" described and defined in the Advancing
Term Credit Agreement of even date between Borrower and Bank (the "Credit
Agreement").
This Advancing Term Note is the Note issued pursuant to the Credit
Agreement. Reference is hereby made to the Credit Agreement for a statement of
the rights and obligations of the holder of this Note and the duties and
obligations of Borrower in relation thereto; but neither this reference to the
Credit Agreement nor any provisions thereof shall affect or impair the absolute
and unconditional obligation of Borrower to pay any outstanding and unpaid
principal of and interest on this Note when due, in accordance with the terms
of the Credit Agreement. Each advance and each payment made pursuant to this
Note shall be reflected by notations made by Bank on its records and the
aggregate unpaid amounts reflected by the notations on the records of Bank
shall be deemed rebuttably presumptive evidence of the principal amount owing
under this Note.
If an Event of Default occurs under the terms of the Credit Agreement,
Bank (or other holder of this Note) may, at its option, without presentment or
demand or any notice to Borrower or any other person liable herefor, declare
the unpaid principal balance of and accrued interest on this Note to be
immediately due and payable.
______________
INITIAL FOR
2 IDENTIFICATION
<PAGE> 45
If this Note is collected by suit or through the Probate or Bankruptcy
Court, or any judicial proceeding, or if this Note is not paid at maturity,
however such maturity may be brought about, and is placed in the hands of an
attorney for collection, then Borrower agrees to pay reasonable attorneys'
fees, not to exceed 10% of the full amount of principal and interest owing
hereon at the time this Note is placed in the hands of an attorney.
Except for any notice expressly required by the Credit Agreement,
Borrower and all sureties, endorsers and guarantors of this Note waive demand,
presentment for payment, notice of nonpayment, protest, notice of protest,
notice of intent to accelerate maturity, notice of acceleration of maturity,
and all other notices, filing of suit and diligence in collecting this Note or
enforcing any of the security herefor, and agree to any substitution, exchange
or release of any such security or the release of any party primarily or
secondarily liable hereon and further agrees that it will not be necessary for
Bank, in order to enforce payment of this Note by them, to first institute suit
or exhaust its remedies against any Borrower or others liable herefor, or to
enforce its rights against any security herefor, and consent to any one or more
extensions or postponements of time of payment of this Note on any terms or any
other indulgences with respect hereto, without notice thereof to any of them.
Bank may transfer this Note, and the rights and privileges of Bank under this
Note shall inure to the benefit of Bank's representatives, successors or
assigns.
Executed this 15th day of January, 1998.
SAN JUAN PARTNERS, L.L.C.
By: O'Sullivan Oil & Gas Company, Inc.
Its Sole Partner
By:_______________________
C.N. O'Sullivan
President
3
<PAGE> 46
EXHIBIT "B"
COMPLIANCE CERTIFICATE
(bracketed information need not be included
in Certificate delivered at Closing)
I, _________________________, the _____________________________
of SAN JUAN PARTNERS, L.L.C. (the "Company"), pursuant to Section 5.05 of the
Loan Agreement dated as of January 15, 1998, by and among BANK ONE, TEXAS, N.A.
("Bank") and the Company, et al. (the "Agreement") do hereby certify, as of the
date hereof, that to my knowledge:
1. No Event of Default (as defined in the Agreement) has occurred
and is continuing, and no Unmatured Event of Default (as defined
in the Agreement) has occurred and is continuing(, except for the
following events (include actions taken to cure such situations):
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
_______________________________________________________________];
2. No material adverse change has occurred in the business
prospects, financial condition, or the results of operations of
the Company or any other Borrower since the date of the previous
Financial Statements (as defined in the Agreement) provided to
Bank(, except for the following changes (include actions taken to
cure such situations):
________________________________________________________________
_______________________________________________________________];
3. Each of the representations and warranties of the Company and
each other Borrower contained in Article IV of the Agreement is
true and correct in all respects(, except for the following
matters (include actions taken to cure such situations):
________________________________________________________________
__________________________________________________________; and]
[4. The Company's consolidated financial condition for the quarter
ending __________ is as follows:
B-1
<PAGE> 47
<TABLE>
<CAPTION>
Date or Required Actual
Time Ratio or Ratio or
Financial Covenant Period Amount Amount
------------------ ------ ------ ------
<S> <C> <C> <C> <C>
(a) Average Trust Unit Quarter ending $0.12/Unit/Quarter
Distributions 3/31/98 ------
(b) Average Trust Unit Calendar year- $0.15/Unit/Quarter
Distributions to-date, ------
beginning
1/1/98,
determined as
of the end of
each quarter,
beginning with
the quarter
ending 6/30/98
</TABLE>
This certificate is executed this ______ day of ____, 199_.
SAN JUAN PARTNERS, L.L.C.
By: O'Sullivan Oil & Gas Company, Inc.
Its Sole Manager
By:_______________________
C.N. O'Sullivan
President
B-2
<PAGE> 48
EXHIBIT "C"
SECURITY INSTRUMENTS
The Security Instruments securing the obligations of Borrower and
Indebtedness to Bank shall include the following, each in form and substance
satisfactory to Bank:
1. SECURITY AGREEMENT granting Bank a first priority security interest in
all of Borrower's material assets, tangible and intangible, real, personal, or
mixed, whether now owned or hereafter acquired, and all products and proceeds
thereof.
2. PLEDGE AGREEMENT granting Bank a first priority security interest in
both the Pass Through Brokerage Account and the Permanent Brokerage Account in
which Borrower's Trust Units shall be maintained.
3. PLEDGE AGREEMENT granting Bank a first priority security interest in the
Cash Collateral Account in which Borrower's Trust Unit distributions and
proceeds from any Tax Credit Monetization shall be maintained.
4. FINANCING STATEMENTS in connection with the Security Instruments
described in the preceding paragraphs, in form and number satisfactory to Bank
as Bank, from to time, may specify (including additional or supplemental
financing statements, amendments thereto, and continuation statements thereof).
5. OTHER SECURITY INSTRUMENTS. Such other instruments as are necessary or
appropriate from time to time, in the good faith opinion of Bank, to perfect to
the satisfaction of Bank Bank's liens, security interests, and other rights in
the Borrowing Base Property and in any and all other collateral covered by or
described in (or, as evidenced by the Agreement, intended to have been covered
by) any of the other Security Instruments described above.
POWER OF ATTORNEY. To the fullest extent permitted by Law, Borrower hereby
appoints Bank as its attorney-in-fact (without requiring Bank to act as such)
to execute any Security Instrument in the name of Borrower, and to perform all
other acts that Bank deems appropriate to perfect and continue its liens,
security interests, and other rights in, and to protect and preserve, the
Borrowing Base Property and other collateral covered by or described in (or, as
evidenced by the Agreement, intended to have been covered by) any of the
Security Instruments described above, but only to the extent required of
Borrower under the terms of this Agreement. This power of attorney is coupled
with an interest and shall be irrevocable until the full and final payment and
performance of all of Borrower's Indebtedness and Obligations to Bank.
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<PAGE> 49
EXHIBIT "D"
FORM OF REQUEST FOR ADVANCE, CONTINUATION OR CONVERSION
BANK ONE, TEXAS, N.A.
910 TRAVIS, 6TH FLOOR
HOUSTON, TEXAS 77002
Attention: Energy Group
RE: Loan Agreement dated as of January 15, 1998, by and
between San Juan Partners, L.L.C. and Bank One, Texas,
N.A. (as amended, restated, or supplemented from time to
time, the "Credit Agreement")
Ladies and Gentlemen:
Pursuant to the Credit Agreement, Borrower hereby makes the
requests indicated below on this ____ day of ______ 199__:
[ ] 1. Loans:
(a) Amount of new Loan: $______________
(b) Requested funding date: _______, 19__
(c) $_____________ of such Loan is to be an Base Rate Loan;
$_____________ of such Loan is to be a LIBOR Loan.
Requested Interest Period for LIBOR Loan: ___ months.
(d) The undersigned certifies that the proceeds of the Loan amount
requested in paragraph 1(a) hereof shall be used exclusively for
the acquisition of ________ Trust Units (as defined in the Credit
Agreement), that the price at which such Trust Units shall be
acquired by Borrower is ____ and ____/100 Dollars ($_______) per
Trust Unit, and that the Loan amount requested in paragraph 1(a)
is not greater than the lesser of: (a) $4.25 times the number of
Trust Units being acquired by Borrower, and (b) one half of the
total purchase price of all of the Trust Units being acquired.
[ ] 2. Continuation or conversion of LIBOR Loan maturing on _______, 19_
:
(a) Amount to be continued as a LIBOR Loan is $______________, with
an Interest Period of ___ months;
(b) Amount to be converted to an Base Rate Loan is $______________.
[ ] 3. Conversion of Base Rate Loan:
(a) Requested conversion date: __________, 19____.
(b) Amount to be converted to a LIBOR Loan is $___________, with an
Interest Period of ______ months.
The undersigned certifies that he is the Vice President and Chief
Financial Officer of Borrower, has obtained all consents necessary, and as such
he is authorized to execute this request on behalf of Borrower. The
undersigned further certifies, represents, and warrants on behalf of Borrower
that Borrower is entitled to receive the requested borrowing, continuation, or
conversion under the terms and conditions of the Credit Agreement.
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<PAGE> 50
Each capitalized term used but not defined herein shall have the
meaning assigned to such term in the Credit Agreement.
Very truly yours,
SAN JUAN PARTNERS, L.L.C.
By: O'Sullivan Oil & Gas Company, Inc.
Its Sole Partner
By:_______________________
C.N. O'Sullivan
President
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<PAGE> 51
PLEDGE OF DEPOSIT ACCOUNT
The undersigned and if more than one, each of them jointly and
severally (hereinafter referred to as "Pledgor"), in consideration of certain
financial accommodations extended by BANK ONE, TEXAS, NATIONAL ASSOCIATION
("Bank"), does hereby assign and transfer to Bank all of Pledgor's right, title
and interest in and to the account(s) identified as follows:
<TABLE>
<CAPTION>
Name and Address of Type of Account Identifying Number
Depository of Account
<S> <C> <C>
Bank One, Texas, N.A. Deposit 1560185793
910 Travis
Houston, Texas 77002
</TABLE>
and all instruments, documents, agreements and other writings evidencing such
account(s), all sums now or at any time hereafter on deposit therein, all sums
now due or to become due with respect to such account(s) and any and all
renewals, replacements and proceeds thereof (hereinafter collectively called
the "Account").
Pledgor represents, warrants and agrees that (i) Pledgor has full
power, right and authority to execute and deliver this Pledge, (ii) Pledgor is
the owner of the Account free and clear of all liens and encumbrances of any
nature whatsoever, (iii) Pledgor will not withdraw any money from the Account
nor create any security interest or lien in or further assign the Account or
any part thereof, and (iv) any funds payable with respect to the Account that
are hereafter received by Pledgor shall immediately upon such receipt become
subject to this Pledge, be segregated from all other funds of Pledgor, be held
in trust by Pledgor for Bank and be immediately paid into the Account. Pledgor
further represents and warrants that, as of the date hereof, and after giving
effect to this Pledge and the completion of all other transactions contemplated
by Pledgor at the time of the execution of this Pledge, (i) Pledgor is and will
be solvent, (ii) the fair saleable value of Pledgor's assets exceeds and will
continue to exceed Pledgor's liabilities (both fixed and contingent), (iii)
Pledgor is paying and will continue to be able to pay its debts as they mature,
and (iv) if Pledgor is not an individual, Pledgor has and will have sufficient
capital to carry on Pledgor's businesses and all businesses in which Pledgor is
about to engage.
The Account shall constitute collateral for the Indebtedness. The
term "Indebtedness" shall mean
(i) all indebtedness, obligations and liabilities of
Pledgor to Bank of any kind or character, now existing or hereafter
arising, whether direct, indirect, related, unrelated, fixed,
contingent, liquidated, unliquidated, joint, several or joint and
several, and regardless of whether such indebtedness, obligations and
liabilities may, prior to their acquisition by Bank, be or have been
payable to or in favor of a third party and subsequently acquired by
Bank (it being contemplated that Bank may make such
<PAGE> 52
acquisitions from third parties), including without limitation all
indebtedness, obligations and liabilities of Pledgor to Bank now
existing or hereafter arising by note, draft, acceptance, guaranty,
endorsement, letter of credit, assignment, purchase, overdraft,
discount, indemnity agreement or otherwise, (ii) all accrued but
unpaid interest on any of the indebtedness described in (i) above,
(iii) all obligations of Pledgor to Bank under any documents
evidencing, securing, governing and/or pertaining to all or any part
of the indebtedness described in (i) and (ii) above, (iv) all costs
and expenses incurred by Bank in connection with the collection and
administration of all or any part of the indebtedness and obligations
described in (i), (ii) and (iii) above or the protection or
preservation of, or realization upon, the collateral securing all or
any part of such indebtedness and obligations, including without
limitation all reasonable attorneys' fees, and (v) all renewals,
extensions, modifications and rearrangements of the indebtedness and
obligations described in (i), (ii), (iii) and (iv) above.
Upon an Event of Default as defined under the Credit Agreement ("Event
of Default"), Bank is hereby authorized without notice to withdraw the funds
represented by the Account and apply such funds to the payment of the
Indebtedness at such times and in such amounts as it shall in its discretion
determine. Pledgor hereby irrevocably appoints Bank its true and lawful
attorney-in-fact, such power of attorney being coupled with an interest, with
full power of substitution, to do any one or more of the following in its sole
discretion upon the occurrence of an Event of Default: (i) demand, collect,
receive, sue for, compound and give acquittance for any and all amounts which
may be or become due or payable with respect to the Account, (ii) execute any
and all withdrawal receipts or other orders for the payment of money drawn on
the Account, (iii) endorse the name of Pledgor on all commercial paper given in
payment or in partial payment of the Account, (iv) file any claim or institute
any proceeding with respect to the Account, (v) transfer the Account into the
name of the Bank or its nominee, and (vi) take any other action which Bank may
deem necessary or appropriate to protect and preserve the right, title and
interest of Bank hereunder.
THIS PLEDGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAWS.
IN WITNESS WHEREOF, the undersigned executes and delivers this Pledge
as of January 15, 1998.
PLEDGOR'S ADDRESS:
SAN JUAN PARTNERS, L.L.C.
Bank One Center
910 Travis, Suite 2150
Houston, Texas 77002
2
<PAGE> 53
PLEDGOR:
SAN JUAN PARTNERS, L.L.C.
By: O'Sullivan Oil & Gas Company, Inc.
Its Sole Manager
By: /s/ C.N. O'SULLIVAN
-------------------------------
C.N. O'Sullivan
President
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<PAGE> 54
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is made as of the 15th day of
January, 1998, by SAN JUAN PARTNERS, L.L.C. (hereinafter called "Debtor",
whether one or more), in favor of BANK ONE, TEXAS, NATIONAL ASSOCIATION
("Bank"). Debtor hereby agrees with Bank as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings indicated below:
(a) The term "Borrower" shall mean Debtor.
(b) The term "Code" shall mean the Uniform Commercial
Code as in effect in the State of Texas on the date of this Agreement
or as it may hereafter be amended from time to time.
(c) The term "Collateral" shall mean all of the property
set forth below:
(i) All present and future accounts, chattel
paper, documents, instruments, deposit accounts and general
intangibles (including any right to payment for goods sold or
services rendered arising out of the sale or delivery of
personal property or work done or labor performed by Debtor),
now or hereafter owned, held, or acquired by Debtor, together
with any and all books of account, customer lists and other
records relating in any way to the foregoing (including,
without limitation, computer software, whether on tape, disk,
card, strip, cartridge or any other form), and in any case
where an account arises from the sale of goods, the interest
of Debtor in such goods.
(ii) All present and hereafter acquired inventory
(including without limitation, all raw materials, work in
process and finished goods) held, possessed, owned, held on
consignment, or held for sale, lease, return or to be
furnished under contracts of services, in whole or in part, by
Debtor wherever located, all records relating in any way to
the foregoing (including, without limitation, any computer
software, whether on tape, disk, card, strip, cartridge or any
other form).
(iii) All equipment and fixtures of whatsoever kind
and character now or hereafter possessed, held, acquired,
leased or owned by Debtor and used or usable in Debtor's
business, together with all replacements, accessories,
additions, substitutions and accessions to all of the
foregoing, all records relating in any way to the foregoing
(including, without limitation, any computer software, whether
on tape, disk, card, strip, cartridge or any other form). To
the extent that the
<PAGE> 55
foregoing property is located on, attached to, annexed to,
related to, or used in connection with, or otherwise made a
part of, and is or shall become fixtures upon, real property,
such real property and the record owner thereof is described
on Schedule "A" attached hereto and made a part hereof.
(iv) All minerals and the like (including, without
limitation, oil and gas) now or hereafter located on the real
property described on Exhibit "A".
The term Collateral, as used herein, shall also include all
PRODUCTS and PROCEEDS of all of the foregoing (including without
limitation, insurance payable by reason of loss or damage to the
foregoing property) and any property, securities, guaranties or monies
of Debtor which may at any time come into the possession of Secured
Party (as hereinafter defined). The designation of proceeds does not
authorize Debtor to sell, transfer or otherwise convey any of the
foregoing property except finished goods intended for sale in the
ordinary course of Debtor's business or as otherwise provided herein.
(d) The term "Indebtedness" shall mean
(i) all indebtedness, obligations and liabilities of Borrower to
Secured Party of any kind or character, now existing or hereafter
arising, whether direct, indirect, related, unrelated, fixed,
contingent, liquidated, unliquidated, joint, several or joint and
several, and regardless of whether such indebtedness, obligations and
liabilities may, prior to their acquisition by Secured Party, be or
have been payable to or in favor of a third party and subsequently
acquired by Secured Party (it being contemplated that Secured Party
may make such acquisitions from third parties), including without
limitation all indebtedness, obligations and liabilities of Borrower
to Secured Party now existing or hereafter arising by note, draft,
acceptance, guaranty, endorsement, letter of credit, assignment,
purchase, overdraft, discount, indemnity agreement or otherwise, (ii)
all accrued but unpaid interest on any of the indebtedness described
in (i) above, (iii) all obligations of Borrower to Secured Party under
any documents evidencing, securing, governing and/or pertaining to all
or any part of the indebtedness described in (i) and (ii) above, (iv)
all costs and expenses incurred by Secured Party in connection with
the collection and administration of all or any part of the
indebtedness and obligations described in (i), (ii) and (iii) above or
the protection or preservation of, or realization upon, the collateral
securing all or any part of such indebtedness and obligations,
including without limitation all reasonable attorneys' fees, and (v)
all renewals, extensions, modifications and rearrangements of the
indebtedness and obligations described in (i), (ii), (iii) and (iv)
above.
(e) The term "Loan Documents" shall mean all instruments
and documents evidencing, securing, governing, guaranteeing and/or
pertaining to the Indebtedness.
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<PAGE> 56
(f) The term "Obligated Party" shall mean any party other
than Borrower who secures, guarantees and/or is otherwise obligated to
pay all or any portion of the Indebtedness.
(g) The term "Secured Party" shall mean Bank, its
successors and assigns, including without limitation, any party to
whom Bank, or its successors or assigns, may assign its rights and
interests under this Agreement.
All words and phrases used herein which are expressly defined in Section 1.201
or Chapter 9 of the Code shall have the meaning provided for therein. Other
words and phrases defined elsewhere in the Code shall have the meaning
specified therein except to the extent such meaning is inconsistent with a
definition in Section 1.201 or Chapter 9 of the Code.
2. SECURITY INTEREST. As security for the Indebtedness, Debtor,
for value received, hereby grants to Secured Party a continuing security
interest in the Collateral.
3. REPRESENTATIONS AND WARRANTIES. Debtor hereby represents and
warrants the following to Secured Party:
(a) Due Authorization. The execution, delivery and
performance of this Agreement and all of the other Loan Documents by
Debtor have been duly authorized by all necessary corporate action of
Debtor, to the extent Debtor is a corporation, or by all necessary
partnership action, to the extent Debtor is a partnership.
(b) Enforceability. This Agreement and the other Loan
Documents constitute legal, valid and binding obligations of Debtor,
enforceable in accordance with their respective terms, except as
limited by bankruptcy, insolvency or similar laws of general
application relating to the enforcement of creditors' rights and
except to the extent specific remedies may generally be limited by
equitable principles.
(c) Ownership and Liens. Debtor has Defensible Title to
the Collateral free and clear of all liens, security interests,
encumbrances or adverse claims, except for the security interest
created by this Agreement. No dispute, right of setoff, counterclaim
or defense exists with respect to all or any part of the Collateral.
Debtor has not executed any other security agreement currently
affecting the Collateral and no effective financing statement or other
instrument similar in effect covering all or any part of the
Collateral is on file in any recording office except as may have been
executed or filed in favor of Secured Party.
(d) No Conflicts or Consents. Neither the ownership, the
intended use of the Collateral by Debtor, the grant of the security
interest by Debtor to Secured Party herein nor the exercise by Secured
Party of its rights or remedies hereunder, will (i) conflict with any
provision of (A) any domestic or foreign law, statute, rule or
regulation, (B) the
3
<PAGE> 57
articles or certificate of incorporation, charter, bylaws or
partnership agreement, as the case may be, of Debtor, or (C) any
agreement, judgment, license, order or permit applicable to or binding
upon Debtor, or (ii) result in or require the creation of any lien,
charge or encumbrance upon any assets or properties of Debtor or of
any person except as may be expressly contemplated in the Loan
Documents. Except as expressly contemplated in the Loan Documents, no
consent, approval, authorization or order of, and no notice to or
filing with, any court, governmental authority or third party is
required in connection with the grant by Debtor of the security
interest herein or the exercise by Secured Party of its rights and
remedies hereunder.
(e) Security Interest. Debtor has and will have at all
times full right, power and authority to grant a security interest in
the Collateral to Secured Party in the manner provided herein, free
and clear of any lien, security interest or other charge or
encumbrance. This Agreement creates a legal, valid and binding
security interest in favor of Secured Party in the Collateral securing
the Indebtedness. Possession by Secured Party of all certificates,
instruments and cash constituting Collateral from time to time and/or
the filing of the financing statements delivered prior hereto and/or
concurrently herewith by Debtor to Secured Party will perfect and
establish the first priority of Secured Party's security interest
hereunder in the Collateral.
(f) Location. Debtor's residence or chief executive
office, as the case may be, and the office where the records
concerning the Collateral are kept is located at its address set forth
on the signature page hereof. Except as specified elsewhere herein,
all Collateral shall be kept at such address and such other addresses
as may be listed in Schedule "A" attached hereto and made a part
hereof.
(g) Solvency of Debtor. As of the date hereof, and after
giving effect to this Agreement and the completion of all other
transactions contemplated by Debtor at the time of the execution of
this Agreement, (i) Debtor is and will be solvent, (ii) the fair
saleable value of Debtor's assets exceeds and will continue to exceed
Debtor's liabilities (both fixed and contingent), (iii) Debtor is
paying and will continue to be able to pay its debts as they mature,
and (iv) if Debtor is not an individual, Debtor has and will have
sufficient capital to carry on Debtor's businesses and all businesses
in which Debtor is about to engage.
(h) Inventory. The security interest in the inventory
shall continue through all stages of manufacture and shall, without
further action, attach to the accounts or other proceeds resulting
from the sale or other disposition thereof and to all such inventory
as may be returned to Debtor by its account debtors.
(i) Accounts. Each account represents the valid and
legally binding indebtedness of a bona fide account debtor arising
from the sale or lease by Debtor of goods or the rendition by Debtor
of services and is not subject to contra accounts, setoffs, defenses
or counterclaims by or available to account debtors obligated on the
accounts
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<PAGE> 58
except as disclosed by Debtor to Secured Party from time to time in
writing. The amount shown as to each account on Debtor's books is the
true and undisputed amount owing and unpaid thereon, subject only to
discounts, allowances, rebates, credits and adjustments to which the
account debtor has a right and which have been disclosed to Secured
Party in writing.
(j) Chattel Paper, Documents and Instruments. The
chattel paper, documents and instruments of Debtor pledged hereunder
have only one original counterpart and no party other than Debtor or
Secured Party is in actual or constructive possession of any such
chattel paper, documents or instruments.
4. AFFIRMATIVE COVENANTS. Debtor will comply with the covenants
contained in this Section 4 at all times during the period of time this
Agreement is effective unless Secured Party shall otherwise consent in writing.
(a) Ownership and Liens. Debtor will maintain Defensible
Title to all Collateral free and clear of all liens, security
interests, encumbrances or adverse claims, except for the security
interest created by this Agreement and the security interests and
other encumbrances expressly permitted by the other Loan Documents.
Debtor will not permit any dispute, right of setoff, counterclaim or
defense to exist with respect to all or any part of the Collateral.
Debtor will cause any financing statement or other security instrument
with respect to the Collateral to be terminated, except as may exist
or as may have been filed in favor of Secured Party. Debtor will
defend at its expense Secured Party's right, title and security
interest in and to the Collateral against the claims of any third
party.
(b) Further Assurances. Debtor will from time to time at
its expense promptly execute and deliver all further instruments and
documents and take all further action necessary or appropriate or that
Secured Party may request in order (i) to perfect and protect the
security interest created or purported to be created hereby and the
first priority of such security interest, (ii) to enable Secured Party
to exercise and enforce its rights and remedies hereunder in respect
of the Collateral, and (iii) to otherwise effect the purposes of this
Agreement, including without limitation: (A) executing and filing
such financing or continuation statements, or amendments thereto; and
(B) furnishing to Secured Party from time to time statements and
schedules further identifying and describing the Collateral and such
other reports in connection with the Collateral, all in reasonable
detail satisfactory to Bank.
(c) Inspection of Collateral. Debtor will keep adequate
records concerning the Collateral and will permit Secured Party and
all representatives and agents appointed by Secured Party, with prior
written notice, to inspect any of the Collateral and the books and
records of or relating to the Collateral at any time during normal
business hours, to make
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<PAGE> 59
and take away photocopies, photographs and printouts thereof and to
write down and record any such information.
(d) Payment of Taxes. Debtor (i) will timely pay all
property and other taxes, assessments and governmental charges or
levies imposed upon the Collateral or any part thereof, (ii) will
timely pay all lawful claims which, if unpaid, might become a lien or
charge upon the Collateral or any part thereof, and (iii) will
maintain appropriate accruals and reserves for all such liabilities in
a timely fashion in accordance with generally accepted accounting
principles. Debtor may, however, delay paying or discharging any such
taxes, assessments, charges, claims or liabilities so long as the
validity thereof is contested in good faith by proper proceedings and
provided Debtor has set aside on Debtor's books adequate reserves
therefor; provided, however, Debtor understands and agrees that in the
event of any such delay in payment or discharge and upon Secured
Party's written request, Debtor will establish with Secured Party an
escrow acceptable to Secured Party adequate to cover the payment of
such taxes, assessments and governmental charges with interest, costs
and penalties and a reasonable additional sum to cover possible costs,
interest and penalties (which escrow shall be returned to Debtor upon
payment of such taxes, assessments, governmental charges, interests,
costs and penalties or disbursed in accordance with the resolution of
the contest to the claimant) or furnish Secured Party with an
indemnity bond secured by a deposit in cash or other security
acceptable to Secured Party. Notwithstanding any other provision
contained in this Subsection, Secured Party may at its discretion
exercise its rights under Subsection 6(c) at any time to pay such
taxes, assessments, governmental charges, interest, costs and
penalties.
(e) Mortgagee's and Landlord's Waivers. Debtor shall
cause each mortgagee of real property owned by Debtor and each
landlord of real property leased by Debtor to execute and deliver
agreements satisfactory in form and substance to Secured Party by
which such mortgagee or landlord waives or subordinates any rights it
may have in the Collateral.
(f) Condition of Goods. Debtor will maintain, preserve,
protect and keep all Collateral which constitutes goods in good
condition, repair and working order and will cause such Collateral to
be used and operated in good and workmanlike manner, in accordance
with applicable laws and in a manner which will not make void or
cancelable any insurance with respect to such Collateral. Debtor will
promptly make or cause to be made all repairs, replacements and other
improvements to or in connection with the Collateral which Secured
Party may request from time to time.
(g) Insurance. Debtor will, at its own expense, maintain
insurance with respect to all Collateral which constitutes goods in
such amounts, against such risks, in such form and with such insurers,
as shall be satisfactory to Secured Party from time to time. If
requested by Secured Party, each policy for property damage insurance
shall provide for all losses to be paid directly to Secured Party. If
requested by Secured Party, each policy
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<PAGE> 60
of insurance maintained by Debtor shall (i) name Debtor and Secured
Party as insured parties thereunder (without any representation or
warranty by or obligation upon Secured Party) as their interests may
appear, (ii) contain the agreement by the insurer that any loss
thereunder shall be payable to Secured Party notwithstanding any
action, inaction or breach of representation or warranty by Debtor,
(iii) provide that there shall be no recourse against Secured Party
for payment of premiums or other amounts with respect thereto, and
(iv) provide that at least thirty (30) days prior written notice of
cancellation or of lapse shall be given to Secured Party by the
insurer. Debtor will, if requested by Secured Party, deliver to
Secured Party original or duplicate policies of such insurance and, as
often as Secured Party may reasonably request, a report of a reputable
insurance broker with respect to such insurance. Debtor will also, at
the request of Secured Party, duly execute and deliver instruments of
assignment of such insurance policies and cause the respective
insurers to acknowledge notice of such assignment. All insurance
payments in respect of loss of or damage to any Collateral shall be
paid to Secured Party and applied as Secured Party in its sole
discretion deems appropriate.
(h) Accounts and General Intangibles. Debtor will,
except as otherwise provided in Subsection 6(e), collect, at Debtor's
own expense, all amounts due or to become due under each of the
accounts and general intangibles. In connection with such
collections, Debtor may and, at Secured Party's direction, will take
such action not otherwise forbidden by Subsection 5(e) as Debtor or
Secured Party may deem necessary or advisable to enforce collection or
performance of each of the accounts and general intangibles. Debtor
will also duly perform and cause to be performed all of its
obligations with respect to the goods or services, the sale or lease
or rendition of which gave rise or will give rise to each account and
all of its obligations to be performed under or with respect to the
general intangibles. Debtor also covenants and agrees to take any
action and/or execute any documents that Secured Party may request in
order to comply with the Federal Assignment of Claims Act, as amended.
(i) Chattel Paper, Documents and Instruments. Debtor
will take such action as may be requested by Secured Party in order to
cause any chattel paper, documents or instruments to be valid and
enforceable and will cause all chattel paper to have only one original
counterpart. Upon request by Secured Party, Debtor will deliver to
Secured Party all originals of chattel paper, documents or instruments
and will mark all chattel paper with a legend indicating that such
chattel paper is subject to the security interest granted hereunder.
5. NEGATIVE COVENANTS. Debtor will comply with the covenants
contained in this Section 5 at all times during the period of time this
Agreement is effective, unless Secured Party shall otherwise consent in
writing.
(a) Transfer or Encumbrance. Debtor will not (i) sell,
assign (by operation of law or otherwise), transfer, exchange, lease
or otherwise dispose of any of the Collateral,
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<PAGE> 61
(ii) grant a lien or security interest in or execute, file or record
any financing statement or other security instrument with respect to
the Collateral to any party other than Secured Party, or (iii) deliver
actual or constructive possession of any of the Collateral to any
party other than Secured Party, except for (A) sales and leases of
inventory in the ordinary course of business, and (B) the sale or
other disposal of any item of equipment which is worn out or obsolete
and which has been replaced by an item of equal suitability and value,
owned by Debtor and made subject to the security interest under this
Agreement, but which is otherwise free and clear of any lien, security
interest, encumbrance or adverse claim; provided, however, the
exceptions permitted in clauses (A) and (B) above shall automatically
terminate upon the occurrence of an Event of Default.
(b) Impairment of Security Interest. Debtor will not
take or fail to take any action which would in any manner impair the
value or enforceability of Secured Party's security interest in any
Collateral.
(c) Possession of Collateral. Debtor will not cause or
permit the removal of any Collateral from its possession, control and
risk of loss, nor will Debtor cause or permit the removal of any
Collateral from the address on the signature page hereof and the
addresses specified on Schedule "B" to this Agreement other than (i)
as permitted by Subsection 5(a), or (ii) in connection with the
possession of any Collateral by Secured Party or by its bailee.
(d) Goods. Debtor will not permit any Collateral which
constitutes goods to at any time (i) be covered by any document except
documents in the possession of the Secured Party, (ii) become so
related to, attached to or used in connection with any particular real
property so as to become a fixture upon such real property, or (iii)
be installed in or affixed to other goods so as to become an accession
to such other goods unless such other goods are subject to a perfected
first priority security interest under this Agreement.
(e) Compromise of Collateral. Debtor will not adjust,
settle, compromise, amend or modify any Collateral, except an
adjustment, settlement, compromise, amendment or modification in good
faith and in the ordinary course of business; provided, however, this
exception shall automatically terminate upon the occurrence of an
Event of Default or upon Secured Party's written request. Debtor
shall provide to Secured Party such information concerning (i) any
adjustment, settlement, compromise, amendment or modification of any
Collateral, and (ii) any claim asserted by any account debtor for
credit, allowance, adjustment, dispute, setoff or counterclaim, as
Secured Party may request from time to time.
(f) Financing Statement Filings. Debtor recognizes that
financing statements pertaining to the Collateral have been or may be
filed where Debtor maintains any Collateral, has its records
concerning any Collateral or has its residence or chief executive
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<PAGE> 62
office, as the case may be. Without limitation of any other covenant
herein, Debtor will not cause or permit any change in the location of
(i) any Collateral, (ii) any records concerning any Collateral, or
(iii) Debtor's residence or chief executive office, as the case may
be, to a jurisdiction other than as represented in Subsection 3(f)
unless Debtor shall have notified Secured Party in writing of such
change at least thirty (30) days prior to the effective date of such
change, and shall have first taken all action required by Secured
Party for the purpose of further perfecting or protecting the security
interest in favor of Secured Party in the Collateral. In any written
notice furnished pursuant to this Subsection, Debtor will expressly
state that the notice is required by this Agreement and contains facts
that may require additional filings of financing statements or other
notices for the purpose of continuing perfection of Secured Party's
security interest in the Collateral.
6. RIGHTS OF SECURED PARTY. Secured Party shall have the rights
contained in this Section 6 at all times during the period of time this
Agreement is effective.
(a) Additional Financing Statements Filings. Debtor
hereby authorizes Secured Party to file, without the signature of
Debtor, one or more financing or continuation statements, and
amendments thereto, relating to the Collateral. Debtor further agrees
that a carbon, photographic or other reproduction of this Security
Agreement or any financing statement describing any Collateral is
sufficient as a financing statement and may be filed in any
jurisdiction Secured Party may deem appropriate.
(b) Power of Attorney. Debtor hereby irrevocably
appoints Secured Party as Debtor's attorney-in-fact, such power of
attorney being coupled with an interest, with full authority in the
place and stead of Debtor and in the name of Debtor or otherwise, from
time to time in Secured Party's discretion, to take any action and to
execute any instrument which Secured Party may deem necessary or
appropriate to accomplish the purposes of this Agreement, including
without limitation: (i) to obtain and adjust insurance required by
Secured Party hereunder; (ii) to demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and
to become due under or in respect of the Collateral; (iii) to receive,
endorse and collect any drafts or other instruments, documents and
chattel paper in connection with clause (i) or (ii) above; and (iv) to
file any claims or take any action or institute any proceedings which
Secured Party may deem necessary or appropriate for the collection
and/or preservation of the Collateral or otherwise to enforce the
rights of Secured Party with respect to the Collateral.
(c) Performance by Secured Party. If Debtor fails to
perform any agreement or obligation provided herein, Secured Party may
itself perform, or cause performance of, such agreement or obligation,
and the expenses of Secured Party incurred in connection therewith
shall be a part of the Indebtedness, secured by the Collateral and
payable by Debtor on demand.
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<PAGE> 63
(d) Debtor's Receipt of Proceeds. All amounts and
proceeds (including instruments and writings) received by Debtor in
respect of such accounts or general intangibles shall be received in
trust for the benefit of Secured Party hereunder and, upon request of
Secured Party, shall be segregated from other property of Debtor and
shall be forthwith delivered to Secured Party in the same form as so
received (with any necessary endorsement) and applied to the
Indebtedness in such manner as Secured Party deems appropriate in its
sole discretion.
(e) Notification of Account Debtors. Secured Party may
at its discretion from time to time notify any or all obligors under
any accounts or general intangibles (i) of Secured Party's security
interest in such accounts or general intangibles and direct such
obligors to make payment of all amounts due or to become due to Debtor
thereunder directly to Secured Party, and (ii) to verify the accounts
or general intangibles with such obligors. Secured Party shall have
the right, at the expense of Debtor, to enforce collection of any such
accounts or general intangibles and to adjust, settle or compromise
the amount or payment thereof, in the same manner and to the same
extent as Debtor.
7. EVENTS OF DEFAULT. Each of the following constitutes an
"Event of Default" under this Agreement:
(a) Event of Default under the Credit Agreement. An
Event of Default under the Credit Agreement; or
(b) Non-Compliance of Covenants. The non-compliance with
any covenant herein which has not been cured within ten (10) days of
written notice to Debtor of such non-compliance; or
(c) Execution on Collateral. The Collateral or any
portion thereof is taken on execution or other process of law in any
action against Debtor; or
(d) Abandonment. Debtor abandons the Collateral or any
portion thereof; or
(e) Action by Other Lienholder. The holder of any lien
or security interest on any of the assets of Debtor, including without
limitation, the Collateral (without hereby implying the consent of
Secured Party to the existence or creation of any such lien or
security interest on the Collateral), declares a default thereunder or
institutes foreclosure or other proceedings for the enforcement of its
remedies thereunder.
8. REMEDIES AND RELATED RIGHTS. If an Event of Default shall
have occurred, and without limiting any other rights and remedies provided
herein, under any of the other Loan Documents or otherwise available to Secured
Party, Secured Party may exercise one or more of the rights and remedies
provided in this Section.
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<PAGE> 64
(a) Remedies. Secured Party may from time to time at its
discretion, without limitation and without notice except as expressly
provided in any of the Loan Documents:
(i) exercise in respect of the
Collateral all the rights and remedies of a secured party
under the Code (whether or not the Code applies to the
affected Collateral);
(ii) require Debtor to, and Debtor hereby
agrees that it will at its expense and upon request of Secured
Party, assemble the Collateral as directed by Secured Party
and make it available to Secured Party at a place to be
designated by Secured Party which is reasonably convenient to
both parties;
(iii) reduce its claim to judgment or
foreclose or otherwise enforce, in whole or in part, the
security interest granted hereunder by any available judicial
procedure;
(iv) sell or otherwise dispose of, at its
office, on the premises of Debtor or elsewhere, the
Collateral, as a unit or in parcels, by public or private
proceedings, and by way of one or more contracts (it being
agreed that the sale or other disposition of any part of the
Collateral shall not exhaust Secured Party's power of sale,
but sales or other dispositions may be made from time to time
until all of the Collateral has been sold or disposed of or
until the Indebtedness has been paid and performed in full),
and at any such sale or other disposition it shall not be
necessary to exhibit any of the Collateral;
(v) buy the Collateral, or any portion
thereof, at any public sale;
(vi) buy the Collateral, or any portion
thereof, at any private sale if the Collateral is of a type
customarily sold in a recognized market or is of a type which
is the subject of widely distributed standard price
quotations;
(vii) apply for the appointment of a
receiver for the Collateral, and Debtor hereby consents to any
such appointment; and
(viii) at its option, retain the Collateral
in satisfaction of the Indebtedness whenever the circumstances
are such that Secured Party is entitled to do so under the
Code or otherwise.
Debtor agrees that in the event Debtor is entitled to receive any
notice under the Uniform Commercial Code, as it exists in the state
governing any such notice, of the sale or other disposition of any
Collateral, reasonable notice shall be deemed given when such notice
is deposited in a depository receptacle under the care and custody of
the United States Postal Service, postage prepaid, at Debtor's address
set forth on the signature page hereof,
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<PAGE> 65
ten (10) days prior to the date of any public sale, or after which a
private sale, of any of such Collateral is to be held. Secured Party
shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. Secured Party may adjourn any
public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.
(b) Application of Proceeds. If any Event of Default
shall have occurred, Secured Party may at its discretion apply or use
any cash held by Secured Party as Collateral, and any cash proceeds
received by Secured Party in respect of any sale or other disposition
of, collection from, or other realization upon, all or any part of the
Collateral as follows in such order and manner as Secured Party may
elect:
(i) to the repayment or reimbursement of
the reasonable out-of-pocket costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses)
incurred by Secured Party in connection with (A) the
administration of the Loan Documents, (B) the custody,
preservation, use or operation of, or the sale of, collection
from, or other realization upon, the Collateral, and (C) the
exercise or enforcement of any of the rights and remedies of
Secured Party hereunder;
(ii) to the payment or other satisfaction
of any liens and other encumbrances upon the Collateral;
(iii) to the satisfaction of the
Indebtedness;
(iv) by holding such cash and proceeds as
Collateral;
(v) to the payment of any other amounts
required by applicable law (including without limitation,
Section 9.504(a)(3) of the Code or any other applicable
statutory provision); and
(vi) by delivery to Debtor or any other party
lawfully entitled to receive such cash or proceeds whether by
direction of a court of competent jurisdiction or otherwise.
(c) Deficiency. In the event that the proceeds of any
sale of, collection from, or other realization upon, all or any part
of the Collateral by Secured Party are insufficient to pay all amounts
to which Secured Party is legally entitled, Borrower and any party who
guaranteed or is otherwise obligated to pay all or any portion of the
Indebtedness shall be liable for the deficiency, together with
interest thereon as provided in the Loan Documents.
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<PAGE> 66
(d) Non-Judicial Remedies. In granting to Secured Party
the power to enforce its rights hereunder without prior judicial
process or judicial hearing, Debtor expressly waives, renounces and
knowingly relinquishes any legal right which might otherwise require
Secured Party to enforce its rights by judicial process. Debtor
recognizes and concedes that non-judicial remedies are consistent with
the usage of trade, are responsive to commercial necessity and are the
result of a bargain at arm's length. Nothing herein is intended to
prevent Secured Party or Debtor from resorting to judicial process at
either party's option.
(e) Other Recourse. Debtor waives any right to require
Secured Party to proceed against any third party, exhaust any
Collateral or other security for the Indebtedness, or to have any
third party joined with Debtor in any suit arising out of the
Indebtedness or any of the Loan Documents, or pursue any other remedy
available to Secured Party. Debtor further waives any and all notice
of acceptance of this Agreement and of the creation, modification,
rearrangement, renewal or extension of the Indebtedness. Debtor
further waives any defense arising by reason of any disability or
other defense of any third party or by reason of the cessation from
any cause whatsoever of the liability of any third party. Until all
of the Indebtedness shall have been paid in full, Debtor shall have no
right of subrogation and Debtor waives the right to enforce any remedy
which Secured Party has or may hereafter have against any third party,
and waives any benefit of and any right to participate in any other
security whatsoever now or hereafter held by Secured Party. Debtor
authorizes Secured Party, and without notice or demand and without any
reservation of rights against Debtor and without affecting Debtor's
liability hereunder or on the Indebtedness to (i) take or hold any
other property of any type from any third party as security for the
Indebtedness, and exchange, enforce, waive and release any or all of
such other property, (ii) apply such other property and direct the
order or manner of sale thereof as Secured Party may in its discretion
determine, (iii) renew, extend, accelerate, modify, compromise, settle
or release any of the Indebtedness or other security for the
Indebtedness, (iv) waive, enforce or modify any of the provisions of
any of the Loan Documents executed by any third party, and (v) release
or substitute any third party.
9. INDEMNITY. DEBTOR HEREBY INDEMNIFIES AND AGREES TO HOLD
HARMLESS SECURED PARTY, AND ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND
REPRESENTATIVES (EACH AN "INDEMNIFIED PERSON") FROM AND AGAINST ANY AND ALL
LIABILITIES, OBLIGATIONS, CLAIMS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND OR NATURE
(COLLECTIVELY, THE "CLAIMS") WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED
AGAINST, ANY INDEMNIFIED PERSON (WHETHER OR NOT CAUSED BY ANY INDEMNIFIED
PERSON'S SOLE, CONCURRENT OR CONTRIBUTORY NEGLIGENCE) ARISING IN CONNECTION
WITH THE LOAN DOCUMENTS, THE INDEBTEDNESS OR THE COLLATERAL (INCLUDING WITHOUT
LIMITATION, THE ENFORCEMENT OF THE
13
<PAGE> 67
LOAN DOCUMENTS AND THE DEFENSE OF ANY INDEMNIFIED PERSON'S ACTIONS AND/OR
INACTIONS IN CONNECTION WITH THE LOAN DOCUMENTS), EXCEPT TO THE LIMITED EXTENT
THE CLAIMS AGAINST AN INDEMNIFIED PERSON ARE PROXIMATELY CAUSED BY SUCH
INDEMNIFIED PERSON'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. IF DEBTOR OR ANY
THIRD PARTY EVER ALLEGES SUCH GROSS NEGLIGENCE OR WILLFUL MISCONDUCT BY ANY
INDEMNIFIED PERSON, THE INDEMNIFICATION PROVIDED FOR IN THIS SECTION SHALL
NONETHELESS BE PAID UPON DEMAND, SUBJECT TO LATER ADJUSTMENT OR REIMBURSEMENT,
UNTIL SUCH TIME AS A COURT OF COMPETENT JURISDICTION ENTERS A FINAL JUDGMENT AS
TO THE EXTENT AND EFFECT OF THE ALLEGED GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
THE INDEMNIFICATION PROVIDED FOR IN THIS SECTION SHALL SURVIVE THE TERMINATION
OF THIS AGREEMENT AND SHALL EXTEND AND CONTINUE TO BENEFIT EACH INDIVIDUAL OR
ENTITY WHO IS OR HAS AT ANY TIME BEEN AN INDEMNIFIED PERSON HEREUNDER.
10. MISCELLANEOUS.
(a) Entire Agreement. This Agreement contains the entire
agreement of Secured Party and Debtor with respect to the Collateral.
If the parties hereto are parties to any prior agreement, either
written or oral, relating to the Collateral, the terms of this
Agreement shall amend and supersede the terms of such prior
agreements as to transactions on or after the effective date of this
Agreement, but all security agreements, financing statements,
guaranties, other contracts and notices for the benefit of Secured
Party shall continue in full force and effect to secure the
Indebtedness unless Secured Party specifically releases its rights
thereunder by separate release.
(b) Amendment. No modification, consent or amendment of
any provision of this Agreement or any of the other Loan Documents
shall be valid or effective unless the same is in writing and signed
by the party against whom it is sought to be enforced.
(c) Actions by Secured Party. The lien, security
interest and other security rights of Secured Party hereunder shall
not be impaired by (i) any renewal, extension, increase or
modification with respect to the Indebtedness, (ii) any surrender,
compromise, release, renewal, extension, exchange or substitution
which Secured Party may grant with respect to the Collateral, or (iii)
any release or indulgence granted to any endorser, guarantor or surety
of the Indebtedness. The taking of additional security by Secured
Party shall not release or impair the lien, security interest or other
security rights of Secured Party hereunder or affect the obligations
of Debtor hereunder.
(d) Waiver by Secured Party. Secured Party may waive
any Event of Default without waiving any other prior or subsequent
Event of Default. Secured Party may
14
<PAGE> 68
remedy any default without waiving the Event of Default remedied.
Neither the failure by Secured Party to exercise, nor the delay by
Secured Party in exercising, any right or remedy upon any Event of
Default shall be construed as a waiver of such Event of Default or as
a waiver of the right to exercise any such right or remedy at a later
date. No single or partial exercise by Secured Party of any right or
remedy hereunder shall exhaust the same or shall preclude any other or
further exercise thereof, and every such right or remedy hereunder may
be exercised at any time. No waiver of any provision hereof or
consent to any departure by Debtor therefrom shall be effective unless
the same shall be in writing and signed by Secured Party and then such
waiver or consent shall be effective only in the specific instances,
for the purpose for which given and to the extent therein specified.
No notice to or demand on Debtor in any case shall of itself entitle
Debtor to any other or further notice or demand in similar or other
circumstances.
(e) Costs and Expenses. Debtor will upon demand pay to
Secured Party the amount of any and all costs and expenses (including
without limitation, attorneys' fees and expenses), which Secured Party
may incur in connection with (i) the transactions which give rise to
the Loan Documents, (ii) the preparation of this Agreement and the
perfection and preservation of the security interests granted under
the Loan Documents, (iii) the administration of the Loan Documents,
(iv) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, the Collateral, (v) the
exercise or enforcement of any of the rights of Secured Party under
the Loan Documents, or (vi) the failure by Debtor to perform or
observe any of the provisions hereof.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND
APPLICABLE FEDERAL LAWS, EXCEPT TO THE EXTENT PERFECTION AND THE
EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST
GRANTED HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL, ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF TEXAS.
(g) Venue. This Agreement has been entered into in the
county in Texas where Bank's address for notice purposes is located,
and it shall be performable for all purposes in such county. Courts
within the State of Texas shall have jurisdiction over any and all
disputes arising under or pertaining to this Agreement and venue for
any such disputes shall be in the county or judicial district where
this Agreement has been executed and delivered.
(h) Severability. If any provision of this Agreement is
held by a court of competent jurisdiction to be illegal, invalid or
unenforceable under present or future laws, such provision shall be
fully severable, shall not impair or invalidate the remainder of this
Agreement and the effect thereof shall be confined to the provision
held to be illegal, invalid or unenforceable.
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<PAGE> 69
(i) No Obligation. Nothing contained herein shall be
construed as an obligation on the part of Secured Party to extend or
continue to extend credit to Borrower.
(j) Notices. All notices, requests, demands or other
communications required or permitted to be given pursuant to this
Agreement shall be in writing and given by (i) personal delivery,
(ii) expedited delivery service with proof of delivery, or (iii)
United States mail, postage prepaid, registered or certified mail,
return receipt requested, sent to the intended addressee at the
address set forth on the signature page hereof or to such different
address as the addressee shall have designated by written notice sent
pursuant to the terms hereof and shall be deemed to have been received
either, in the case of personal delivery, at the time of personal
delivery, in the case of expedited delivery service, as of the date of
first attempted delivery at the address and in the manner provided
herein, or in the case of mail, upon deposit in a depository
receptacle under the care and custody of the United States Postal
Service. Either party shall have the right to change its address for
notice hereunder to any other location within the continental United
States by notice to the other party of such new address at least
thirty (30) days prior to the effective date of such new address.
(k) Binding Effect and Assignment. This Agreement (i)
creates a continuing security interest in the Collateral, (ii) shall
be binding on Debtor and the heirs, executors, administrators,
personal representatives, successors and assigns of Debtor, and (iii)
shall inure to the benefit of Secured Party and its successors and
assigns. Without limiting the generality of the foregoing, Secured
Party may pledge, assign or otherwise transfer the Indebtedness and
its rights under this Agreement and any of the other Loan Documents to
any other party. Debtor's rights and obligations hereunder may not be
assigned or otherwise transferred without the prior written consent of
Secured Party.
(l) Termination. It is contemplated by the parties
hereto that from time to time there may be no outstanding
Indebtedness, but notwithstanding such occurrences, this Agreement
shall remain valid and shall be in full force and effect as to
subsequent outstanding Indebtedness. Upon (i) the satisfaction in
full of the Indebtedness, (ii) the termination or expiration of any
commitment of Secured Party to extend credit to Borrower, (iii)
written request for the termination hereof delivered by Debtor to
Secured Party, and (iv) written release or termination delivered by
Secured Party to Debtor, this Agreement and the security interests
created hereby shall terminate. Upon termination of this Agreement
and Debtor's written request, Secured Party will, at Debtor's sole
cost and expense, return to Debtor such of the Collateral as shall not
have been sold or otherwise disposed of or applied pursuant to the
terms hereof and execute and deliver to Debtor such documents as
Debtor shall reasonably request to evidence such termination.
(m) Cumulative Rights. All rights and remedies of
Secured Party hereunder are cumulative of each other and of every
other right or remedy which Secured Party may otherwise have at law or
in equity or under any of the other Loan Documents, and the
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<PAGE> 70
exercise of one or more of such rights or remedies shall not prejudice
or impair the concurrent or subsequent exercise of any other rights or
remedies.
(n) Gender and Number. Within this Agreement, words of
any gender shall be held and construed to include the other gender,
and words in the singular number shall be held and construed to
include the plural and words in the plural number shall be held and
construed to include the singular, unless in each instance the context
requires otherwise.
(o) Descriptive Headings. The headings in this Agreement
are for convenience only and shall in no way enlarge, limit or define
the scope or meaning of the various and several provisions hereof.
EXECUTED as of the date first written above.
Debtor's Address:
Bank One Center
910 Travis, Suite 2150
Houston, Texas 77002
Secured Party's Address:
Bank One, Texas, National Association
910 Travis, 14th Floor
Houston, Texas 77002
DEBTOR:
SAN JUAN PARTNERS, L.L.C.
By: O'Sullivan Oil & Gas Company, Inc.
Its Sole Manager
By: /s/ C. N. O'SULLIVAN
---------------------------------
C. N. O'Sullivan
President
17
<PAGE> 71
SCHEDULE "A"
TO
SECURITY AGREEMENT
DATED JANUARY 15, 1998
BY AND BETWEEN
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AND
SAN JUAN PARTNERS, L.L.C.
The other addresses referenced in Subsections 1(c)(iv) and 3(f) are as follows:
NONE
A-1
<PAGE> 72
EXHIBIT "A"
TO
SECURITY AGREEMENT
DATED JANUARY 15, 1998
BY AND BETWEEN
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AND
SAN JUAN PARTNERS, L.L.C.
NONE
A-1
<PAGE> 73
SCHEDULE "B"
TO
SECURITY AGREEMENT
DATED JANUARY 15, 1998
BY AND BETWEEN
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AND
SAN JUAN PARTNERS, L.L.C.
The other addresses referenced in Subsection 5(c) are as follows:
NONE
B-1
<PAGE> 74
PLEDGE OF BROKERAGE ACCOUNT
THIS PLEDGE AGREEMENT ("Agreement") is made as of the 15th day of
January, 1998, by SAN JUAN PARTNERS, L.L.C. (hereinafter called "Pledgor",
whether one or more), in favor of BANK ONE, TEXAS, NATIONAL ASSOCIATION
("Bank"). Pledgor hereby agrees with Bank as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings indicated below:
(a) The term "Borrower" shall mean Pledgor.
(b) The term "Code" shall mean the Uniform Commercial
Code as in effect in the State of Texas on the date of this Agreement
or as it may hereafter be amended from time to time.
(c) The term "Collateral" shall mean all property
specifically described on Schedule "A" attached hereto and made a part
hereof. The term Collateral, as used herein, shall also include (i)
all certificates, instruments and/or other documents evidencing the
foregoing, (ii) all renewals, replacements and substitutions of all of
the foregoing, (iii) all Additional Property (as hereinafter defined),
and (iv) all PRODUCTS and PROCEEDS of all of the foregoing. The
designation of proceeds does not authorize Pledgor to sell, transfer
or otherwise convey any of the foregoing property. The delivery at
any time by Pledgor to Secured Party of any property as a pledge to
secure payment or performance of any indebtedness or obligation
whatsoever shall also constitute a pledge of such property as
Collateral hereunder.
(d) The term "Indebtedness" shall mean
(i) all indebtedness, obligations and liabilities of Borrower to
Secured Party of any kind or character, now existing or hereafter
arising, whether direct, indirect, related, unrelated, fixed,
contingent, liquidated, unliquidated, joint, several or joint and
several, and regardless of whether such indebtedness, obligations and
liabilities may, prior to their acquisition by Secured Party, be or
have been payable to or in favor of a third party and subsequently
acquired by Secured Party (it being contemplated that Secured Party
may make such acquisitions from third parties), including without
limitation all indebtedness, obligations and liabilities of Borrower
to Secured Party now existing or hereafter arising by note, draft,
acceptance, guaranty, endorsement, letter of credit, assignment,
purchase, overdraft, discount, indemnity agreement or otherwise, (ii)
all accrued but unpaid interest on any of the indebtedness described
in (i) above, (iii) all obligations of Borrower to Secured Party under
any documents evidencing, securing, governing and/or pertaining to all
or any part of the indebtedness described in (i) and (ii) above, (iv)
all costs and
<PAGE> 75
expenses incurred by Secured Party in connection with the collection
and administration of all or any part of the indebtedness and
obligations described in (i), (ii) and (iii) above or the protection
or preservation of, or realization upon, the collateral securing all
or any part of such indebtedness and obligations, including without
limitation all reasonable attorneys' fees, and (v) all renewals,
extensions, modifications and rearrangements of the indebtedness and
obligations described in (i), (ii), (iii) and (iv) above.
(e) The term "Loan Documents" shall mean all instruments
and documents evidencing, securing, governing, guaranteeing and/or
pertaining to the Indebtedness.
(f) The term "Obligated Party" shall mean any party other
than Borrower who secures, guarantees and/or is otherwise obligated to
pay all or any portion of the Indebtedness.
(g) The term "Secured Party" shall mean Bank, its
successors and assigns, including without limitation, any party to
whom Bank, or its successors or assigns, may assign its rights and
interests under this Agreement.
All words and phrases used herein which are expressly defined in Section 1.201,
Chapter 8 or Chapter 9 of the Code shall have the meaning provided for therein.
Other words and phrases defined elsewhere in the Code shall have the meaning
specified therein except to the extent such meaning is inconsistent with a
definition in Section 1.201, Chapter 8 or Chapter 9 of the Code.
2. SECURITY INTEREST. As security for the Indebtedness, Pledgor,
for value received, hereby grants to Secured Party a continuing security
interest in the Collateral.
3. ADDITIONAL PROPERTY. Collateral shall also include the
following property (collectively, the "Additional Property") which Pledgor
becomes entitled to receive or shall receive in connection with any other
Collateral: (a) any stock certificate, including without limitation, any
certificate representing a stock dividend or any certificate in connection with
any recapitalization, reclassification, merger, consolidation, conversion, sale
of assets, combination of shares, stock split or spin-off; (b) any option,
warrant, subscription or right, whether as an addition to or in substitution of
any other Collateral; (c) any dividends or distributions of any kind
whatsoever, whether distributable in cash, stock or other property; (d) any
interest, premium or principal payments; and (e) any conversion or redemption
proceeds; provided, however, that until the occurrence of an Event of Default
(as hereinafter defined), Pledgor shall be entitled to all cash dividends and
all interest paid on the Collateral (except interest paid on any certificate of
deposit pledged hereunder) free of the security interest created under this
Agreement. All Additional Property received by Pledgor shall be received in
trust for the benefit of Secured Party. All Additional Property and all
certificates or other written instruments or documents evidencing and/or
representing the Additional Property that is received by Pledgor, together with
such instruments of transfer as Secured Party may request, shall immediately be
delivered to or deposited with Secured Party and held by Secured Party as
Collateral under the terms of this
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<PAGE> 76
Agreement. If the Additional Property received by Pledgor shall be shares of
stock or other securities, such shares of stock or other securities shall be
duly endorsed in blank or accompanied by proper instruments of transfer and
assignment duly executed in blank with, if requested by Secured Party,
signatures guaranteed by a bank or member firm of the New York Stock Exchange,
all in form and substance satisfactory to Secured Party. Secured Party shall
be deemed to have possession of any Collateral in transit to Secured Party or
its agent.
4. VOTING RIGHTS. As long as no Event of Default shall have
occurred hereunder, any voting rights incident to any stock or other securities
pledged as Collateral may be exercised by Pledgor; provided, however, that
Pledgor will not exercise, or cause to be exercised, any such voting rights,
without the prior written consent of Secured Party, if the direct or indirect
effect of such vote will result in an Event of Default hereunder.
5. MAINTENANCE OF COLLATERAL. Other than the exercise of
reasonable care to assure the safe custody of any Collateral in Secured Party's
possession from time to time, Secured Party does not have any obligation, duty
or responsibility with respect to the Collateral. Without limiting the
generality of the foregoing, Secured Party shall not have any obligation, duty
or responsibility to do any of the following: (a) ascertain any maturities,
calls, conversions, exchanges, offers, tenders or similar matters relating to
the Collateral or informing Pledgor with respect to any such matters; (b) fix,
preserve or exercise any right, privilege or option (whether conversion,
redemption or otherwise) with respect to the Collateral unless (i) Pledgor
makes written demand to Secured Party to do so, (ii) such written demand is
received by Secured Party in sufficient time to permit Secured Party to take
the action demanded in the ordinary course of its business, and (iii) Pledgor
provides additional collateral, acceptable to Secured Party in its sole
discretion; (c) collect any amounts payable in respect of the Collateral
(Secured Party being liable to account to Pledgor only for what Secured Party
may actually receive or collect thereon); (d) sell all or any portion of the
Collateral to avoid market loss; (e) sell all or any portion of the Collateral
unless and until (i) Pledgor makes written demand upon Secured Party to sell
the Collateral, and (ii) Pledgor provides additional collateral, acceptable to
Secured Party in its sole discretion; or (f) hold the Collateral for or on
behalf of any party other than Pledgor.
6. REPRESENTATIONS AND WARRANTIES. Pledgor hereby represents and
warrants the following to Secured Party:
(a) Due Authorization. The execution, delivery and
performance of this Agreement and all of the other Loan Documents by
Pledgor have been duly authorized by all necessary corporate action of
Pledgor, to the extent Pledgor is a corporation, or by all necessary
partnership action, to the extent Pledgor is a partnership.
(b) Enforceability. This Agreement and the other Loan
Documents constitute legal, valid and binding obligations of Pledgor,
enforceable in accordance with their respective terms, except as
limited by bankruptcy, insolvency or similar laws of general
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application relating to the enforcement of creditors' rights and
except to the extent specific remedies may generally be limited by
equitable principles.
(c) Ownership and Liens. Pledgor has Defensible Title to
the Collateral free and clear of all liens, security interests,
encumbrances or adverse claims, except for the security interest
created by this Agreement. No dispute, right of setoff, counterclaim
or defense exists with respect to all or any part of the Collateral.
Pledgor has not executed any other security agreement currently
affecting the Collateral and no financing statement or other
instrument similar in effect covering all or any part of the
Collateral is on file in any recording office except as may have been
executed or filed in favor of Secured Party.
(d) No Conflicts or Consents. Neither the ownership, the
intended use of the Collateral by Pledgor, the grant of the security
interest by Pledgor to Secured Party herein nor the exercise by
Secured Party of its rights or remedies hereunder, will (i) conflict
with any provision of (A) any domestic or foreign law, statute, rule
or regulation, (B) the articles or certificate of incorporation,
charter, bylaws or partnership agreement, as the case may be, of
Pledgor, or (C) any agreement, judgment, license, order or permit
applicable to or binding upon Pledgor or otherwise affecting the
Collateral, or (ii) result in or require the creation of any lien,
charge or encumbrance upon any assets or properties of Pledgor or of
any person except as may be expressly contemplated in the Loan
Documents. Except as expressly contemplated in the Loan Documents, no
consent, approval, authorization or order of, and no notice to or
filing with, any court, governmental authority or third party is
required in connection with the grant by Pledgor of the security
interest herein or the exercise by Secured Party of its rights and
remedies hereunder.
(e) Security Interest. Pledgor has and will have at all
times full right, power and authority to grant a security interest in
the Collateral to Secured Party in the manner provided herein, free
and clear of any lien, security interest or other charge or
encumbrance. This Agreement creates a legal, valid and binding
security interest in favor of Secured Party in the Collateral.
(f) Location. Pledgor's residence or chief executive
office, as the case may be, and the office where the records
concerning the Collateral are kept is located at its address set forth
on the signature page hereof.
(g) Solvency of Pledgor. As of the date hereof, and
after giving effect to this Agreement and the completion of all other
transactions contemplated by Pledgor at the time of the execution of
this Agreement, (i) Pledgor is and will be solvent, (ii) the fair
saleable value of Pledgor's assets exceeds and will continue to exceed
Pledgor's liabilities (both fixed and contingent), (iii) Pledgor is
paying and will continue to be able to pay its debts as they mature,
and (iv) if Pledgor is not an individual, Pledgor has and will have
sufficient
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capital to carry on Pledgor's businesses and all businesses in which
Pledgor is about to engage.
(h) Securities. Any certificates evidencing securities
pledged as Collateral are valid and genuine and have not been altered.
All securities pledged as Collateral have been duly authorized and
validly issued, are fully paid and non-assessable, and were not issued
in violation of the preemptive rights of any party or of any agreement
by which Pledgor or the issuer thereof is bound. No restrictions or
conditions exist with respect to the transfer or voting of any
securities pledged as Collateral, except as has been disclosed to
Secured Party in writing. To the best of Pledgor's knowledge, no
issuer of such securities (other than securities of a class which are
publicly traded) has any outstanding stock rights, rights to
subscribe, options, warrants or convertible securities outstanding or
any other rights outstanding entitling any party to have issued to
such party capital stock of such issuer, except as has been disclosed
to Secured Party in writing.
7. AFFIRMATIVE COVENANTS. Pledgor will comply with the covenants
contained in this Section at all times during the period of time this Agreement
is effective unless Secured Party shall otherwise consent in writing.
(a) Ownership and Liens. Pledgor will maintain
Defensible Title to all Collateral free and clear of all liens,
security interests, encumbrances or adverse claims, except for the
security interest created by this Agreement and the security interests
and other encumbrances expressly permitted by the other Loan
Documents. Pledgor will not permit any dispute, right of setoff,
counterclaim or defense to exist with respect to all or any part of
the Collateral. Pledgor will cause any financing statement or other
security instrument with respect to the Collateral to be terminated,
except as may exist or as may have been filed in favor of Secured
Party. Pledgor will defend at its expense Secured Party's right,
title and security interest in and to the Collateral against the
claims of any third party.
(b) Inspection of Books and Records. Pledgor will keep
adequate records concerning the Collateral and will permit Secured
Party and all representatives and agents appointed by Secured Party,
with prior written notice, to inspect Pledgor's books and records of
or relating to the Collateral at any time during normal business
hours, to make and take away photocopies, photographs and printouts
thereof and to write down and record any such information.
(c) Adverse Claim. Pledgor covenants and agrees to
promptly notify Secured Party of any claim, action or proceeding
affecting title to the Collateral, or any part thereof, or the
security interest created hereunder and, at Pledgor's expense, defend
Secured Party's security interest in the Collateral against the claims
of any third party. Pledgor also covenants and agrees to promptly
deliver to Secured Party a copy of all written notices received by
Pledgor with respect to the Collateral, including without
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limitation, notices received from the issuer of any securities pledged
hereunder as Collateral.
(d) Further Assurances. Pledgor will contemporaneously
with the execution hereof and from time to time thereafter at its
expense promptly execute and deliver all further instruments and
documents and take all further action necessary or appropriate or that
Secured Party may reasonably request in order (i) to perfect and
protect the security interest created or purported to be created
hereby and the first priority of such security interest, (ii) to
enable Secured Party to exercise and enforce its rights and remedies
hereunder in respect of the Collateral, and (iii) to otherwise effect
the purposes of this Agreement, including without limitation: (A)
executing and filing any financing or continuation statements, or any
amendments thereto; (B) obtaining written confirmation from the issuer
of any securities pledged as Collateral of the pledge of such
securities, in form and substance satisfactory to Secured Party; (C)
cooperating with Secured Party in registering the pledge of any
securities pledged as Collateral with the issuer of such securities;
(D) delivering notice of Secured Party's security interest in any
securities pledged as Collateral to any financial intermediary,
clearing corporation or other party required by Secured Party, in form
and substance satisfactory to Secured Party; and (E) obtaining written
confirmation of the pledge of any securities constituting Collateral
from any financial intermediary, clearing corporation or other party
required by Secured Party, in form and substance satisfactory to
Secured Party. If all or any part of the Collateral is securities
issued by an agency or department of the United States, Pledgor
covenants and agrees, at Secured Party's request, to cooperate in
registering such securities in Secured Party's name or with Secured
Party's account maintained with a Federal Reserve Bank.
8. NEGATIVE COVENANTS. Pledgor will comply with the covenants
contained in this Section at all times during the period of time this Agreement
is effective, unless Secured Party shall otherwise consent in writing.
(a) Transfer or Encumbrance. Pledgor will not (i) sell,
assign (by operation of law or otherwise) or transfer Pledgor's rights
in any of the Collateral, (ii) grant a lien or security interest in or
execute, file or record any financing statement or other security
instrument with respect to the Collateral to any party other than
Secured Party, or (iii) deliver actual or constructive possession of
any certificate, instrument or document evidencing and/or representing
any of the Collateral to any party other than Secured Party.
(b) Impairment of Security Interest. Pledgor will not
take or fail to take any action which would in any manner impair the
value or enforceability of Secured Party's security interest in any
Collateral.
(c) Dilution of Ownership. As to any securities pledged
as Collateral (other than securities of a class which are publicly
traded), Pledgor will not consent to or approve of the issuance of (i)
any additional shares of any class of securities of such issuer
(unless
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immediately upon issuance additional securities are pledged and
delivered to Secured Party pursuant to the terms hereof to the extent
necessary to give Secured Party a security interest after such
issuance in at least the same percentage of such issuer's outstanding
securities as Secured Party had before such issuance), (ii) any
instrument convertible voluntarily by the holder thereof or
automatically upon the occurrence or non-occurrence of any event or
condition into, or exchangeable for, any such securities, or (iii) any
warrants, options, contracts or other commitments entitling any third
party to purchase or otherwise acquire any such securities.
(d) Restrictions on Securities. Pledgor will not enter
into any agreement creating, or otherwise permit to exist, any
restriction or condition upon the transfer, voting or control of any
securities pledged as Collateral, except as consented to in writing by
Secured Party.
9. RIGHTS OF SECURED PARTY. Secured Party shall have the rights
contained in this Section at all times during the period of time this Agreement
is effective.
(a) Power of Attorney. Pledgor hereby irrevocably
appoints Secured Party as Pledgor's attorney-in-fact, such power of
attorney being coupled with an interest, with full authority in the
place and stead of Pledgor and in the name of Pledgor or otherwise, to
take any action and to execute any instrument which Secured Party may
from time to time in Secured Party's discretion deem necessary or
appropriate to accomplish the purposes of this Agreement, including
without limitation, the following action: (i) transfer any
securities, instruments, documents or certificates pledged as
Collateral in the name of Secured Party or its nominee; (ii) use any
interest, premium or principal payments, conversion or redemption
proceeds or other cash proceeds received in connection with any
Collateral to reduce any of the Indebtedness; (iii) exchange any of
the securities pledged as Collateral for any other property upon any
merger, consolidation, reorganization, recapitalization or other
readjustment of the issuer thereof, and, in connection therewith, to
deposit and deliver any and all of such securities with any committee,
depository, transfer agent, registrar or other designated agent upon
such terms and conditions as Secured Party may deem necessary or
appropriate; (iv) exercise or comply with any conversion, exchange,
redemption, subscription or any other right, privilege or option
pertaining to any securities pledged as Collateral; provided, however,
except as provided herein, Secured Party shall not have a duty to
exercise or comply with any such right, privilege or option (whether
conversion, redemption or otherwise) and shall not be responsible for
any delay or failure to do so; and (v) file any claims or take any
action or institute any proceedings which Secured Party may deem
necessary or appropriate for the collection and/or preservation of the
Collateral or otherwise to enforce the rights of Secured Party with
respect to the Collateral.
(b) Performance by Secured Party. If Pledgor fails to
perform any agreement or obligation provided herein, Secured Party may
itself perform, or cause performance of,
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such agreement or obligation, and the expenses of Secured Party
incurred in connection therewith shall be a part of the Indebtedness,
secured by the Collateral and payable by Pledgor on demand.
Notwithstanding any other provision herein to the contrary, Secured Party does
not have any duty to exercise or continue to exercise any of the foregoing
rights and shall not be responsible for any failure to do so or for any delay
in doing so.
10. EVENTS OF DEFAULT. Each of the following constitutes an
"Event of Default" under this Agreement:
(a) Default under Credit Agreement. An Event of Default
under the Credit Agreement; or
(b) Execution on Collateral. The Collateral or any
portion thereof is taken on execution or other process of law in any
action against Pledgor; or
(c) Abandonment. Pledgor abandons the Collateral or any
portion thereof; or
(d) Dilution of Ownership. The issuer of any securities
(other than securities of a class which are publicly traded)
constituting Collateral hereafter issues any shares of any class of
capital stock (unless immediately upon issuance, additional securities
are pledged and delivered to Secured Party pursuant to the terms
hereof to the extent necessary to give Secured Party a security
interest after such issuance in at least the same percentage of such
issuer's outstanding securities as Secured Party had before such
issuance) or any options, warrants or other rights to purchase any
such capital stock; or
(e) Bankruptcy of Issuer. (i) The issuer of any
securities constituting Collateral files a petition for relief under
any Applicable Bankruptcy Law, (ii) an involuntary petition for relief
is filed against any such issuer under any Applicable Bankruptcy Law
and such involuntary petition is not dismissed within thirty (30) days
after the filing thereof, or (iii) an order for relief naming any such
issuer is entered under any Applicable Bankruptcy Law.
11. REMEDIES AND RELATED RIGHTS. If an Event of Default shall
have occurred, and without limiting any other rights and remedies provided
herein, under any of the other Loan Documents or otherwise available to Secured
Party, Secured Party may exercise one or more of the rights and remedies
provided in this Section.
(a) Remedies. Secured Party may from time to time at its
discretion, without limitation and without notice except as expressly
provided in any of the Loan Documents:
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(i) exercise in respect of the Collateral all the
rights and remedies of a secured party under the Code (whether
or not the Code applies to the affected Collateral);
(ii) reduce its claim to judgment or foreclose or
otherwise enforce, in whole or in part, the security interest
granted hereunder by any available judicial procedure;
(iii) sell or otherwise dispose of, at its office,
on the premises of Pledgor or elsewhere, the Collateral, as a
unit or in parcels, by public or private proceedings, and by
way of one or more contracts (it being agreed that the sale or
other disposition of any part of the Collateral shall not
exhaust Secured Party's power of sale, but sales or other
dispositions may be made from time to time until all of the
Collateral has been sold or disposed of or until the
Indebtedness has been paid and performed in full), and at any
such sale or other disposition it shall not be necessary to
exhibit any of the Collateral;
(iv) buy the Collateral, or any portion thereof, at any
public sale;
(v) buy the Collateral, or any portion thereof, at any
private sale if the Collateral is of a type customarily sold
in a recognized market or is of a type which is the subject of
widely distributed standard price quotations;
(vi) apply for the appointment of a receiver for the
Collateral, and Pledgor hereby consents to any such
appointment; and
(vii) at its option, retain the Collateral in satisfaction
of the Indebtedness whenever the circumstances are such that
Secured Party is entitled to do so under the Code or
otherwise.
Pledgor agrees that in the event Pledgor is entitled to receive any
notice under the Uniform Commercial Code, as it exists in the state
governing any such notice, of the sale or other disposition of any
Collateral, reasonable notice shall be deemed given when such notice
is deposited in a depository receptacle under the care and custody of
the United States Postal Service, postage prepaid, at Pledgor's
address set forth on the signature page hereof, ten (10) days prior to
the date of any public sale, or after which a private sale, of any of
such Collateral is to be held. Secured Party shall not be obligated
to make any sale of Collateral regardless of notice of sale having
been given. Secured Party may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor,
and such sale may, without further notice, be made at the time and
place to which it was so adjourned. Pledgor further acknowledges and
agrees that the redemption by Secured Party of any certificate of
deposit pledged as Collateral shall be deemed to be a commercially
reasonable disposition under Section 9.504(c) of the Code.
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(b) Private Sale of Securities. Pledgor recognizes that
Secured Party may be unable to effect a public sale of all or any part
of the securities pledged as Collateral because of restrictions in
applicable federal and state securities laws and that Secured Party
may, therefore, determine to make one or more private sales of any
such securities to a restricted group of purchasers who will be
obligated to agree, among other things, to acquire such securities for
their own account, for investment and not with a view to the
distribution or resale thereof. Pledgor acknowledges that each any
such private sale may be at prices and other terms less favorable then
what might have been obtained at a public sale and, notwithstanding
the foregoing, agrees that each such private sale shall be deemed to
have been made in a commercially reasonable manner and that Secured
Party shall have no obligation to delay the sale of any such
securities for the period of time necessary to permit the issuer to
register such securities for public sale under any federal or state
securities laws. Pledgor further acknowledges and agrees that any
offer to sell such securities which has been made privately in the
manner described above to not less than five (5) bona fide offerees
shall be deemed to involve a "public sale" for the purposes of Section
9.504(c) of the Code, notwithstanding that such sale may not
constitute a "public offering" under any federal or state securities
laws and that Secured Party may, in such event, bid for the purchase
of such securities.
(c) Application of Proceeds. If any Event of Default
shall have occurred, Secured Party may at its discretion apply or use
any cash held by Secured Party as Collateral, and any cash proceeds
received by Secured Party in respect of any sale or other disposition
of, collection from, or other realization upon, all or any part of the
Collateral as follows in such order and manner as Secured Party may
elect:
(i) to the repayment or reimbursement of the
reasonable out-of-pocket costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses)
incurred by Secured Party in connection with (A) the
administration of the Loan Documents, (B) the custody,
preservation, use or operation of, or the sale of, collection
from, or other realization upon, the Collateral, and (C) the
exercise or enforcement of any of the rights and remedies of
Secured Party hereunder;
(ii) to the payment or other satisfaction of any
liens and other encumbrances upon the Collateral;
(iii) to the satisfaction of the Indebtedness;
(iv) by holding such cash and proceeds as
Collateral;
(v) to the payment of any other amounts required
by applicable law (including without limitation, Section
9.504(a)(3) of the Code or any other applicable statutory
provision); and
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(vi) by delivery to Pledgor or any other party lawfully
entitled to receive such cash or proceeds whether by direction
of a court of competent jurisdiction or otherwise.
(d) Deficiency. In the event that the proceeds of any
sale of, collection from, or other realization upon, all or any part
of the Collateral by Secured Party are insufficient to pay all amounts
to which Secured Party is legally entitled, Borrower and any party who
guaranteed or is otherwise obligated to pay all or any portion of the
Indebtedness shall be liable for the deficiency, together with
interest thereon as provided in the Loan Documents.
(e) Non-Judicial Remedies. In granting to Secured Party
the power to enforce its rights hereunder without prior judicial
process or judicial hearing, Pledgor expressly waives, renounces and
knowingly relinquishes any legal right which might otherwise require
Secured Party to enforce its rights by judicial process. Pledgor
recognizes and concedes that non-judicial remedies are consistent with
the usage of trade, are responsive to commercial necessity and are the
result of a bargain at arm's length. Nothing herein is intended to
prevent Secured Party or Pledgor from resorting to judicial process at
either party's option.
(f) Other Recourse. Pledgor waives any right to require
Secured Party to proceed against any third party, exhaust any
Collateral or other security for the Indebtedness, or to have any
third party joined with Pledgor in any suit arising out of the
Indebtedness or any of the Loan Documents, or pursue any other remedy
available to Secured Party. Pledgor further waives any and all notice
of acceptance of this Agreement and of the creation, modification,
rearrangement, renewal or extension of the Indebtedness. Pledgor
further waives any defense arising by reason of any disability or
other defense of any third party or by reason of the cessation from
any cause whatsoever of the liability of any third party. Until all
of the Indebtedness shall have been paid in full, Pledgor shall have
no right of subrogation and Pledgor waives the right to enforce any
remedy which Secured Party has or may hereafter have against any third
party, and waives any benefit of and any right to participate in any
other security whatsoever now or hereafter held by Secured Party.
Pledgor authorizes Secured Party, and without notice or demand and
without any reservation of rights against Pledgor and without
affecting Pledgor's liability hereunder or on the Indebtedness, to (i)
take or hold any other property of any type from any third party as
security for the Indebtedness, and exchange, enforce, waive and
release any or all of such other property, (ii) apply such other
property and direct the order or manner of sale thereof as Secured
Party may in its discretion determine, (iii) renew, extend,
accelerate, modify, compromise, settle or release any of the
Indebtedness or other security for the Indebtedness, (iv) waive,
enforce or modify any of the provisions of any of the Loan Documents
executed by any third party, and (v) release or substitute any third
party.
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(g) Voting Rights. Upon the occurrence of an Event of
Default, Pledgor will not exercise any voting rights with respect to
securities pledged as Collateral. Pledgor hereby irrevocably appoints
Secured Party as Pledgor's attorney-in-fact (such power of attorney
being coupled with an interest) and proxy to exercise any voting
rights with respect to Pledgor's securities pledged as Collateral upon
the occurrence of an Event of Default.
(h) Dividend Rights and Interest Payments. Upon the
occurrence of an Event of Default:
(i) all rights of Pledgor to receive and retain
the dividends and interest payments which it would otherwise
be authorized to receive and retain pursuant to Section 3
shall automatically cease, and all such rights shall thereupon
become vested with Secured Party which shall thereafter have
the sole right to receive, hold and apply as Collateral such
dividends and interest payments; and
(ii) all dividend and interest payments which are
received by Pledgor contrary to the provisions of clause (i)
of this Subsection shall be received in trust for the benefit
of Secured Party, shall be segregated from other funds of
Pledgor, and shall be forthwith paid over to Secured Party in
the exact form received (properly endorsed or assigned if
requested by Secured Party), to be held by Secured Party as
Collateral.
12. INDEMNITY. PLEDGOR HEREBY INDEMNIFIES AND AGREES TO HOLD
HARMLESS SECURED PARTY, AND ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND
REPRESENTATIVES (EACH AN "INDEMNIFIED PERSON") FROM AND AGAINST ANY AND ALL
LIABILITIES, OBLIGATIONS, CLAIMS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND OR NATURE
(COLLECTIVELY, THE "CLAIMS") WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED
AGAINST, ANY INDEMNIFIED PERSON (WHETHER OR NOT CAUSED BY ANY INDEMNIFIED
PERSON'S SOLE, CONCURRENT OR CONTRIBUTORY NEGLIGENCE) ARISING IN CONNECTION
WITH THE LOAN DOCUMENTS, THE INDEBTEDNESS OR THE COLLATERAL (INCLUDING WITHOUT
LIMITATION, THE ENFORCEMENT OF THE LOAN DOCUMENTS AND THE DEFENSE OF ANY
INDEMNIFIED PERSON'S ACTIONS AND/OR INACTIONS IN CONNECTION WITH THE LOAN
DOCUMENTS), EXCEPT TO THE LIMITED EXTENT THE CLAIMS AGAINST AN INDEMNIFIED
PERSON ARE PROXIMATELY CAUSED BY SUCH INDEMNIFIED PERSON'S GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT. IF PLEDGOR OR ANY THIRD PARTY EVER ALLEGES SUCH GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT BY ANY INDEMNIFIED PERSON, THE INDEMNIFICATION
PROVIDED FOR IN THIS SECTION SHALL NONETHELESS BE PAID UPON DEMAND, SUBJECT TO
LATER ADJUSTMENT OR REIMBURSEMENT, UNTIL SUCH TIME AS A COURT OF
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COMPETENT JURISDICTION ENTERS A FINAL JUDGMENT AS TO THE EXTENT AND EFFECT OF
THE ALLEGED GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. THE INDEMNIFICATION
PROVIDED FOR IN THIS SECTION SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT
AND SHALL EXTEND AND CONTINUE TO BENEFIT EACH INDIVIDUAL OR ENTITY WHO IS OR
HAS AT ANY TIME BEEN AN INDEMNIFIED PERSON HEREUNDER.
13. MISCELLANEOUS.
(a) Entire Agreement. This Agreement contains the entire
agreement of Secured Party and Pledgor with respect to the Collateral.
If the parties hereto are parties to any prior agreement, either
written or oral, relating to the Collateral, the terms of this
Agreement shall amend and supersede the terms of such prior
agreements as to transactions on or after the effective date of this
Agreement, but all security agreements, financing statements,
guaranties, other contracts and notices for the benefit of Secured
Party shall continue in full force and effect to secure the
Indebtedness unless Secured Party specifically releases its rights
thereunder by separate release.
(b) Amendment. No modification, consent or amendment of
any provision of this Agreement or any of the other Loan Documents
shall be valid or effective unless the same is in writing and signed
by the party against whom it is sought to be enforced.
(c) Actions by Secured Party. The lien, security
interest and other security rights of Secured Party hereunder shall
not be impaired by (i) any renewal, extension, increase or
modification with respect to the Indebtedness, (ii) any surrender,
compromise, release, renewal, extension, exchange or substitution
which Secured Party may grant with respect to the Collateral, or (iii)
any release or indulgence granted to any endorser, guarantor or surety
of the Indebtedness. The taking of additional security by Secured
Party shall not release or impair the lien, security interest or other
security rights of Secured Party hereunder or affect the obligations
of Pledgor hereunder.
(d) Waiver by Secured Party. Secured Party may waive
any Event of Default without waiving any other prior or subsequent
Event of Default. Secured Party may remedy any default without
waiving the Event of Default remedied. Neither the failure by Secured
Party to exercise, nor the delay by Secured Party in exercising, any
right or remedy upon any Event of Default shall be construed as a
waiver of such Event of Default or as a waiver of the right to
exercise any such right or remedy at a later date. No single or
partial exercise by Secured Party of any right or remedy hereunder
shall exhaust the same or shall preclude any other or further exercise
thereof, and every such right or remedy hereunder may be exercised at
any time. No waiver of any provision hereof or consent to any
departure by Pledgor therefrom shall be effective unless the same
shall be in writing and signed by Secured Party and then such waiver
or consent shall be effective only in the specific instances, for the
purpose for which given and to the extent therein
13
<PAGE> 87
specified. No notice to or demand on Pledgor in any case shall of
itself entitle Pledgor to any other or further notice or demand in
similar or other circumstances.
(e) Costs and Expenses. Pledgor will upon demand pay to
Secured Party the amount of any and all costs and expenses (including
without limitation, attorneys' fees and expenses), which Secured Party
may incur in connection with (i) the transactions which give rise to
the Loan Documents, (ii) the preparation of this Agreement and the
perfection and preservation of the security interests granted under
the Loan Documents, (iii) the administration of the Loan Documents,
(iv) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, the Collateral, (v) the
exercise or enforcement of any of the rights of Secured Party under
the Loan Documents, or (vi) the failure by Pledgor to perform or
observe any of the provisions hereof.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND
APPLICABLE FEDERAL LAWS, EXCEPT TO THE EXTENT PERFECTION AND THE
EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST
GRANTED HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL, ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF TEXAS.
(g) Venue. This Agreement has been entered into in the
county in Texas where Bank's address for notice purposes is located,
and it shall be performable for all purposes in such county. Courts
within the State of Texas shall have jurisdiction over any and all
disputes arising under or pertaining to this Agreement and venue for
any such disputes shall be in the county or judicial district where
this Agreement has been executed and delivered.
(h) Severability. If any provision of this Agreement is
held by a court of competent jurisdiction to be illegal, invalid or
unenforceable under present or future laws, such provision shall be
fully severable, shall not impair or invalidate the remainder of this
Agreement and the effect thereof shall be confined to the provision
held to be illegal, invalid or unenforceable.
(i) No Obligation. Nothing contained herein shall be
construed as an obligation on the part of Secured Party to extend or
continue to extend credit to Borrower.
(j) Notices. All notices, requests, demands or other
communications required or permitted to be given pursuant to this
Agreement shall be in writing and given by (i) personal delivery, (ii)
expedited delivery service with proof of delivery, or (iii) United
States mail, postage prepaid, registered or certified mail, return
receipt requested, sent to the intended addressee at the address set
forth on the signature page hereof or to such different address as the
addressee shall have designated by written notice sent pursuant to
14
<PAGE> 88
the terms hereof and shall be deemed to have been received either, in
the case of personal delivery, at the time of personal delivery, in
the case of expedited delivery service, as of the date of first
attempted delivery at the address and in the manner provided herein,
or in the case of mail, upon deposit in a depository receptacle under
the care and custody of the United States Postal Service. Either
party shall have the right to change its address for notice hereunder
to any other location within the continental United States by notice
to the other party of such new address at least thirty (30) days prior
to the effective date of such new address.
(k) Binding Effect and Assignment. This Agreement (i)
creates a continuing security interest in the Collateral, (ii) shall
be binding on Pledgor and the heirs, executors, administrators,
personal representatives, successors and assigns of Pledgor, and (iii)
shall inure to the benefit of Secured Party and its successors and
assigns. Without limiting the generality of the foregoing, Secured
Party may pledge, assign or otherwise transfer the Indebtedness and
its rights under this Agreement and any of the other Loan Documents to
any other party. Pledgor's rights and obligations hereunder may not
be assigned or otherwise transferred without the prior written consent
of Secured Party.
(l) Termination. It is contemplated by the parties
hereto that from time to time there may be no outstanding
Indebtedness, but notwithstanding such occurrences, this Agreement
shall remain valid and shall be in full force and effect as to
subsequent outstanding Indebtedness. Upon (i) the satisfaction in
full of the Indebtedness, (ii) the termination or expiration of any
commitment of Secured Party to extend credit to Borrower, (iii)
written request for the termination hereof delivered by Pledgor to
Secured Party, and (iv) written release delivered by Secured Party to
Pledgor, this Agreement and the security interests created hereby
shall terminate. Upon termination of this Agreement and Pledgor's
written request, Secured Party will, at Pledgor's sole cost and
expense, return to Pledgor such of the Collateral as shall not have
been sold or otherwise disposed of or applied pursuant to the terms
hereof and execute and deliver to Pledgor such documents as Pledgor
shall reasonably request to evidence such termination.
(m) Cumulative Rights. All rights and remedies of
Secured Party hereunder are cumulative of each other and of every
other right or remedy which Secured Party may otherwise have at law or
in equity or under any of the other Loan Documents, and the exercise
of one or more of such rights or remedies shall not prejudice or
impair the concurrent or subsequent exercise of any other rights or
remedies.
(n) Gender and Number. Within this Agreement, words of
any gender shall be held and construed to include the other gender,
and words in the singular number shall be held and construed to
include the plural and words in the plural number shall be held and
construed to include the singular, unless in each instance the context
requires otherwise.
15
<PAGE> 89
(o) Descriptive Headings. The headings in this Agreement
are for convenience only and shall in no way enlarge, limit or define
the scope or meaning of the various and several provisions hereof.
EXECUTED as of the date first written above.
PLEDGOR'S ADDRESS:
-----------------
SAN JUAN PARTNERS, L.L.C.
Bank One Center
910 Travis, Suite 2150
Houston, Texas 77002
PLEDGOR:
-------
SAN JUAN PARTNERS, L.L.C.
By: O'Sullivan Oil & Gas Company, Inc.
Its Sole Manager
By: /s/ C.N. O'SULLIVAN
---------------------
C.N. O'Sullivan
President
16
<PAGE> 90
SCHEDULE "A"
TO
PLEDGE AGREEMENT
DATED JANUARY 15, 1998
BY AND BETWEEN
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AND
SAN JUAN PARTNERS, L.L.C.
The following property is a part of the Collateral as defined in Subsection
1(c):
Account No. 029-102287-105 in the name of Pledgor and maintained with
BANC ONE SECURITIES CORPORATION, and all securities, cash and all other
property contained from time to time in such Account.
Account No. 7900386512 in the name of Pledgor and maintained with
JEFFERIES & COMPANY, INC., and all securities, cash and all other
property contained from time to time in such Account.
A-1
<PAGE> 91
NOTICE OF SECURITY INTEREST
TO BROKER
BANC ONE SECURITIES CORPORATION
783 Greencrest Drive
Westerville, OH 43081
RE: SAN JUAN PARTNERS, L.L.C.
This is to notify you that the following securities (the "Pledged
Securities") held by the undersigned in Account No. 029-102215-105 with you are
subject to a security interest granted by the undersigned to BANK ONE, TEXAS,
N.A. ("Bank One"):
All Trust Units now owned or acquired hereafter in Burlington Resources
Coal Seam Gas Royalty Trust.
You are hereby instructed not to effect any transfer of any of the Pledged
Securities without the prior written consent of Bank One.
Please sign the Confirmation of Pledge set forth below and return the same to
Bank One at 910 Travis, 6th Floor, Houston, Texas 77002 Attn: Energy Lending.
This Notice is dated January 15, 1998.
SAN JUAN PARTNERS, L.L.C.
By: O'Sullivan Oil & Gas Company, Inc.
Its Sole Manager
By:________________________
C.N. O'Sullivan
President
CONFIRMATION OF PLEDGE
The undersigned, BANC ONE SECURITIES CORPORATION (the "Broker"), hereby
agrees, confirms and certifies to BANK ONE, TEXAS, N.A. ("Bank One") the
following:
1
<PAGE> 92
1. Broker maintains Account No. 029-102215-105 for the benefit of
SAN JUAN PARTNERS, L.L.C. ("Pledgor") in which the Pledged Securities (as such
term is defined in the above Notice from Pledgor) are held.
2. The Pledged Securities are identified on the Broker's books and
records, by book-entry or otherwise, as being owned by Pledgor. Broker is in
receipt of the above Notice from Pledgor that the Pledged Securities have been
pledged to Bank One and hereby confirms to Bank One that as of the date hereof
such pledge has been indicated on Broker's books and records.
3. The records of Broker do not indicate any person having any
interest in the Pledged Securities other than Pledgor and Bank One. Broker has
not created, nor has it received notice of, any liens, claims or encumbrances
with respect to the Pledged Securities, except to Bank One.
4. Broker agrees not to effect any transfer of Pledgor's interest
in any of the Pledged Securities without the prior written consent of Bank One.
5. Any security interest of Broker in the Pledged Securities is
inferior to the Bank's security interest in the Pledged Securities, except any
lien that secured Broker's ordinary transaction and service fees or
commissions.
6. Until Broker receives written notice from Bank One, Broker
agrees to hold all Pledged Securities, and all dividends and other
distributions relating to the Pledged Securities (whether in cash, securities
or other property), subject to the written instructions of Bank One.
This Confirmation is dated January 15, 1998.
BANC ONE SECURITIES CORPORATION
-------------------------------
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
2
<PAGE> 93
NOTICE OF SECURITY INTEREST
TO BROKER
JEFFERIES & COMPANY, INC.
55 West Monroe, Suite 400
Chicago, IL 60603
RE: SAN JUAN PARTNERS, L.L.C.
This is to notify you that the following securities (the "Pledged
Securities") held by the undersigned in Account No. 7900386512 with you are
subject to a security interest granted by the undersigned to BANK ONE, TEXAS,
N.A. ("Bank One"):
All Trust Units now owned or acquired hereafter in Burlington Resources
Coal Seam Gas Royalty Trust.
You are hereby instructed not to effect any transfer of any of the Pledged
Securities without the prior written consent of Bank One.
Please sign the Confirmation of Pledge set forth below and return the same to
Bank One at 910 Travis, 6th Floor, Houston, Texas 77002 Attn: Energy Lending.
This Notice is dated January 15, 1998.
SAN JUAN PARTNERS, L.L.C.
By: O'Sullivan Oil & Gas Company, Inc.
Its Sole Manager
By:________________________
C.N. O'Sullivan
President
CONFIRMATION OF PLEDGE
The undersigned, JEFFERIES & COMPANY, INC. (the "Broker"), hereby
agrees, confirms and certifies to BANK ONE, TEXAS, N.A. ("Bank One") the
following:
1. Broker maintains Account No. 7900386512 for the benefit of SAN
JUAN PARTNERS, L.L.C. ("Pledgor") in which the Pledged Securities (as such
term is defined in the above Notice from Pledgor) are held.
1
<PAGE> 94
2. The Pledged Securities are identified on the Broker's books and
records, by book-entry or otherwise, as being owned by Pledgor. Broker is in
receipt of the above Notice from Pledgor that the Pledged Securities have been
pledged to Bank One and hereby confirms to Bank One that as of the date hereof
such pledge has been indicated on Broker's books and records.
3. The records of Broker do not indicate any person having any
interest in the Pledged Securities other than Pledgor and Bank One. Broker has
not created, nor has it received notice of, any liens, claims or encumbrances
with respect to the Pledged Securities, except to Bank One.
4. Broker agrees not to effect any transfer of Pledgor's interest
in any of the Pledged Securities without the prior written consent of Bank One.
5. Any security interest of Broker in the Pledged Securities is
inferior to the Bank's security interest in the Pledged Securities, except any
lien that secured Broker's ordinary transaction and service fees or
commissions.
6. Until Broker receives written notice from Bank One, Broker
agrees to hold all Pledged Securities, and all dividends and other
distributions relating to the Pledged Securities (whether in cash, securities
or other property), subject to the written instructions of Bank One.
This Confirmation is dated January 15, 1998.
JEFFERIES & COMPANY, INC.
-------------------------
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
2
<PAGE> 1
EXHIBIT (c)(1)
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY REGULATIONS
OF
SAN JUAN PARTNERS, L.L.C.,
A TEXAS LIMITED LIABILITY COMPANY
JANUARY 15, 1998
THE MEMBERSHIP INTERESTS REFERENCED HEREIN HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS. WITHOUT REGISTRATION, THESE SECURITIES MAY NOT BE
SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED AT ANY TIME WHATSOEVER,
EXCEPT ON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE
MANAGER OF THE COMPANY THAT REGISTRATION IS NOT REQUIRED FOR THE TRANSFER, OR
THE SUBMISSION TO THE MANAGER OF THE COMPANY OF OTHER EVIDENCE SATISFACTORY TO
THE MANAGER TO THE EFFECT THAT ANY TRANSFER WILL NOT BE IN VIOLATION OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR ANY
RULE OR REGULATIONS PROMULGATED THEREUNDER. ADDITIONALLY, ANY SALE OR OTHER
TRANSFER OF MEMBERSHIP INTERESTS IS SUBJECT TO CERTAIN RESTRICTIONS THAT ARE
SET FORTH IN THESE AMENDED AND RESTATED REGULATIONS.
<PAGE> 2
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY REGULATIONS
OF
SAN JUAN PARTNERS, L.L.C.,
A TEXAS LIMITED LIABILITY COMPANY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Offices and Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Purposes and Business; Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 Foreign Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.7 No Power to Bind Company or Other Members; No Partnership . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 3 MATTERS RELATING TO MEMBERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Admission of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Issuance of Additional Units or Other Securities; Preemptive Rights . . . . . . . . . . . . . . . . . 3
3.3 Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Information; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.5 Liability to Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.6 Expulsion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.7 Nature of Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.8 Organizational Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 4 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.1 Contributions and Issuance of Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Initial Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.3 Potential Additional Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.4 Return of Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.5 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 5 DISTRIBUTIONS AND ALLOCATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.1 Distributions of Net Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.2 Allocations of Profit and Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.3 Allocations for U.S. Tax Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.4 Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.5 Varying Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
Amended and Restated
Limited Liability Company Regulations of
SAN JUAN PARTNERS, L.L.C.
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 6 MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.1 Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.2 Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.3 Compensation of Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.4 Duties and Services of Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.5 Major Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 7 MEETINGS OF MEMBERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.1 Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.2 Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.3 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.4 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.5 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.6 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.7 List of Members Entitled to Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.8 Registered Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.9 Compensation of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.10 Actions Without a Meeting and Telephone Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 8 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.1 Right to Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.2 Advance Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.3 Indemnification of Officers, Employees and Agents . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.4 Nonexclusivity of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.5 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.6 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.7 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 9 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.1 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.2 Tax Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.3 Tax Matters Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 10 DISPOSITION OF COMPANY INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.1 Dispositions and Encumbrances of Company Interests . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.2 Dispositions of Interests in a Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 11 BUYOUT OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.1 Buyout Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.2 Procedure for Member-Related Buyout Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.3 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.4 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11.5 Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 12 DISSOLUTION, WINDING UP AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12.2 Winding Up and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.3 Deficit Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.4 Articles of Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
Amended and Restated
Limited Liability Company Regulations of
SAN JUAN PARTNERS, L.L.C.
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE 13 BOOKS AND ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
13.1 Maintenance of Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
13.2 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
13.3 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 14 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.1 Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.3 Entire Agreement; Supersedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.4 Effect of Waiver or Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.5 Binding Effect; No Third-party Beneficiaries; Remedies Not Exclusive . . . . . . . . . . . . . . . . 22
14.6 Governing Law; Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.7 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.8 Waiver of Certain Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.9 Disclosure of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.10 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.12 Directly or Indirectly; Without Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.13 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.14 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.15 Observance of Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
14.17 Spouses of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
14.18 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
EXHIBIT A BASIC INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B SPOUSE'S AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C DISTRIBUTION EXAMPLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
EXHIBIT D TRANSACTION FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1
EXHIBIT E BUSINESS PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1
ATTACHMENT I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
</TABLE>
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Limited Liability Company Regulations of
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<PAGE> 5
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY REGULATIONS
OF
SAN JUAN PARTNERS, L.L.C.,
A TEXAS LIMITED LIABILITY COMPANY
These AMENDED AND RESTATED LIMITED LIABILITY COMPANY REGULATIONS of
SAN JUAN PARTNERS, L.L.C. (the "REGULATIONS") are entered into as of January
15, 1998, by and among the Persons listed on Exhibit A (the "ORGANIZING
MEMBERS").
RECITALS
WHEREAS, O'Sullivan formed San Juan Partners, L.L.C. (the "COMPANY")
as its sole manager and sole member on or about December 12, 1997; and
WHEREAS, the Organizing Members desire to continue the Company and
amend and restate the Regulations as provided herein;
REGULATIONS
NOW, THEREFORE, for and in consideration of the mutual covenants,
rights, and obligations set forth herein, the benefits to be derived therefrom,
and other good and valuable consideration, the receipt and the sufficiency of
which each party hereto acknowledges and confesses, these Regulations are
adopted, executed and agreed to by the Organizing Members as follows:
ARTICLE 1
DEFINITIONS
Each capitalized term used in these Regulations shall have the meaning
given that term in Attachment I.
ARTICLE 2
ORGANIZATION
2.1 Formation. The Company has been organized as a Texas limited
liability company under and pursuant to the Act by the filing of the Articles
with, and acceptance of the Articles by, the Secretary of State.
2.2 Name. The name of the Company is "San Juan Partners, L.L.C."
The Company shall conduct its business under such name unless or until the
Manager has designated another name and provided notice thereof to the Members.
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2.3 Offices and Agent. The registered office and agent of the
Company in the State of Texas shall be the initial registered office and agent
designated in the Articles unless or until the Manager has designated another
office or agent in the manner provided by applicable law. The principal office
of the Company shall be the office designated as such on Exhibit A unless or
until the Manager has designated another location. In case of any change of
these offices or of the agent, the Manager shall provide timely notice thereof
to the Members.
2.4 Purposes and Business; Powers.
(a) Subject to the terms hereof, the purpose and nature
of the business ("BUSINESS") to be conducted by the Company shall be to (i)
directly or indirectly, acquire, invest in, own and dispose of publicly traded
units (the "TRUST UNITS") of Burlington Resources Coal Seam Gas Royalty Trust
(the "TRUST"), (ii) directly or indirectly, invest in, own and dispose of
interests in the properties owned by the Trust, including the "UNDERLYING
PROPERTIES" as defined in the registration statement of the Trust (the
"PROPERTIES"), and (iii) exercise all of the rights and powers conferred upon
the Company pursuant to agreements relating to the Business.
(b) Subject to the terms hereof, the Company shall be
empowered to do any and all acts and things necessary, appropriate, proper,
advisable, incidental to or convenient for the furtherance and accomplishment
of the Business and for the protection and benefit of the Company.
2.5 Foreign Qualification.
(a) Prior to the Company conducting business in any
jurisdiction outside of the State of Texas, the Manager shall cause the Company
to comply with all requirements necessary to qualify the Company as a foreign
entity in that jurisdiction. Without limiting the foregoing, prior to the
dissolution of the Trust, the Manager shall qualify the Company as a foreign
limited liability company in the State of New Mexico and shall provide evidence
of such qualification to the Members.
(b) Each Member shall, upon the request of the Manager,
execute, acknowledge, swear to and deliver all certificates and other
instruments conforming to these Regulations that are necessary or appropriate
to qualify, or, as appropriate, to continue or terminate the qualification of,
the Company as a company having limited liability in all jurisdictions in which
the Company may conduct business.
2.6 Term. The Company commenced on the filing of the Articles in
accordance with the Act and shall continue in existence until December 31,
1999, or until the earlier termination of the Company in accordance with the
terms of these Regulations.
2.7 No Power to Bind Company or Other Members; No Partnership.
(a) A Member or Affiliate of a Member may not take any
action purporting to bind the Company, any other Member, or the Affiliates of
other Members, except as expressly provided in these Regulations. All actions
undertaken by the Members and their Affiliates, or any of them, are at their
sole risk and expense except to the extent, if any, that the Company either has
authorized those actions or assumes those obligations by executing documents in
accordance with these Regulations. By virtue of its execution of these
Regulations and participation in the Company as the owner of a Company
Interest, no Member is, and may hold itself out as, an agent, employee,
contractor, vendor representative or partner of any other Member or its
Affiliates.
(b) Each Member intends that the Company not be a
partnership, limited partnership or joint venture and that, by virtue of its
execution of these Regulations and participation in the Business as the owner
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of a Company Interest, no Member shall be a partner or joint venturer of any
other Member for any purposes other than United States federal, state and local
income tax purposes, and these Regulations shall not be deemed or construed to
suggest otherwise.
ARTICLE 3
MATTERS RELATING TO MEMBERS
3.1 Admission of Members.
Each of the Organizing Members is hereby acknowledged as a Member.
Subject to Section 3.2, no other Person shall be admitted to the Company as a
Member without the Consent of the Members.
3.2 Issuance of Additional Units or Other Securities; Preemptive
Rights.
(a) The Manager, with the Consent of the Members, shall
have the authority to cause the Company to issue additional Units or classes,
series, options, rights, warrants or appreciation rights relating to Units, any
other type of equity security that the Company may lawfully issue, or any
unsecured or secured debt obligations of the Company convertible into any class
or series of equity securities of the Company (collectively, the "COMPANY
SECURITIES"), for any Company purpose at any time or from time to time, to the
Members or other Persons, in each case for consideration, and on terms and
conditions, established by the Manager with the Consent of the Members.
Additional Company Securities may be issued by the Company in one or more
classes or series of classes, with designations, preferences and relative,
participating, optional or other special rights, powers and duties that shall
be so established with the Consent of the Members. Admission is effective only
after the Person who is proposed as a new Member has executed and delivered to
the Members an instrument containing the notice address of the proposed new
Member, the proposed new Member's ratification of, and agreement to be bound
by, these Regulations and its confirmation that the representations and
warranties in Section 14.14 are true and correct with respect to the proposed
new Member. Article 10, rather than this Section 3.2, shall control
Dispositions of a Company Interest or the admission of Assignees.
(b) If, pursuant to Section 3.2(a), the Company elects to
issue additional Units or other Company Securities, each Member shall have the
preemptive right to purchase those Units or other Company Securities to the
extent necessary to maintain its Sharing Ratio as in effect immediately prior
to issuance on the same terms and conditions as those on which the Units or
other Company Securities are to be issued by the Company. If, pursuant to
Section 3.2(a), the Company elects to issue Units or other Company Securities
for non-cash consideration, the Manager shall establish a cash equivalent price
for purposes of these preemptive rights. This cash equivalent price shall be
based on the Manager's determination, with the Consent of the Members, of the
fair market value of the non-cash consideration to be received for such Units
or other Company Securities. If any Member elects not to exercise its
preemptive right to the fullest extent available, the other Members Pro Rata
shall have the right to purchase any Units or other Company Securities, to be
issued, not being purchased by that Member.
3.3 Resignation. No Member shall have the right to Resign;
provided, however, a Member shall have the power to Resign at any time in
violation of these Regulations. If a Member exercises this power in violation
of these Regulations, (i) the Resigning Member shall be liable to the Company
and the other Members for all monetary damages suffered by them as a result of
the Resignation (including indirect and incidental damages); and (ii) the
Company and the other Members shall, in addition, have the rights in Article
11. In no event shall
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<PAGE> 8
the Company or any Member have the right, through specific performance or
otherwise, to prevent a Member from Resigning in violation of these
Regulations.
3.4 Information; Confidentiality.
(a) Each Member is entitled to all Company information to
which that Member is entitled under the Act.
(b) Any and all data, plans, proposals, or other
materials related to the Business, any seismic, geological and geophysical
data, processing or interpretive works relating to the area covered by the
Underlying Properties or any adjacent areas, or any plans or proposals relating
to the contemplated purchase of any Entity by the Company, developed by or
provided to a Member or any of its Affiliates by or on behalf of the Company or
another Member or Affiliate of a Member in connection with the Underlying
Properties or the Business is "CONFIDENTIAL INFORMATION." Each Member shall,
and shall cause its Affiliates to, use Confidential Information only with
regard to and for the benefit of the Company and not for any other purpose and
to hold in strict confidence and not disclose Confidential Information to any
third party without the Consent of the Members. The obligation to hold
Confidential Information in strict confidence and not disclose Confidential
Information to any third party (as opposed to the obligation to use
Confidential Information only as set forth above) shall not apply to any
disclosure:
(1) of information that is in or enters the
public domain through no fault of the receiving Person;
(2) of information that was in the possession of
the receiving Person prior to its receipt of similar information from the
Member, another Member or an Affiliate of a Member in connection with the
Business;
(3) required by law, regulation, legal process,
or order of any court or governmental body having jurisdiction;
(4) to a Member, a lender, or permitted direct or
indirect prospective purchaser of Company Interests, in each case provided that
the Person has agreed in writing to be bound by use and confidentiality
restrictions at least as restrictive as those in this Section 3.4(b); or
(5) to directors, officers, employees or
representatives of a Member if those Persons have been informed of the
obligations in this Section 3.4(b) and the Member has agreed to cause those
Persons to use and maintain the confidentiality of such Confidential
Information in accordance with the terms of this Section 3.4(b).
The Members acknowledge that the harm caused by a breach of this Section 3.4(b)
would be difficult to calculate and irreparable. Accordingly the Company and
each Member shall be entitled to injunctive relief to compel compliance with
the provisions of this Section 3.4(b). The provisions of this Section 3.4(b)
are intended to benefit, and to be enforceable by, the Company and each Member.
If a Member ceases to be a Member, the provisions of this Section 3.4(b) shall
continue to be binding upon that Member for a period of two (2) years following
the date on which the Member ceased to be a Member.
3.5 Liability to Third Parties. No Member or Manager shall be
liable for the debts, obligations or liabilities of the Company solely by
reason of being a Member or Manager.
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3.6 Expulsion. A Member may not be expelled or removed as a
Member from the Company.
3.7 Nature of Relationship.
(a) Each Member expressly acknowledges and agrees that
its relationship to the Company and to each other Member, to the extent
established by virtue of its execution of these Regulations and participation
in the Business as the owner of a Company Interest, is strictly contractual in
nature, and except to the limited extent provided in Section 2.7(b), is not
that of partners, joint venturers or any similarly situated Persons.
Accordingly, the Members acknowledge and agree that, except as provided below,
no Member, in its capacity as a Member, owes the Company or any other Member a
fiduciary or other similar duty as a result of its being a Member.
(b) Notwithstanding anything to the contrary herein:
(1) No Member nor any Affiliate thereof shall,
directly or indirectly, purchase or otherwise acquire (A) any Trust Units, (B)
any interest in the Properties or (C) any interest in an oil and gas lease,
mineral interest, royalty or overriding royalty, fee right, or other right
covering oil, gas and related hydrocarbons (or a contractual right to acquire
such an interest) or related properties or other assets ("Other Property
Interests") located in the Area, or otherwise engage, directly or indirectly,
in any business or other activity that is in competition with the business or
activities of the Company; and
(2) Without limiting the provisions of Section
3.7(b)(1), any project, activity or other opportunity relating to (A) the
purchase or acquisition of Trust Units or (B) oil and gas exploration and
production activities relating to the Properties or to Other Property Interests
located in the Area, shall be undertaken only by the Company and not
individually by any Member or its Affiliates.
(c) Except as provided in Section 3.7(b), (i) neither the
Company, any Member nor any other Person shall have any rights whatsoever by
virtue of these Regulations or the limited liability company relationship
created hereby or otherwise in any current or future business venture or
opportunity of a Member or an Affiliate thereof of any and every type and
description and (ii) no Member or any Affiliate thereof shall have any
obligation whatsoever by virtue of these Regulations or the limited liability
company relationship created hereby or otherwise, to offer any interest in, or
otherwise account to the Company or any other Member with respect to, any such
business venture or opportunity.
(d) Notwithstanding anything herein to the contrary, the
Members hereby acknowledge and agree that (i) certain of the O'Sullivan Members
have an interest in the Pre-Existing Investment and shall be entitled to retain
such interest for their own account and (ii) in the case of First Union
Investors or any of its Affiliates, the restrictions contained in this Section
3.7 shall be applicable only to purchases, acquisitions, projects, activities
or opportunities proposed by the current management employees employed by First
Union Corporation and presently working in a merchant banking unit referred to
as "First Union Capital Partners."
3.8 Organizational Expenses. The Company shall reimburse each
Member for all third party out-of-pocket expenses incurred by that Member or
its Affiliates in pursuit of the investment in the Trust and in organizing the
Company, including all reasonable legal, accounting, banking, and due diligence
expenses related to the formation and continuation of the Company and to the
review of an investment in the Trust.
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<PAGE> 10
ARTICLE 4
CAPITALIZATION
4.1 Contributions and Issuance of Units. Contemporaneously with
the execution of these Regulations, in consideration of the Capital
Contributions that are described in Section 4.2, the Company shall issue Class
A Units and Class B Units to the Organizing Members as specified in Exhibit A.
Except for the capital contributions required of the Members pursuant to
Section 4.2, no Member shall be required to make any further capital
contributions to the Company.
4.2 Initial Contributions. Without creating any rights in favor
of any third party, the Organizing Members agree to make the following capital
contributions (the "INITIAL CONTRIBUTIONS") on the date of the execution of
these Regulations:
(a) the amount of cash that equals the Initial Cash
Commitment for that Member as specified in Exhibit A; and
(b) the right, title and interest in and to the number of
Trust Units that equals the Property Commitment for that Member as specified in
Exhibit A (the "ASSIGNMENTS"). For purposes hereof, the Trust Units
contributed pursuant to the Assignments shall be deemed to have the Book Value,
and therefore will result in a Capital Contribution, as set forth on Exhibit A.
4.3 Potential Additional Contributions.
(a) Potential Additional Contributions. Subject to
Section 6.5, if, in the Tender Offer, the Company has the opportunity to
acquire Trust Units that would place its ownership of Trust Units in excess of
67% thereof, but the Company does not have sufficient funds available to
acquire those additional Trust Units, the Manager shall calculate the
additional capital contributions that the Company needs to acquire those Trust
Units (the "ADDITIONAL FUNDING") (in this regard, unless otherwise determined
by Consent of the Members, the Additional Funding shall equal approximately
fifty percent (50%) of the cost for those Trust Units). The Manager shall
provide timely notice to the Members of the need for this Additional Funding
and request that the Members Pro Rata make capital contributions in cash to the
Company in the amount of this Additional Funding by the date that is five (5)
Days prior to the consummation of the Tender Offer (such amount for each Member
being its "ADDITIONAL CASH COMMITMENT" and such date being the "FUNDING DATE").
Except as provided in Section 4.3(b)(4), each funding Member other than an
O'Sullivan Member shall receive one (1) Class A Unit and each funding
O'Sullivan Member shall receive one (1) Class B Unit for each $1.00 that such
Member contributes to satisfy its Additional Cash Commitment.
(b) Failure to Make Required Contributions. If a Member
fails to contribute an amount in cash equal to its Additional Cash Commitment
by the Funding Date, that Member shall be a "NONCONTRIBUTING MEMBER" and the
following provisions shall apply as the sole and exclusive remedy for such
failure to contribute:
(1) the Manager shall give a notice in writing to
each Member in writing as to the identity of the Noncontributing Member and
that Member's unfunded Additional Cash Commitment (the "SHORTFALL") (the
"SHORTFALL NOTICE");
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(2) the other Members Pro Rata or as they may
otherwise agree shall have the option (but not the obligation), exercisable by
the delivery of written notice to the Manager on or before the Day following
the date of the Shortfall Notice, to fund the amount of such Shortfall;
provided, however, in the case of (i) any O'Sullivan Member, such option shall
be given first to the other O'Sullivan Members and (ii) any EnCap Member, such
option shall be given first to the other EnCap Members, in each case for a
period of two (2) Days; provided, further, that First Union Investors shall not
be required at any time to fund more than, and may exercise its option
hereunder as to, its Maximum Percentage (as defined in Section 14.16) of the
amount of such Shortfall; and
(3) those Members accordingly notified by the
Manager and exercising their option to fund the Shortfall as provided herein
shall fund the Shortfall as directed by the Manager prior to the consummation
of the Tender Offer; and
(4) to the extent any Additional Funding is done
by the Members other than Pro Rata, the funding Members shall receive the
following Units: (i) the O'Sullivan Members, collectively, shall receive a
Class B Unit for each dollar of Additional Funding that they provide up to
twenty percent (20%) of such Additional Funding and a Class A Unit for each
dollar of any excess funding; and (ii) the other Members, collectively, shall
receive Class A Units for each dollar of Additional Funding that they provide
up to eighty percent (80%) of that Additional Funding and a Class B Unit for
each dollar of excess funding (allocated to those Members in proportion to
their excess funding).
4.4 Return of Contributions. Although each Member has the right
to receive distributions in accordance with the terms of these Regulations, a
Member is not entitled to the return of any part of its Capital Contributions
or to be paid interest in respect of either its capital account or its Capital
Contributions. An unrepaid Capital Contribution is not a liability of the
Company or of any Member. A Member is not required to contribute or to lend
any cash or property to the Company to enable the Company to return any
Member's Capital Contribution.
4.5 Capital Accounts. A capital account shall be established and
maintained for each Member in accordance with Treasury Regulation Section
1.704-1(b).
ARTICLE 5
DISTRIBUTIONS AND ALLOCATIONS
5.1 Distributions of Net Cash Flow.
(a) Except as provided in Section 5.1(c), Net Cash Flow
with respect to each month during the term shall be distributed to the Members
as follows on or before the twentieth (20th) day following the end of that
month; provided, however, for purposes of determining the distributions
hereunder, tax credits properly allocated to each Member pursuant to Section
5.3(b) shall be treated as distributions hereunder on a dollar-for-dollar basis
(as further illustrated on Exhibit C):
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(1) First, 80% to the Members holding Class A
Units in proportion thereto and 20% to the Members holding Class B Units in
proportion thereto until Payout No. 1;
(2) Second, 70% to the Members holding Class A
Units in proportion thereto and 30% to the Members holding Class B Units in
proportion thereto after Payout No. 1 but prior to Payout No. 2; and;
(3) Third, 45% to the Members holding Class A
Units in proportion thereto and 55% to the Members holding Class B Units in
proportion thereto after Payout No. 2.
(b) If, as of 5:00 p.m., Central Time, on March 15, 1998,
the Company has acquired less than 5,896,000 Trust Units, the Company shall, no
later than March 20, 1998, make a cash distribution to the Members in an
aggregate amount equal to A times B, where "A" is equal to 5,896,000 Trust
Units minus the number of Trust Units held by the Company as of 5:00 p.m.,
Central time, on March 15, 1998, and where "B" is $4.00. In addition, the
Company shall make an additional cash distribution to the Members in an amount
equal to the interest earned on the Capital Contributions made by the Members
that has accrued through the date that the distributions described in the
preceding sentence are made.
(c) Section 5.1(a), as well as the terms of Section 5.2,
shall not require any distribution of cash if and to the extent the
distribution would be prohibited by the Act, applicable law or by any loan
agreement, security agreement, mortgage, debt instrument or other agreement or
obligation to which the Company is a party, by which the Company is bound or to
which the Company's assets are subject. No Member shall be entitled to
interest on any amounts that would have, but for the provisions of this Section
5.1(c), been distributed by the Company to the Members.
5.2 Allocations of Profit and Loss. All items of Profit and Loss
(including oil and gas production income) of the Company for each fiscal year
shall be allocated among the Members in those shares and proportions that will
result in the positive balances in each Member's capital account equaling the
amount that would be distributed to each Member if a sum equal to the aggregate
amount of all of the Members' capital accounts was then distributable pursuant
to Section 5.1(a).
5.3 Allocations for U.S. Tax Purposes.
(a) General. Except as provided in Section 5.3(c), each
item of income, gain, loss, and deduction determined for U.S. federal and state
income tax purposes shall be allocated among the Members in the same manner as
each corresponding item of Profit and Loss is allocated among the Members
pursuant to Section 5.2.
(b) Credits. Tax credits for each of the Company's
fiscal years (or other applicable periods) shall be allocated to the Members in
proportion to the allocation of oil and gas production income among the Members
for that fiscal year (or other applicable period).
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(c) Built-in Items. Income, gain, loss or deduction with
respect to property contributed to the Company by a Member or revalued pursuant
to the principles of Treasury Regulation Section 1.704-1(b)(2)(iv)(f) shall be
allocated among the Members in a manner that takes into account the variation
between the tax basis of such property and its Book Value, as required by the
principles of section 704(c) of the Code and Treasury Regulation Section 1.704-
1(b)(4)(i), using a method permitted by Treasury Regulation Section 1.704-3
determined by the Manager and approved by Consent of the Members. (In this
regard, the Trust Units contributed to the Company pursuant to the Assignments
shall be deemed to have a Book Value on the date of their Capital Contribution
equal to the Book Value therefor indicated in Exhibit A.)
5.4 Withholding. All amounts required to be withheld pursuant to
any tax law shall be treated as amounts actually distributed to the affected
Members for all purposes under these Regulations.
5.5 Varying Interests. All Profit and Loss (and any item of
income, gain, loss, deduction or credit) shall be allocated, and all
distributions shall be made, to the Persons shown on the records of the Company
to have been Members as of the last calendar day of the period for which the
allocation or distribution is to be made. However, if during any fiscal year
there is a change in any Member's Company Interest, the Members' allocable
shares of the Profit and Loss for the fiscal year shall be determined using any
method determined by the Manager to be permissible under the principles of Code
Section 706 and the related Treasury Regulations to take account of the
Members' varying interests.
ARTICLE 6
MANAGEMENT
6.1 Management. Subject to Section 6.5 and the other terms and
provisions hereof, the powers of the Company shall be exercised by or under the
authority of, and the business and affairs of the Company shall be managed
under, the Manager. In addition to the powers and authorities expressly
conferred by these Regulations upon the Manager (but subject to Section 6.5 and
the other terms and provisions hereof), the Manager may exercise all such
powers of the Company and do all such lawful acts and things as are not
directed or required to be exercised or done by the Members by the Act, the
Articles or these Regulations to effectuate the Business.
6.2 Number. The number of Managers of the Company shall be one
(1). The Manager as of the date hereof shall be O'Sullivan. O'Sullivan (or
any substitute Manager) shall serve as Manager until the earlier of (i) its
Resignation as such or (ii) its removal (with or without cause) by Consent of
the Members (except that in the instance of O'Sullivan, such removal may be
effected by Consent of the Members other than the Members of the O'Sullivan
Group). Any removal of a Manager hereunder shall be effective upon receipt by
the Manager of written notice to that effect executed by the requisite Consent
of the Members sufficient to effect the removal. Any substituted Manager shall
be designated by Consent of the Members.
6.3 Compensation of Manager. The Manager shall not receive any
stated compensation or, except as provided below, any reimbursement for its
services as the Manager unless otherwise approved by Consent of the Members.
The Manager, however, shall be entitled to be reimbursed for any expenses
incurred by the Manager or its Affiliates for services provided to, or on
behalf of, the Company by Persons other than the Manager or its Affiliates. No
officer or other agent of the Company designated by the Manager shall be
entitled to receive any stated compensation or reimbursement unless otherwise
approved by Consent of the Members.
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6.4 Duties and Services of Manager.
(a) The Manager shall devote such time and effort to the
Company's operations and the Business as shall be reasonably necessary to
promote fully the interest of the Company and the mutual interests of the
Members; provided, however, that the Manager shall not be required to devote
full time to the Company's business.
(b) In connection with the conduct and winding up of the
Company's business and affairs, the Manager shall have the duty to act with the
care an ordinarily prudent person would exercise under similar circumstances.
In discharging its duties and obligations to the Company and the Members
hereunder, the Manager shall act in good faith and in a manner reasonably
believed by it to be in the best interests of the Company.
(c) The Manager covenants and agrees with the Company and
the Members to use its reasonable best efforts to cause the Company to
discharge the Business Plan.
6.5 Major Actions. The Company shall not take any of the
following actions (the "MAJOR ACTIONS") without the Consent of the Members:
(a) Take any action that varies from the Business Plan;
(b) Provide guaranties;
(c) Borrow money (other than under the Bank One Debt) and
pledge or encumber the Company's assets (other than as required under the Bank
One Debt);
(d) Sell any of the Trust Units or other properties or
assets of the Company;
(e) Merge or consolidate the Company with any other
Entity, convert the Company into any other Entity or, except as otherwise
provided herein, dissolve, liquidate, wind up or terminate the Company;
(f) Loan any Company funds;
(g) Compromise or settle any lawsuit, administrative
action or dispute where the amount in question exceeds $25,000;
(h) Bind or obligate the Company with respect to any
matter outside the scope of the Business;
(i) Enter into any contract for services or supplies with
the Manager or any Member or any Affiliate of either;
(j) Distribute any assets of the Company other than money
or, except as provided in Article 11, redeem or otherwise re-purchase or
liquidate all or part of a Member's Company Interest; or
(k) Take other action requiring Consent of the Members
pursuant hereto.
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ARTICLE 7
MEETINGS OF MEMBERS
7.1 Place. All meetings of the Members shall be held at the
principal office of the Company or at such other place within the State of
Texas as may be determined by the Manager and set forth in the respective
notice or waivers of notice of such meeting.
7.2 Annual Meetings. The annual meeting of the Members and the
transaction of such other business as may properly come before the meeting
shall be held at such time and date as shall be designated by the Manager from
time to time and stated in the notice of the meeting. Such annual meeting
shall be called in the same manner as provided in these Regulations for special
meetings of the Members, except that the purposes of such meeting need be
enumerated in the notice of such meeting only to the extent required by law in
the case of annual meetings.
7.3 Special Meetings. Special meetings of the Members may be
called by the Manager or by any Member. Business transacted at all special
meetings shall be confined to the purposes stated in the notice.
7.4 Notice. Written or printed notice stating the place, day and
hour of the meeting and, in the case of special meetings, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
(10) nor more than sixty (60) Days before the date of the meeting, in
accordance with Section 15.2, by or at the direction of the Manager or Person
calling the meeting, to each Member of record entitled to vote at such meeting.
7.5 Quorum. All Members must be represented at meetings of the
Members.
7.6 Voting. For purposes of voting on matters properly before the
Members, the act of Members shall be the Consent of the Members. Each Member
shall be represented by a single individual as designated by that Member to the
Company from time to time (with respect to each Member, its "DESIGNATED
REPRESENTATIVE"); provided, however, for all purposes of voting, all of the
O'Sullivan Members and all of the EnCap Members shall be represented by a
single Designated Representative designated by the O'Sullivan Members and a
majority of the EnCap Members (as determined by the number of Units held
thereby), respectively, from time to time and shall vote as a block as
indicated by that Designated Representative. The initial Designated
Representative of each Member is specified on Exhibit A.
7.7 List of Members Entitled to Vote. The Manager shall make, at
least three (3) Days before each meeting of Members, a complete list of the
Members entitled to vote at such meeting, or any adjournment of such meeting,
arranged in alphabetical order, with the address of and the Company Interest
held by each, which list, for a period of three (3) Days prior to such meeting,
shall be kept on file at the registered office of the Company and shall be
subject to inspection by any Member at any time during usual business hours.
Such list shall also be produced and kept open at the time and place of the
meeting and shall be subject to inspection of any Member during the meeting.
However, failure to comply with the requirements of this Section 7.7 shall not
affect the validity of any action taken at such meeting.
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7.8 Registered Members. The Company shall be entitled to treat
the holder of record of any Company Interest as the holder in fact of such
Company Interest for all purposes, and accordingly shall not be bound to
recognize any equitable or other claim to or interest in such Company Interest
on the part of any other Person, whether or not it shall have express or other
notice of such claim or interest, except as expressly provided by these
Regulations or the laws of the State of Texas.
7.9 Compensation of Members.
(a) Except as may be provided in Section 7.9(b), Members,
as such, shall not receive any stated salary for their services, but shall
receive such compensation for their services as may be from time to time agreed
upon by Consent of the Members. In addition, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or special
meeting of the Members; provided, however, nothing contained in these
Regulations shall be construed to preclude any Member from serving the Company
in any other capacity and receiving compensation for such service.
(b) The Company shall pay, on the date hereof, the
transaction fees set forth on Exhibit D to the Persons identified thereon.
7.10 Actions Without a Meeting and Telephone Meetings.
Notwithstanding any provision contained in this Article 7, all actions of the
Members provided for herein may be taken by written consent without a meeting,
or any meeting thereof may be held by means of a conference telephone. Any
such action which may be taken by the Members without a meeting shall be
effective only if the written consent or consents are in writing, set forth the
action so taken, and are signed by all of the holder or holders of Company
Interests or their Designated Representatives.
ARTICLE 8
INDEMNIFICATION
8.1 Right to Indemnification. Subject to the limitations and
conditions of this Article 8, each Person (or Affiliate) who was or is made a
party or is threatened to be made a party to or is involved in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative (a "PROCEEDING"), or any appeal in
a Proceeding or any inquiry or investigation that could lead to a Proceeding,
by reason of the fact that the Person (or Affiliate), (i) is or was a Member of
the Company, or (ii) is or was a Manager of the Company, shall be indemnified
by the Company to the fullest extent permitted by the Act, against judgments,
penalties (including excise and similar taxes and punitive damages), fines,
settlements and reasonable expenses (including attorneys' fees) actually
incurred by the Person (or any Affiliate thereof) in connection with the
Proceeding, and indemnification under this Article 8 shall continue as to a
Person who has ceased to serve in the capacity which initially entitled the
Person to this indemnity. The rights granted pursuant to this Article 8 shall
be deemed contract rights, and no amendment, modification or repeal of this
Article 8 shall have the effect of limiting or denying any rights with respect
to actions taken or Proceedings arising prior to that amendment, modification
or repeal. Indemnification provided in this Article 8 shall not apply to
actions constituting bad faith, willful misconduct, gross negligence or breach
of the provisions of these Regulations.
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8.2 Advance Payment. The right to indemnification conferred in
this Article 8 shall include the right to be paid or reimbursed by the Company
the reasonable expenses incurred by a Person potentially indemnified under
Section 8.1 who was, is or is threatened to be made a named defendant or
respondent in a Proceeding in advance of the final disposition of the
Proceeding and without any determination as to the Person's ultimate
entitlement to indemnification; provided, however, that the payment of expenses
incurred by any Person in advance of the final disposition of a Proceeding,
shall be made only upon delivery to the Company of a written affirmation by the
Person of its good faith belief that it has met the standard of conduct
necessary for indemnification under this Article 8 and a written undertaking,
by or on behalf of that Person, to repay all amounts so advanced if it shall
ultimately be determined that the potentially indemnified Person is not
entitled to be indemnified under this Article 8.
8.3 Indemnification of Officers, Employees and Agents. The
Company will indemnify and advance expenses to an officer, employee or agent of
the Company, any Member, any Manager or any Affiliate thereof to the same
extent and subject to the same conditions under which it indemnifies and
advances expenses to Members under this Article 8. The Company will indemnify
and advance expenses to Persons who are not or were not Members, Managers,
officers, employees or agents of the Company but who are or were serving at the
request of the Company as a member, manager, director, officer, agent or
similar functionary of another foreign or domestic Entity against any liability
asserted against that Person and incurred by that Person in that capacity or
arising out of its status as such to the same extent that the Company may
indemnify and advance expenses to Members under this Article 8.
8.4 Nonexclusivity of Rights. The right to indemnification and the
advancement and payment of expenses conferred in this Article 8 shall not be
exclusive of any other right that an indemnified Member or other Person may
have or acquire under any law, provision of the Articles, these Regulations,
agreement, vote of Members or otherwise.
8.5 Notice. The Manager shall provide notice to all of the
Members of any Person's claim of the benefits hereof and the details of such
claim.
8.6 Indemnification. THE MEMBERS RECOGNIZE THAT THE PROVISIONS OF
THIS SECTION 8 SHALL RELIEVE EACH INDEMNIFIED PERSON FROM, AND SHALL ENTITLE
EACH INDEMNIFIED PERSON TO BE INDEMNIFIED AGAINST, ANY AND ALL LIABILITIES,
OBLIGATIONS AND CLAIMS WHATSOEVER ARISING OR TO ARISE OUT OF THE NEGLIGENCE OF
SUCH INDEMNIFIED PERSON. THE MEMBERS WOULD NOT HAVE ENTERED INTO THIS
AGREEMENT IF THIS SECTION 8 WAS NOT INCLUDED IN THIS AGREEMENT.
8.7 Insurance. The Company, with Consent of the Members, may
purchase and maintain insurance, at its expense, to protect itself and any
Person who is or was serving as a Member, Manager, officer, employee or agent
of the Company or is or was serving at the request of the Company as a member,
manager, director, officer, agent or similar functionary of another foreign or
domestic Entity against any expense, liability or loss, whether the Company
would have the power to indemnify that Person against the expense, liability or
loss under this Article 8.
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ARTICLE 9
TAX MATTERS
9.1 Tax Returns. The Manager shall cause the Company to prepare
and timely file all tax returns required to be filed by the Company. Each
Member shall furnish to the Company all pertinent information in its possession
relating to the Company's operations that is necessary to enable the Company's
tax returns to be timely prepared and filed. The Company shall deliver a copy
of each Company tax return to the Members on or before ten (10) Days prior to
the return's due date, together with any additional information required for
the Members to file their individual returns reflecting the Company's
operations. The Company shall bear the costs of the preparation and filing of
Company returns by Persons other than the Manager, the Members or Affiliates
thereof.
9.2 Tax Elections. The Company shall make the following elections
on the appropriate tax returns:
(a) to adopt the calendar year as the Company's fiscal
year;
(b) to elect to amortize the organizing expenses of the
Company ratably over a period of sixty (60) months as permitted by Code Section
709(b);
(c) to elect (if available) to be classified as a
partnership for federal and state tax purposes; and
(d) any other election which, by Consent of the Members,
the Members may deem appropriate and in the best interests of the Members.
Neither the Company nor any Member may make an election for the Company to be
excluded from the application of the provisions of subchapter K of chapter 1 of
subtitle A of the Code or any similar provisions of applicable state law, and
no provision of these Regulations shall be construed to sanction or approve
such an election.
9.3 Tax Matters Partner. O'Sullivan shall be the "TAX MATTERS
PARTNER." The Tax Matters Partner shall take such action as may be necessary
to cause each other Member to become a "notice partner" within the meaning of
Code Section 6223. The Tax Matters Partner shall inform each other Member of
all significant matters that may come to its attention in its capacity as "tax
matters partner" (as defined in Code Section 6231) by giving notice thereof on
or before the fifth (5th) Business Day after becoming aware thereof and, within
that time, shall forward to each other Member copies of all significant written
communications it may receive in that capacity. The Tax Matters Partner may
not take any action contemplated by Code Sections 6222 through 6232 without the
Consent of the Members, but this sentence does not authorize such Member (or
any other Member) to take any action left to the determination of an individual
Member under Code Sections 6222 through 6232.
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ARTICLE 10
DISPOSITION OF COMPANY INTERESTS
10.1 Dispositions and Encumbrances of Company Interests.
(a) General Restriction. A Member may not Dispose of or
Encumber all or any portion of its Company Interest except in strict accordance
with this Section 10.1. Any attempted Disposition or Encumbrance of all or any
portion of a Member's Company Interest, other than in strict accordance with
this Section 10.1, shall be, and is hereby declared, null and void ab initio.
The Members agree that breach of the provisions of this Section 10.1 may cause
irreparable injury to the Company for which monetary damages (or other remedies
at law) are inadequate in view of the complexities and uncertainties in
measuring the actual damages that would be sustained by reason of the failure
of a Member to comply with these provisions and the uniqueness of the Company's
approach to its business and the relationship among the Members. Accordingly,
the Members agree that the provisions of this Section 10.1 may be enforced by
specific performance.
(b) Dispositions of Company Interest.
(1) General Restrictions. Subject to the terms of
Sections 10.1(b)(2), and 10.1(c), a Member may Dispose of all or any portion of
its Company Interest only with the Consent of the other Members (which shall
not be unreasonably withheld); provided, however, that these approval
requirements shall not apply to the following Dispositions:
(A) Dispositions by a Member of all or
any portion of its Company Interest to another Member, to an Affiliate of such
Member, or in the case of First Union Investors, to any Entity upon a Change of
Control of First Union Investors; or
(B) Dispositions arising as a result of
the death, dissolution or bankruptcy of a Member, all of which are governed by
Article 11.
(2) Admission of Assignee as a Member. Each
Assignee that receives a Company Interest and was not a Member shall be
admitted to the Company as a Member effective only upon the Consent of the
Members. Approval may be withheld or granted in the sole discretion of each
Member. If an Assignee is admitted to the Company as a Member, it shall cease
to have the status of an Assignee. If an Assignee requests admission, but that
request is denied in accordance with this Section 10.1(b)(2), the Assignee
shall continue to have the status of an Assignee and shall have only the rights
of an assignee under the Act.
(3) Co-Sale Right. In the event of a proposed
Disposition of any Class A Units by any Member or Assignee (other than pursuant
to Section 10.1(b)(1)(A) and (B)), such Member or Assignee (the "SELLING
MEMBER") shall, at least thirty (30) Days prior to such Disposition, deliver to
the other holders or Assignees of Class A Units (the "OTHER CLASS A MEMBERS")
written notice thereof (the "SELLING MEMBER'S NOTICE") describing the terms and
conditions of such Disposition, including the number of Class A Units subject
to such Disposition. Upon receipt of a Selling Member's Notice, any Other
Class A Member, by giving written notice of its election to participate to the
Selling Member not later than ten (10) Days following receipt of the Selling
Member's Notice, may participate in such Disposition by including therein a
number of Class A Units equal to the product of (A) the number of Class A Units
to be sold by the Selling Member in connection with such Disposition and (B) a
fraction, the numerator of which is the number of Class A Units then owned by
such electing Members immediately prior to giving effect to such Disposition
and the denominator of which is the
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aggregate number of Class A Units then owned by all Members immediately prior
to giving effect to such Disposition. Such Disposition by the electing Other
Class A Members shall be made on the same terms and conditions of the
Disposition described in the Selling Member's Notice. The number of Class A
Units to be sold by the Selling Member in connection with such Disposition
shall be reduced by the number of Class A Units sold by the electing Other
Class A Members pursuant to this Section 10.1(b)(3). The closing of any
transaction pursuant to this Section 10.1(b)(3) shall be held at such time and
place as the Selling Member shall reasonably specify. At such closing, the
Selling Members shall deliver the Company Interests to be sold, duly endorsed
for transfer and accompanied by all requisite transfer taxes, if any, and the
Company Interests to be transferred shall be free and clear of any liens,
claims or encumbrances (other than restrictions imposed pursuant to applicable
Federal and state securities laws and pursuant to these Regulations), and each
Selling Member shall so represent and warrant. Each Selling Member shall
further represent and warrant that it is the record and beneficial owner of
such Company Interests and make such additional representations and warranties
as shall be customary in transactions of a similar nature. The principles
provided in this Section 10.1(b)(3) shall have equal application to any other
class of Company Securities (with the sole exception of Class B Units) that any
Member or Assignee may propose for Disposition, substituting for such purposes
(i) "Other Company Securities" of the class of those which the Selling Member
proposes for Disposition in lieu of "Class A Units" and (ii) "Other Class
Members" in lieu of "Other Class A Members."
(c) Requirements Applicable to All Dispositions and
Admissions. In addition to the requirements of Section 10.1(b), any
Disposition of a Company Interest and any admission of an Assignee as a Member
shall also be subject to the following requirements, and the Disposition and
admission shall not be effective unless these requirements are met:
(1) Disposition Documents. The following
documents must be delivered to the Manager and must be satisfactory, in form
and substance, to the Manager:
(A) Disposition Instrument. A copy of
the instrument pursuant to which the Disposition is effected.
(B) Ratification of Regulations. An
instrument, executed by the Disposing Member and its Assignee, containing the
following information and agreements:
(i) the notice address of the
Assignee;
(ii) after giving effect to the
Disposition, the Company Interest of the Disposing Member and its Assignee
(which together must total the Company Interest of the Disposing Member before
the Disposition);
(iii) if the Assignee is to be
admitted as a Member, (a) the Assignee's ratification of these Regulations and
agreement to be bound by it, and (b) its confirmation that the representations
and warranties in Section 14.14(a) are true and correct with respect to the
Assignee;
(iv) if the Assignee is not to be
admitted as a Member, an acknowledgment by the Assignee that the Company
Interest acquired is subject in all respects to these Regulations; and
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(v) representations and
warranties by the Member and its Assignee that the (a) Disposition (and
admission, if applicable), is being made in accordance with all applicable laws,
and (b) items in Sections 10.1(c)(1)(C) and (D) have been delivered.
(C) Securities Law Opinion. Unless the
Company Interest subject to the Disposition is registered under the Securities
Act and any applicable state securities laws, a favorable opinion of the
Company's legal counsel, or of other legal counsel acceptable to the Manager,
to the effect that the Disposition (and admission, if applicable) is being made
pursuant to a valid exemption from registration under, and in accordance with,
those laws.
(D) Restrictions on Disposition of
Interests in a Member. The Company must receive a favorable opinion of the
Company's legal counsel, or legal counsel acceptable to the Manager, to the
effect that the Disposition would not result in the Company's deemed
termination under Code Section 708.
(2) Payment of Expenses. The Disposing Member and
its Assignee shall pay, or reimburse the Company for, all costs and expenses
incurred by the Company in connection with the Disposition (and admission, if
applicable), including the legal fees incurred in connection with the legal
opinions referred to in Section 10.1(c)(1)(C) and (D), on or before the tenth
Day after the receipt by that Person of the Company's invoice for the amount
due. If payment is not made by the date due, the Person owing that amount shall
pay interest on the unpaid amount from the date due until paid at the Default
Rate.
(3) Effective Date. Each Disposition (and
admission, if applicable) complying with the provisions of this Section 10.1 is
effective as of the first Day of the month immediately succeeding the month in
which all of the requirements of this Section 10.1(c) have been met.
(e) Encumbrances of Company Interest. A Member may not
Encumber all or any portion of its Company Interest without the Consent of the
Members. If the Members, by Consent thereof, consent to the creation by a
Member of an Encumbrance on its Company Interest, the Member effecting the
Encumbrance shall ensure that the applicable secured party (i) acknowledges the
rights of the Members under Article 11 and (ii) agrees to allow the exercise of
those rights prior to any foreclosure by the secured party or its assignees on
the Company Interest subject to the Encumbrance.
10.2 Dispositions of Interests in a Member. Unless waived by the
Manager, no Member may cause or permit an interest in itself, direct or
indirect, to be Disposed of, if after the Disposition, the Company would be
considered terminated under Code Section 708.
ARTICLE 11
BUYOUT OPTION
11.1 Buyout Events. This Article 11 shall apply to any of the
following events (each a "BUYOUT EVENT"): (i) a Member shall die, dissolve,
Resign (in violation of these Regulations) or become a Bankrupt Member; (ii) a
Member (other than First Union Investors or its Affiliates) shall be the
subject of a Change of Control; or (iii) a Member shall be subject to a
Regulatory Requirement as described in Section 14.16. In each case, the Member
with respect to whom a Buyout Event has occurred is the "AFFECTED MEMBER."
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11.2 Procedure for Member-Related Buyout Events. If a Member shall
suffer a Buyout Event, the Affected Member (or representative) shall promptly
give notice to the Company and the other Members. Upon the occurrence of a
Buyout Event, the Company, and to the extent the Company does not exercise, the
Members (other than the Affected Member) on a pro rata basis shall have the
option to acquire the applicable Company Interests of the Affected Member;
provided, however, in the case of (i) any O'Sullivan Member, such option shall
be given first to the other O'Sullivan Members and (ii) any EnCap Member, such
option shall be given first to the other EnCap Members, in each case for a
period of ten (10) Days. In the case of Buyout Events, the Company shall have
the first right to acquire the applicable Company Interests of an Affected
Member and may exercise that right by notifying the Affected Member (or its
representative) of exercise within thirty (30) Days following the later of (i)
the occurrence of such Buyout Event and (ii) the receipt by the Company of the
Affected Member's notice (this 30-Day period is the "COMPANY OPTION PERIOD").
If the Company does not respond during the Company Option Period, the Company
shall be deemed to have waived its preferential right in that particular Buyout
Event. If the Company elects to waive, or is deemed to have waived, its right
to acquire the applicable Company Interests of an Affected Member, or if the
Company elects only to acquire a portion of such Company Interest of an
Affected Member, each of the Members (other than the Affected Member) shall
have the option to acquire that part of the Company Interest of the Affected
Member not acquired by the Company. In that event, the Members (other than the
Affected Member) may exercise their right by notifying the Affected Member (or
its representative) and the Company of the exercise within thirty (30) Days
following the date on which the Company notified the Members of its decision
with respect to, or was deemed to have waived, its option to acquire the
Company Interest of the Affected Member. If more than one Member exercises its
right, the exercising Members, Pro Rata or as they may otherwise agree, shall
participate in the purchase.
11.3 Purchase Price. The Person that is required to sell the
applicable Company Interest pursuant to this Article 11 is the "SELLER," and
the Persons that exercise a right to purchase the applicable Company Interest
pursuant to this Article 11 are the "BUYERS." (All actions by the Buyers
pursuant to this Article 11 shall be by a vote of the Buyers holding a majority
of the Sharing Ratios of all Buyers.) The purchase price for a Company
Interest being purchased pursuant to this Article 11 (the "PURCHASE PRICE")
shall be determined under this Section 11.3. The Seller and the Buyers shall
attempt to agree upon the fair market value of the applicable Company Interest.
If the Seller and Buyers do not reach such agreement on or before the thirtieth
(30th) Day following the expiration of the Company Option Period (or the
thirtieth (30th) Day following the date on which the last Buyer exercised or
waived its option, if applicable), any of the Seller or Buyers, by notice to
the others, may require the determination of fair market value to be made by
valuation pursuant to Section 11.5. Following the determination of fair market
value by agreement or valuation (the "FAIR MARKET VALUE"), the Purchase Price
shall be determined and paid in accordance with the following procedures:
(a) the Purchase Price shall be ninety percent (90%) of
the Fair Market Value; provided, however, that if the Buyout Event is the
Resignation of the Affected Member, then the Purchase Price shall be reduced by
the amount of all monetary damages suffered by the Company and the other
Members as a result of the Resignation (including indirect, incidental and
consequential damages); and
(b) at the closing, the Buyers shall pay the Seller
twenty-five percent (25%) of the Purchase Price in cash or immediately
available funds and the remainder of the Purchase Price shall accrue interest
from the date of closing at a rate per annum equal to the minimum rate
chargeable under the Code without triggering the imputation of interest for
federal income tax purposes and shall be paid by the Buyers in equal cash
installments on a monthly basis over a six (6) month period.
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Subject to Section 14.16, the payment to be made to the Seller pursuant to this
Article 11 shall be in complete liquidation and satisfaction of all of the
rights and interest of the Seller (and of all Persons claiming by, through or
under the Seller) in and in respect of the Company, including any rights
against the Company and, to the extent of the affairs of the Company, against
the other Members.
11.4 Closing. If an option to purchase is exercised in accordance
with the other provisions of this Article 11, the closing of the purchase shall
occur at a mutually agreeable location on the thirtieth (30th) Day after the
determination of the Fair Market Value pursuant to Section 11.3 (or, if later,
the fifth Business Day after the receipt of any applicable regulatory approvals
to the purchase), unless the parties to the closing agree upon a different
place or date. At the closing, (i) the Seller shall execute and deliver to the
Buyers (A) an assignment of the Seller's applicable Company Interest, in form
and substance reasonably acceptable to the Buyers, containing a general
warranty of title to such Company Interest (including that such Company
Interest is free and clear of any Encumbrances), and (B) any other instruments
reasonably requested by the Buyers to give effect to the purchase; and (ii) the
Buyers shall deliver to the Seller (A) the portion of the Purchase Price
required to be paid at the closing, in immediately available funds, and (B) one
or more unsecured promissory notes reflecting the payment terms established in
Section 11.3.
11.5 Valuation. In the absence of a price set by an offer from a
third party or by mutual agreement, the purchase price of a Company Interest
sold pursuant to these Regulations shall be Fair Market Value determined by
three (3) independent appraisers, experienced in the valuation of equity in an
oil and gas company, one selected by the purchasers, one selected by the seller
and the third selected by the first two appraisers. The Fair Market Value
shall be the average of the two (2) closest values determined by the three (3)
appraisers and shall be determined by valuing the Company Interests as an
entirety without regard to any discounts for minority interests, lack of
marketability, disparate voting rights or similar matters. The Buyers and the
Seller shall each pay the fees and expenses of the appraiser selected
respectively by the Buyers and Seller, and the fees and expenses of the third
appraiser shall be borne equally. The appraisals of all appraisers shall be
completed within thirty (30) Days after appointment of the last appraiser.
Either the Buyers or the Seller may give notice to the other party as soon as
it becomes apparent that the purchase price of a transfer of a Company Interest
will be based on a Fair Market Value determination pursuant to this Section
11.5 (an "APPRAISAL NOTICE"). Within ten (10) Days of delivery of the Appraisal
Notice, both the Buyers and the Seller shall have selected their respective
appraisers and notified the other party of the identity of their selection.
Within twenty (20) Days of delivery of the Appraisal Notice, the first two
appraisers shall have selected the third appraiser. If a party fails to select
an appraiser and give notice of the selection to the other party within the ten
(10) Day period following delivery of the Appraisal Notice, then the one
appraiser, which has been timely selected shall be the sole appraiser and its
valuation shall determine the purchase price and shall be binding upon both
Buyers and Seller.
ARTICLE 12
DISSOLUTION, WINDING UP AND TERMINATION
12.1 Dissolution. The Company shall dissolve and its affairs shall
be wound up on the first to occur of the following events (each a "DISSOLUTION
EVENT"): (i) when the period fixed for the duration of the Company shall
expire in accordance with Section 2.6; (ii) upon the election to dissolve the
Company by Consent of the Members; or (iii) upon the lapse of the time period
specified in the Articles.
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12.2 Winding Up and Termination. On the occurrence of a
Dissolution Event, the Manager shall act as liquidator and shall proceed
diligently to wind up the affairs of the Company and make final distributions
as provided in these Regulations and in the Act. The costs of winding up shall
be borne by the Company. Until final distribution, the liquidator shall
continue to operate the Company properties and Business with all of the power
and authority of the Manager. The steps to be accomplished by the liquidator
are as follows:
(a) as promptly as possible after dissolution and again
after final winding up, the liquidator shall cause a proper accounting to be
made by a recognized firm of certified public accountants of the Company's
assets, liabilities and operations through the last day of the month in which
the dissolution occurs or the final winding up is completed, as applicable;
(b) the liquidator shall pay, satisfy or discharge from
the Company's funds all of the debts, liabilities and obligations of the
Company or otherwise make adequate provision for payment and discharge of
Company obligations (including the establishment of a cash escrow fund for
contingent liabilities in an amount and for a term as reasonably determined by
the liquidator and approved by Consent of the Members); and
(c) all remaining assets of the Company shall be
distributed to the Members as follows:
(1) the liquidator may sell any or all of the
Company's property, including to Members, and any resulting gain or loss from
each sale shall be computed and allocated to the capital accounts of the
Members in accordance with the provisions of Article 5;
(2) with respect to all Company property that has
not been sold, the fair market value of that property shall be determined
(which, if the Company owns any publicly traded property, shall be deemed to be
the average trading price of that property for the prior ten (10) trading days)
and the capital accounts of the Members shall be adjusted to reflect the manner
in which the unrealized income, gain, loss, and deduction inherent in property
that has not been reflected in the capital accounts previously would be
allocated among the Members if there were a taxable disposition of that
property for the fair market value of that property on the date of
distribution; and
(3) Company property shall be distributed among
the Members in accordance with Section 5.1(a).
Distributions shall be made by the end of the taxable year of the Company
during which the liquidation of the Company occurs (or, if later, ninety (90)
Days after the date of the liquidation). All distributions in kind to the
Members shall be made subject to the liability of each distributee for costs,
expenses and liabilities incurred or committed by the Company prior to the date
of termination and those costs, expenses and liabilities shall be allocated to
the distributee pursuant to this Section 12.2. The distribution of cash and/or
property to a Member in accordance with the provisions of this Section 12.2
constitutes a complete return to the Member of its Capital Contributions and a
complete distribution to the Member of its Company Interest and interest in any
of the Company's property. To the extent that a Member returns funds to the
Company, it has no claim against any other Member for those funds.
12.3 Deficit Capital Accounts. No Member will be required to pay
to the Company, any other Member or any third party any deficit balance which
may exist from time to time in the Member's capital account.
12.4 Articles of Dissolution. On completion of the distribution of
Company assets, the Members shall file Articles of Dissolution with the
Secretary of State, cancel any other filings made pursuant to Section 2.5, and
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take such other actions as may be necessary to terminate the existence of the
Company. Upon the effectiveness of the Articles of Dissolution, the existence
of the Company shall cease, except as may be otherwise provided by the Act or
other applicable law.
ARTICLE 13
BOOKS AND ACCOUNTS
13.1 Maintenance of Books. The Manager shall keep or cause to be
kept at the principal office of the Company complete and accurate books and
records of the Company, supporting documentation of the transactions with
respect to the conduct of the Business and minutes of the meetings of the
Members. The records shall include, but not be limited to, complete and
accurate information regarding the state of the Business and financial
condition of the Company; a copy of the Articles and the Regulations along with
all amendments thereto; a current list of the names and last known business,
residence or mailing addresses and the Units held by each Member; and the
Company's tax returns for the Company's six (6) most recent tax years.
13.2 Reports. Within ten (10) days after the date hereof, the
Manager shall prepare a summary sheet setting forth the number and type of
Units held by each Member, the Capital Contribution of each Member, and the
Sharing Ratio of each Member. The Manager shall cause to be prepared and
delivered to the Members such reports as any Member may deem appropriate from
time to time. Without limitation of the foregoing, the Manager shall deliver
to each Member such reports as may be delivered to the lenders under the Bank
One Debt concurrently with the delivery of such reports to such lenders. The
Company shall bear the costs of all of these financial statements and reports.
13.3 Accounts. The Manager shall establish one or more separate
bank and investment accounts and arrangements for the Company, which shall be
maintained in the Company's name with Bank One, Jefferies, and any other
financial institutions and firms that are approved by Consent of the Members.
Pending investment in the Trust Units (and thereby becoming Invested Equity),
any excess proceeds of the Company from Capital Contributions or the Bank One
Debt shall be invested in only Qualified Investments. Any other excess funds
of the Company also shall be invested in only Qualified Investments. The
Manager may not commingle the Company's funds with the funds of any Member.
ARTICLE 14
GENERAL PROVISIONS
14.1 Offset. Whenever the Company is to pay any sum to any Member,
any amounts that Member or any of its Affiliates owes the Company which are
then due and payable may be deducted from that sum before payment.
14.2 Notices. Except as otherwise set forth herein, all notices,
requests or consents provided for or permitted to be given under these
Regulations must be in writing and must be delivered to the recipient in
person, by courier or mail or by facsimile, telegram, telex, cablegram or
similar transmission; and a notice, request or consent given under these
Regulations is effective (i) upon receipt if sent by personal delivery, mail,
courier, telegram or cablegram or (ii) upon the sender's receipt of electronic
confirmation of transmission, if sent by telex or facsimile during regular
business hours on a Business Day or if not sent during regular business hours
or on a Business Day, on the next succeeding Business Day. All notices,
requests and consents to be sent to a Member
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must be sent to or made at the addresses given for that Member on Exhibit A, or
such other address as that Member may specify by notice to the other Members.
Whenever any notice is required to be given by law or these Regulations, a
written waiver, signed by the Person entitled to notice, whether before or
after the stated notice time, shall be deemed equivalent to the giving of that
notice.
14.3 Entire Agreement; Supersedure. These Regulations constitute
the entire agreement of the Members and their Affiliates relating to the
continuation and organization of the Company and supersedes all prior contracts
or agreements among these Persons with respect to those matters, whether oral
or written.
14.4 Effect of Waiver or Consent. A waiver or consent, express or
implied, to or of any breach or default by any Person in the performance by
that Person of its obligations with respect to the Company is not a consent or
waiver to or of any other breach or default in the performance by that Person
of the same, or any other, obligations of that Person with respect to the
Company. Failure on the part of a Person to complain of any act of any Person
or to declare any Person in default with respect to the Company, irrespective
of how long that failure continues, does not constitute a waiver by that Person
of its rights with respect to that default until the applicable
statute-of-limitations period has run.
14.5 Binding Effect; No Third-party Beneficiaries; Remedies Not
Exclusive. Subject to the restrictions on Dispositions of these Regulations,
these Regulations are binding on and inure to the benefit of the Members and
their respective heirs, legal representatives, successors and assigns. Except
to the extent Article 8 provides otherwise, these Regulations are solely for
the benefit of the Members and their respective successors and permitted
assigns, and these Regulations shall not otherwise be deemed to confer upon or
give to any other third party any remedy, claim, liability, reimbursement,
cause of action or other right. Except as otherwise expressly stated in these
Regulations, the rights and remedies provided by these Regulations are
cumulative and the use of any one right or remedy by any Person under these
Regulations shall not preclude or constitute a waiver of its right to use any
or all other remedies. The rights and remedies of these Regulations are given
in addition to any other rights and remedies a party may have by law, statute
or otherwise.
14.6 Governing Law; Severability. THESE REGULATIONS ARE GOVERNED
BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS,
EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE
GOVERNANCE OR THE CONSTRUCTION OF THESE REGULATIONS TO THE LAW OF ANOTHER
JURISDICTION. In the event of a direct conflict between the provisions of
these Regulations and (i) any provision of the Articles, or (ii) any mandatory,
non-waivable provision of the Act, the provision of the Articles or the Act
shall control. If any provision of the Act provides that it may be varied or
superseded in the regulations of a limited liability company (or otherwise by
agreement of the members or managers of a limited liability company), that
provision shall be deemed superseded and waived in its entirety if these
Regulations contain a provision addressing the same issue or subject matter. If
any provision of these Regulations, or its application to any Person or
circumstance, is held invalid or unenforceable to any extent, the remainder of
these Regulations, and the application of that provision to other Persons or
circumstances, is not affected and that provision shall be enforced to the
greatest extent permitted by law.
14.7 Further Assurances. In connection with these Regulations and
related contemplated transactions, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may
be reasonably necessary or appropriate to effectuate and perform the provisions
of these Regulations and those transactions; provided, however, if any Member
shall suffer undue expense thereby, the Company shall reimburse that Member.
Amended and Restated
Limited Liability Company Regulations of
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14.8 Waiver of Certain Rights. Each Member irrevocably waives any
right it may have to maintain any action for dissolution of the Company or for
partition of the property of the Company.
14.9 Disclosure of Information. Each Member shall share with the
other Members the results of all studies or analyses conducted by or for the
benefit of that Member that involve the assessment of the feasibility or
prospects for success of any of the Properties (to the extent such information
has not already been communicated or distributed to the other Members) or of
the Business. No Member shall knowingly share false or misleading information
with another Member, but otherwise no Member shall have any liability in
connection with any information it shares with the other Members.
14.10 Indemnification. To the fullest extent permitted by law, each
Member shall indemnify the Company and each other Member and hold them harmless
from and against all losses, costs, liabilities, damages and expenses
(including costs of suit and attorney's fees) they may incur on account of any
breach by the indemnifying Member of any of its representations, warranties or
obligations under these Regulations.
14.11 Counterparts. These Regulations may be executed in any number
of counterparts with the same effect as if all signing parties had signed the
same document. All counterparts shall be construed together and constitute the
same instrument.
14.12 Directly or Indirectly; Without Limitation. Where any
provision in these Regulations refers to action to be taken, or not taken, by
any Person, that provision shall be applicable whether the action is taken
directly or indirectly by the Person, including actions taken by or on behalf
of any Affiliate of the Person. Throughout these Regulations, the term
"INCLUDING" and words to the same or similar effect shall be interpreted and
construed to mean "including without limitation."
14.13 References. All references in these Regulations to (i) one
gender shall include the others and (ii) the singular shall include the plural
and vice versa as appropriate. All references to an entity shall be deemed to
include its successors and assigns, to the extent succession or assignment is
not restricted by these Regulations. Unless otherwise expressly provided, all
references to "ARTICLES" or "SECTIONS" are to Articles or Sections of these
Regulations and all references to "EXHIBITS" are to the exhibits attached to
these Regulations, each of which is made a part of these Regulations for all
purposes.
14.14 Representations and Warranties. Each Member hereby represents
and warrants to the Company and each other Member that:
(a) If an Entity, it is a duly organized, validly
existing entity of the type it represents and is in good standing under the
laws of the jurisdiction of its formation. It has all requisite power and
authority to enter into and to perform its obligations under these Regulations.
(b) If an Entity, its execution, delivery, and
performance of these Regulations have been duly authorized, and do not and will
not, in any material respect, (i) violate any law, rule, regulation, order, or
decree applicable to it, (ii) violate its organizational documents or (iii)
contravene or constitute a default or breach under any instrument, indenture,
agreement or other obligation to which it or any of its Affiliates is a party
or by which it or any Affiliate is bound.
(c) These Regulations are a legal and binding obligation
of that Member, enforceable against that Member in accordance with its terms,
except to the extent enforceability is modified by bankruptcy, reorganization
and other similar laws affecting the rights of creditors generally and by
general principles of equity.
Amended and Restated
Limited Liability Company Regulations of
SAN JUAN PARTNERS, L.L.C.
23
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(d) There is no litigation pending or, to the best of its
knowledge, threatened to which that Member or any of its Affiliates is a party
that, if adversely determined, could have a material adverse effect on that
Member's ability to perform its obligations under these Regulations.
(e) Its Company Interest is not acquired with a view to
or for sale in connection with any distribution thereof within the meaning of
the Securities Act of 1933, as amended.
(f) If O'Sullivan, that the Company, prior to the date
hereof, has not engaged in any business or incurred any liabilities or
obligations.
(g) If a Member contributing Trust Units, that Member has
good and marketable title to such Trust Units and is transferring to the
Company such Trust Units free and clear of all liens and other encumbrances.
(h) To the best of its knowledge, except as disclosed in
the Schedule 13D questionnaire completed by that Member, neither that Member
nor any Affiliate thereof (i) owns any Trust Units other than the Trust Units
to be contributed to the Company pursuant to Section 4.2 or (ii) owns an
interest in the Properties, other than the interest of certain of the
O'Sullivan Members in the Pre-Existing Investment.
(i) If an EnCap Member or First Union Investors, the
Designated Representative therefor is an employee, officer or director of that
Member or of an Affiliate thereof.
14.15 Observance of Laws. Each Member shall comply with, shall
cause its Affiliates to comply with, and shall use all reasonable efforts to
cause the Company to comply with, all laws applicable to the Properties or the
Business and the Members' and their Affiliates' activities in connection with
the Properties.
14.16 Regulatory Requirements. If, by reason of any existing or
future Federal or state rule, regulation, guideline, order, request or
directive (whether or not having the force of law and whether or not failure to
comply therewith would be unlawful) (collectively, a "REGULATORY REQUIREMENT"),
any Member is effectively restricted or prohibited from holding any of the
Company Interests (including any securities distributable to such Member in any
merger, reorganization, readjustment or other reclassification of securities),
the Company and the other Members shall take such action as may be deemed
reasonably necessary by such Member to permit such Member to comply with such
Regulatory Requirement. Such action to be taken may include, without
limitation, the Company's authorization of one or more new classes of Company
Interests and the modification or amendment of the Articles, these Regulations
or any other documents or instruments executed in connection with the Company
Interests held by such Member. The affected Member shall give written notice
to the Company and the other Members of any such Regulatory Requirement and the
action or actions necessary to comply with such Regulatory Requirement, and the
Company and such other Members shall take all steps reasonably necessary to
comply with such Regulatory Requirement as expeditiously as possible. Without
limitation of the foregoing, in the event any Member that is a bank holding
company or an Affiliate thereof is, or by reason of any prospective transaction
would become, through no prospective action of its own, the holder of more than
the maximum percentage of Company Interests (the "MAXIMUM PERCENTAGE") then
permitted under any Regulatory Requirement (such current Maximum Percentage
being 24.9% of the Company Interests), such event shall be a "BUYOUT EVENT" for
purposes of Article 11 with respect to the Company Interests of such Member in
excess of the Maximum Percentage (the "EXCESS COMPANY INTERESTS"), and the
Company shall exercise its option under Section 11.2 with respect to such
Excess Company Interests.
Amended and Restated
Limited Liability Company Regulations of
SAN JUAN PARTNERS, L.L.C.
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14.17 Spouses of Members. Spouses of the Members do not
automatically become Members as a result of the marital relationship unless
that spouse is a Member in his/her own right. Each spouse of a Member who is
not a Member in his/her own right has executed a Spouse's Agreement in the form
of Exhibit B.
14.18 Amendments. Except as otherwise expressly set forth in these
Regulations, the Articles and these Regulations may be amended, supplemented or
restated only upon Consent of the Members. Upon obtaining the approval of any
amendment to the Articles, the Manager shall cause Articles of Amendment in
accordance with the Act to be prepared, and such Articles of Amendment shall be
executed by no less than one (1) Manager and shall be filed in accordance with
the Act.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGE(S) FOLLOW.
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<PAGE> 30
IN WITNESS WHEREOF, the Members have executed these Regulations as of
the date first set forth above.
MEMBERS:
ENCAP ENERGY CAPITAL FUND III, L.P.
By: EnCap Investments L.C.,
its general partner
By: /s/ ROBERT L. ZORICH
------------------------------------
Name: Robert L. Zorich
----------------------------------
Title: Managing Director
---------------------------------
ENCAP ENERGY ACQUISITION III-B, INC.
By: /s/ ROBERT L. ZORICH
------------------------------------
Name: Robert L. Zorich
----------------------------------
Title: Managing Director
---------------------------------
ECIC CORPORATION
By: /s/ ROBERT L. ZORICH
------------------------------------
Name: Robert L. Zorich
----------------------------------
Title: Managing Director
---------------------------------
BOCP ENERGY PARTNERS, L.P.
By: EnCap Investments L.C.,
its manager
By: /s/ ROBERT L. ZORICH
------------------------------------
Name: Robert L. Zorich
----------------------------------
Title: Managing Director
---------------------------------
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Limited Liability Company Regulations of
SAN JUAN PARTNERS, L.L.C.
<PAGE> 31
FIRST UNION INVESTORS, INC.
By: /s/ TED A. GARDNER
------------------------------------
Name: Ted A. Gardner
----------------------------------
Title: Senior Vice President
---------------------------------
O'SULLIVAN OIL & GAS COMPANY, INC.
By: /s/ C.N. O'SULLIVAN
------------------------------------
Name: C.N. O'Sullivan
----------------------------------
Title: President
---------------------------------
/s/ CHRISTOPHER P. SCULLY
---------------------------------------
CHRISTOPHER P. SCULLY
/s/ CHARLES T. MCCORD III
---------------------------------------
CHARLES T. MCCORD III
SCOTT W. SMITH FUNDING, LLC
By: /s/ SCOTT W. SMITH
------------------------------------
Name: Scott W. Smith
----------------------------------
Title: Manager
---------------------------------
/s/ JOHN V. WHITING
---------------------------------------
JOHN V. WHITING
ANDOVER GROUP, INC.
By: /s/ A. JOHN KNAPP, JR.
------------------------------------
Name: A. John Knapp, Jr.
----------------------------------
Title: President
---------------------------------
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Limited Liability Company Regulations of
SAN JUAN PARTNERS, L.L.C.
<PAGE> 32
EXHIBIT A
BASIC INFORMATION
1. Name of Company: San Juan Partners, L.L.C.
2. Principal Office:
a. Address c/o O'Sullivan Oil & Gas Company, Inc.
Bank One Center
910 Travis Street, Suite 2150
Houston, Texas 77002
b. Telephone Number: (713) 759-2030
c. Telecopy Number: (713) 759-2040
3. Registered Agent and Office: CT Corporation
811 Dallas Avenue
Suite 1500
Houston, Texas 77002
Amended and Restated
Limited Liability Company Regulations of
SAN JUAN PARTNERS, L.L.C.
A-1
<PAGE> 33
4. EnCap Members:
a. Name: EnCap Energy Capital Fund III, L.P.
Mailing Address: c/o EnCap Investments L.C.
1100 Louisiana Street, Suite 3150
Houston, Texas 77002
Attention: Robert L. Zorich
Telephone Number: (713) 659-6100
Telecopy Number: (713) 659-6130
Class A Units: 5,823,556
Class B Units: 0
Initial Cash Commitment: $5,823,556
Property Commitment: No Trust Units
Time of or Events
Requiring Additional
Contribution(s): As provided in the Agreement.
Date Became Member: January 15, 1998
Designated Representative: Robert L. Zorich
Amended and Restated
Limited Liability Company Regulations of
SAN JUAN PARTNERS, L.L.C.
A-2
<PAGE> 34
b. Name: EnCap Energy Acquisition III-B, Inc.
Mailing Address: c/o EnCap Investments L.C.
1100 Louisiana Street, Suite 3150
Houston, Texas 77002
Attention: Robert L. Zorich
Telephone Number: (713) 659-6100
Telecopy Number: (713) 659-6130
Class A Units: 4,404,360
Class B Units: 0
Initial Cash Commitment: $4,404,360
Property Commitment: No Trust Units
Time of or Events
Requiring Additional
Contribution(s): As provided in the Agreement.
Date Became Member: January 15, 1998
Designated Representative: Robert L. Zorich
Amended and Restated
Limited Liability Company Regulations of
SAN JUAN PARTNERS, L.L.C.
A-3
<PAGE> 35
c. Name: ECIC Corporation
Mailing Address: c/o EnCap Investments L.C.
1100 Louisiana Street, Suite 3150
Houston, Texas 77002
Attention: Robert L. Zorich
Telephone Number: (713) 659-6100
Telecopy Number: (713) 659-6130
Class A Units: 2,056,388
Class B Units: 0
Initial Cash Commitment: $2,056,388
Property Commitment: No Trust Units
Time of or Events
Requiring Additional
Contribution(s): As provided in the Agreement.
Date Became Member: January 15, 1998
Designated Representative: Robert L. Zorich
Amended and Restated
Limited Liability Company Regulations of
SAN JUAN PARTNERS, L.L.C.
A-4
<PAGE> 36
d. Name: BOCP Energy Partners, L.P.
Mailing Address: c/o EnCap Investments L.C.
1100 Louisiana Street, Suite 3150
Houston, Texas 77002
Attention: Robert L. Zorich
Telephone Number: (713) 659-6100
Telecopy Number: (713) 659-6130
Class A Units: 1,424,960
Class B Units: 0
Initial Cash Commitment: $1,424,960
Property Commitment: No Trust Units
Time of or Events
Requiring Additional
Contribution(s): As provided in the Agreement.
Date Became Member: January 15, 1998
Designated Representative: Robert L. Zorich
Amended and Restated
Limited Liability Company Regulations of
SAN JUAN PARTNERS, L.L.C.
A-5
<PAGE> 37
5. Capital Partners:
a. Name: First Union Investors, Inc.
Mailing Address: One First Union Center
Fifth Floor
Charlotte, North Carolina 28288
Telephone Number: (704) 374-4769
Telecopy Number: (704) 374-6711
Class A Units: 6,195,294
Class B Units: 0
Initial Cash Commitment: $6,195,294
Property Commitment: No Trust Units
Time of or Events
Requiring Additional
Contribution(s): As provided in the Agreement.
Designated Representative: Ted A. Gardner
Date Became Member: January 15, 1998
Amended and Restated
Limited Liability Company Regulations of
SAN JUAN PARTNERS, L.L.C.
A-6
<PAGE> 38
6. O'Sullivan Members:
a. Name: O'Sullivan Oil & Gas Company, Inc.
Mailing Address: 910 Travis Street, Suite 2150
Houston, Texas 77002
Telephone Number: (713) 759-2030
Telecopy Number: (713) 759-2040
Class A Units: 0
Class B Units: 1,156,952
Initial Cash Commitment: $443,952
Property Commitment: 100,000 Trust Units with a Book Value
equal to $713,000
Time of or Events
Requiring Additional
Contribution(s): As provided in the Agreement.
Date Became Member: December 12, 1997
Designated Representative: C. N. O'Sullivan
Amended and Restated
Limited Liability Company Regulations of
SAN JUAN PARTNERS, L.L.C.
A-7
<PAGE> 39
b. Name: Christopher P. Scully
Mailing Address: 910 Travis Street, Suite 2150
Houston, Texas 77002
Telephone Number: (713) 759-2030
Telecopy Number: (713) 759-2040
Class A Units: 0
Class B Units: 1,156,952
Initial Cash Commitment: $443,952
Property Commitment: 100,000 Trust Units with a Book
Value equal to $713,000
Time of or Events
Requiring Additional
Contribution(s): As provided in the Agreement.
Date Became Member: January 15, 1998
Designated Representative: C. N. O'Sullivan
Amended and Restated
Limited Liability Company Regulations of
SAN JUAN PARTNERS, L.L.C.
A-8
<PAGE> 40
c. Name: Charles T. McCord III
Mailing Address: 1201 Louisiana, #1048
Houston, Texas 77002
Telephone Number: (713) 651-1414
Telecopy Number: (713) 651-0077
Class A Units: 0
Class B Units: 1,542,603
Initial Cash Commitment: $657,770
Property Commitment: 124,100 Trust Units with a Book
Value equal to $884,833
Time of or Events
Requiring Additional
Contribution(s): As provided in the Agreement.
Date Became Member: January 15, 1998
Designated Representative: C. N. O'Sullivan
Amended and Restated
Limited Liability Company Regulations of
SAN JUAN PARTNERS, L.L.C.
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d. Name: Scott W. Smith Funding, LLC
Mailing Address: 910 Travis Street, Suite 2150
Houston, Texas 77002
Telephone Number: (713) 759-2030
Telecopy Number: (713) 759-2040
Class A Units: 0
Class B Units: 497,614
Initial Cash Commitment: $205,307
Property Commitment: 42,200 Trust Units with a Book
Value equal to $292,307
Time of or Events
Requiring Additional
Contribution(s): As provided in the Agreement.
Date Became Member: January 15, 1998
Designated Representative: C. N. O'Sullivan
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e. Name: John V. Whiting
Mailing Address: 910 Travis Street, Suite 2150
Houston, Texas 77002
Telephone Number: (713) 759-2030
Telecopy Number: (713) 759-2040
Class A Units: 0
Class B Units: 248,807
Initial Cash Commitment: $93,801
Property Commitment: 21,740 Trust Units with a Book
Value equal to $155,006
Time of or Events
Requiring Additional
Contribution(s): As provided in the Agreement.
Date Became Member: January 15, 1998
Designated Representative: C. N. O'Sullivan
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f. Name: Andover Group, Inc.
Mailing Address: 910 Travis Street, Suite 2150
Houston, Texas 77002
Telephone Number: (713) 658-0444
Telecopy Number: (713) 658-8322
Class A Units: 0
Class B Units: 373,210
Initial Cash Commitment: $128,651
Property Commitment: 34,300 Trust Units with a Book
Value equal to $244,559
Time of or Events
Requiring Additional
Contribution(s): As provided in the Agreement.
Date Became Member: January 15, 1998
Designated Representative: C. N. O'Sullivan
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EXHIBIT B
SPOUSE'S AGREEMENT
The undersigned, being the spouse of_________________________, agrees
to be bound by the provisions of these Regulations, to the extent applicable
to the undersigned.
Name:
------------------------------
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EXHIBIT C
DISTRIBUTION EXAMPLE
I.
-----------------------------------------------------------------------
Capital Contributions $24,000,000
-----------------------------------------------------------------------
Section 5.1(b) Distribution
(Assume 1,000,000 Trust Units @ $4.00 per Trust Unit) -$4,000,000
-----------------------------------------------------------------------
Net Investment Equity $20,000,000
-----------------------------------------------------------------------
NB: Any Additional Funding increases the Net Investment Equity amount.
The distribution calculation will not be impacted by the fees or
expenses that are paid with revenues generated by ownership of the
Trust Units.
II.
Below is an example of the actual and deemed distributions that will
be made to Members pursuant to Section 5.1(a) assuming Net Investment
Equity of $20,000,000, and proceeds, after repayment of principal and
payment of the interest thereon and fees and expenses, equal to
$36,000,000:
----------------------------------------------------------------
PAYOUT NO. 1 TOTAL
(UNDER SECTION 5.1(a)(1)) -----------------
-----------------
A Units B Units
------- -------
$16,000,000 $4,000,000 $20,000,000
----------------------------------------------------------------
PAYOUT NO. 2
(UNDER SECTION 5.1(a)(2))
-----------------
A Units B Units
------- -------
$5,250,000 $2,250,000 $ 7,500,000(1)
----------------------------------------------------------------
AFTER PAYOUT NO. 2
(UNDER SECTION 5.1(a)(3))
-----------------
A Units B Units
------- -------
$3,825,000 $4,675,000 $ 8,500,000
----------------------------------------------------------------------
TOTAL $25,075,000 $10,925,000 $36,000,000
----------------------------------------------------------------------
(1)37.5% of Net Investment Equity of $20,000,000.
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EXHIBIT D
TRANSACTION FEES
Bank One, Texas, NA $177,500.00
EnCap Investments, L.C. 265,577.04
First Union Investors, Inc. 120,013.00
O'Sullivan Oil & Gas Company, Inc. 22,417.70
Christopher P. Scully 22,417.70
Charles T. McCord III 29,890.26
Scott W. Smith Funding, LLC 9,642.00
John V. Whiting 4,826.00
Andover Group, Inc. 7,231.52
Jefferies & Company, Inc. 75,000.00
Morrow & Co., Inc. 7,500.00
Hutcheson & Grundy, L.L.P. 15,000.00
W. B. VonGotten & Co. 10,000.00
The Bank of New York 3,000.00
O'Sullivan Oil & Gas Company, Inc. - Legal Fees 27,000.00
O'Sullivan Oil & Gas Company, Inc. - 10,000.00
Bank One Fees
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EXHIBIT E
BUSINESS PLAN
(a) Prior to commencement of the Tender Offer, the
purchase of up to five percent (5%) of the Trust Units (other than pursuant to
the Assignments) at a price less than or equal to $6.50 (other than pursuant to
the Assignments);
(b) With respect to the Tender Offer:
(1) A commencement date of January 20, 1998;
(2) A tender period of twenty (20) trading days;
(3) A price per Trust Unit of $8.00; and
(4) A closing date for the acquisition of the
Trust Units pursuant to the Tender Offer on or by February 28, 1998;
(c) Request, no later than June 30, 1998, a vote of the
holders of the Trust Units to liquidate the Trust;
(d) Vote in favor of the liquidation of the Trust; and
(e) Consent of the Members with respect to:
(1) The approval of all loan documents;
(2) The approval of all Schedule 13D and 14D-1
securities filings;
(3) The announcement of the Tender Offer; and
(4) Any purchases of Trust Units after the
consummation of the Tender Offer.
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ATTACHMENT I
DEFINITIONS
As used in these Regulations, the following terms have the following
respective meanings:
"$" - refers to U.S. dollars.
"ACT" - the Texas Limited Liability Company Act, as amended from time
to time.
"ADDITIONAL CASH COMMITMENT" - See Section 4.3(a).
"ADDITIONAL FUNDING" - See Section 4.3(a).
"AFFECTED MEMBER" - See Section 11.1.
"AFFILIATE" - with respect to any Person, any other Person that (i)
owns or controls the first Person, (ii) is owned or controlled by the first
Person or (iii) is under common ownership or control with first Person, where
"OWN" means direct or indirect ownership of more than fifty percent (50%) of
the equity interest or rights to distributions on account of equity of the
Person and "CONTROL" means the direct or indirect power to direct the
management or policies of the Person, whether through the ownership of voting
securities, by contract, or otherwise. However, the Company shall not be
considered an Affiliate of a Member or of an Affiliate of a Member.
"APPRAISAL NOTICE" - See Section 11.5.
"AREA" - the area known as the Northeast Blanco unit in the San Juan
Basin of New Mexico.
"ARTICLES" - the Company's Articles of Organization filed with the
Secretary of State on December 12, 1997.
"ASSIGNEE" - any Person that acquires a Company Interest through a
Disposition; provided, however, that, an Assignee shall have no right to be
admitted to the Company as a Member. The Assignee of a dissolved Member is the
shareholder, partner, member or other equity owner or owners of the dissolved
Member to whom that Member's Company Interest is assigned by the Person
conducting the liquidation or winding up of the Member. The Assignee of a
Bankrupt Member is the Person or Persons (if any) to whom the Bankrupt Member's
Company Interest is assigned by order of the bankruptcy court or other
governmental authority having jurisdiction over the bankruptcy; or, in the
event of a general assignment for the benefit of creditors, the creditor to
which the Company Interest is assigned.
"ASSIGNMENTS" - See Section 4.2.
"BANK ONE DEBT" - that certain indebtedness to be entered into by the
Company with Bank One that is approved by Consent of the Members.
"BANK ONE" - Bank One, Texas, NA.
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"BANKRUPT MEMBER" - any Member (i) that (A) makes an assignment for
the benefit of creditors, (B) files a voluntary petition in bankruptcy, (C) is
adjudged a bankrupt or insolvent or has entered against the Member an order for
relief in any bankruptcy or insolvency proceeding, (D) files a petition or
answer seeking for the Member a reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law
or regulation, (E) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against the Member in a
proceeding of the type described in subclauses (A) through (D) of this clause
(i) or (F) seeks, consents to, or acquiesces in the appointment of a trustee,
receiver or liquidator of the Member or of all or any substantial part of the
Member's properties or (ii) against which a proceeding seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation has been commenced and 120 Days
have expired without dismissal or stay or with respect to which, without the
Member's consent or acquiescence, a trustee, receiver or liquidator of the
Member or of all or any substantial part of the Member's properties has been
appointed and ninety (90) Days have expired without the decree or order making
the appointment having been vacated or stayed, or ninety (90) Days have expired
after the date of expiration of a stay, if the appointment has not previously
been vacated.
"BOOK VALUE" - with respect to any asset, the adjusted basis of the
asset for U.S. federal income tax purposes, adjusted as follows: (i) The
initial Book Value of any asset contributed to the Company by a Member shall be
the fair market value of the asset as of the date of contribution; (ii) the
Book Value of each asset shall be its respective fair market value, as of (A)
the issuance of a Company Interest to a new or existing Member in exchange for
a Capital Contribution, (B) the distribution by the Company to a Member in
liquidation of the Member's Company Interest, and (C) the liquidation of the
Company within the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g);
(iii) the Book Value of each asset distributed to any Member will be the fair
market value of the asset as of the date of distribution; and (iv) the Book
Value of each asset will be increased or decreased to reflect any adjustment to
the adjusted basis of the asset under Code Section 734(b) or 743(b), but only
to the extent that the adjustment is taken into account in determining Capital
Accounts under Treasury Regulation Section 1.704-1(b)(2)(iv)(m), provided that
the Book Value will not be adjusted under this paragraph (d) to the extent that
an adjustment under paragraph (i) is necessary or appropriate in connection
with a transaction that would otherwise result in an adjustment under this
paragraph (iv). Book Value will be adjusted by book depletion and
depreciation, and gain or loss on a disposition of any asset shall be
determined by reference to that asset's Book Value as adjusted. The
determination of the fair market value of property shall be determined by the
Manager using any reasonable method of valuation.
"BUSINESS" - See Section 2.4(a).
"BUSINESS DAY" - any day other than a Saturday, a Sunday or a holiday
on which national banking associations in Houston, Texas are required or
permitted by law to be closed.
"BUSINESS PLAN" - the business plan outlined on Exhibit E as such plan
may be modified from time to time by Consent of the Members.
"BUYERS" - See Section 11.3.
"BUYOUT EVENT" - See Section 11.1.
"CAPITAL CONTRIBUTION" - with respect to any Member, the amount of
money and the initial Book Value of any property (other than money) contributed
to the Company by the Member. Any reference in these Regulations to the Capital
Contribution of a Member shall include the Capital Contributions of his
predecessors in interest.
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"CHANGE OF CONTROL" - that the Ultimate Parent of that Member has
ceased to own, directly or indirectly, at least (i) fifty-one percent (51%) of
the issued and outstanding voting equity interests of the Member, or
twenty-five percent (25%) of the issued and outstanding equity interests if no
single Person (or "GROUP" of Persons as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended and including the related rules and
regulations), other than the Ultimate Parent, owns more than five percent (5%)
of the balance of the equity interests and (ii) twenty- five percent (25%) of
the rights to distributions in respect of the issued and outstanding equity
interests of the Member. For purposes of this definition, the "ULTIMATE
PARENT" of a Member shall mean the Affiliate of the Member that is neither
owned nor controlled by another Person and shall include any successors in
interest by merger to the Affiliate.
"CLASS A UNITS" - a Company Interest of a Member or Assignee
representing a fractional part of the Company Interests of all Members and
Assignees and having the rights and obligations specified with respect to Units
generally and Class A Units specifically in these Regulations.
"CLASS B UNITS" - a Company Interest of a Member or Assignee
representing a fractional part of the Company Interests of all Members and
Assignees and having the rights and obligations specified with respect to Units
generally and Class B Units specifically in these Regulations.
"CODE" - the United States Internal Revenue Code of 1986, and any
successor statute, as amended from time to time.
"COMMITMENT" - subject in each case to adjustments on account of
Dispositions of Company Interests permitted by these Regulations, (i) in the
case of a Member executing these Regulations as of the date of these
Regulations or a Person acquiring a Company Interest from such a Member, the
amount specified for that Member as its Commitment on Exhibit A, and (ii) in
the case of a Member purchasing a Company Interest subsequently issued, the
Commitment established by the Manager or pursuant to its subscription
agreement, if any.
"COMPANY" - San Juan Partners, L.L.C., the Texas limited liability
partnership continued pursuant to these Regulations.
"COMPANY INTEREST" - an interest in the Company, which shall include
Units or other Company Securities, and any attendant rights, including the
right to vote, a share of the income, gain, loss, deduction and/or credits of,
and the right to receive distributions from, the Company.
"COMPANY OPTION PERIOD" - See Section 11.2.
"COMPANY SECURITIES" - See Section 3.2(a).
"CONFIDENTIAL INFORMATION" - See Section 3.4(b).
"CONSENT" - with respect to any referenced group of Members, all of
such Members; provided, however, in no event shall (i) any consent of any
Member that is a bank holding company or an Affiliate thereof (or its
permitted successors or assigns) be required unless the matter subject to such
consent would "significantly and adversely affect" the Company Interest of such
Member, as such terms are used in Section 225.2(q)(2)(i) of Regulation Y of the
Board of Governors of the Federal Reserve System (it being understood that if
such matter subject to consent would significantly and adversely affect the
Company Interest of such Member then such consent shall be required) and (ii)
any consent of any Member referred to in clause (i) be required if the result
of such consent would be to cause the Company Interests of such Member in the
Company to be considered "voting securities" for purposes of Regulation Y of
the Board of Governors of the Federal Reserve System; provided,
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further, that the Manager shall notify each Member at the time any consent is
sought from Members pursuant to these Regulations.
"DAY" - a calendar day; provided, however, that, if any period of Days
referred to in these Regulations shall end on a Day that is not a Business Day,
then the expiration of such period shall be automatically extended until the
first succeeding Business Day.
"DEFAULT RATE" - a rate per annum equal to the lesser of (i) four
percent (4%) plus a rate per annum equal to the prime rate published in the
Wall Street Journal under the heading "MONEY RATES" on the Day in question (or
if the Wall Street Journal was not published on such Day, the first Day
immediately prior to such Day for which a Wall Street Journal was published) or
(ii) the maximum rate permitted by applicable law.
"DESIGNATED REPRESENTATIVE" - See Section 7.6.
"DISPOSE," "DISPOSING," or "DISPOSITION" - with respect to any asset
(including Company Interests or any portion), a sale, assignment, transfer,
conveyance, gift, exchange or other disposition of that asset, whether that
disposition is voluntary, involuntary or by operation of law, including the
following: (i) in the case of an asset owned by a natural person, a transfer of
that asset upon the death of its owner, whether by will, intestate succession
or otherwise; (ii) in the case of an asset owned by an Entity, if a Change of
Control is so effected with respect to that Entity, (A) a merger or
consolidation of that Entity, (B) a conversion of that Entity into another type
of Entity, or (C) a distribution of the asset in connection with the
dissolution, liquidation, winding up or termination of that Entity (unless, in
the case of dissolution, that Entity's business is continued without the
commencement of liquidation or winding-up); and (iii) a disposition in
connection with, or in lieu of, a foreclosure of an Encumbrance; but these
terms shall not include the creation of an Encumbrance.
"DISSOLUTION EVENT" - See Section 12.1(a).
"ENCAP MEMBERS" - the Members listed as such on Exhibit A.
"ENCUMBER," "ENCUMBERING," or "ENCUMBRANCE" - the creation of a
security interest, lien, pledge, mortgage or other encumbrance, whether the
encumbrance is voluntary, involuntary or by operation of law.
"ENTITY" - any corporation, limited liability company, partnership,
limited partnership, venture, trust, estate, governmental entity or other
entity.
"EXCESS COMPANY INTERESTS" - See Section 14.16.
"FAIR MARKET VALUE" - See Section 11.3.
"FIRST UNION INVESTORS" - First Union Investors, Inc., a North
Carolina corporation, and its permitted successors or assigns.
"FUNDING DATE" - See Section 4.3(b).
"INITIAL CASH COMMITMENT" - with respect to each Member, the amount of
cash to be contributed by that Member as specified on Exhibit A.
"INITIAL CONTRIBUTIONS" - See Section 4.2.
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"JEFFERIES" - Jefferies & Company, Inc.
"MANAGER" - "O'Sullivan."
"MAXIMUM PERCENTAGE" - See Section 14.16.
"MEMBER" - the Organizing Members and any Person subsequently admitted
to the Company as a Member as provided in these Regulations, but does not
include any Person who has ceased to be a Member in the Company.
"NET CASH FLOW" - all cash funds derived by the Company other than as
Capital Contributions without reduction for any non-cash charges, but less cash
funds used to pay current operating expenses and to pay or establish reasonable
reserves for future expenses or debt payments, as determined by the Manager and
approved by Consent of the Members.
"NET INVESTMENT EQUITY" - the aggregate Capital Contributions made by
the Members to the Company minus the Special Distribution (if any).
"NONCONTRIBUTING MEMBER" - See Section 4.3(b).
"ORGANIZING MEMBERS" - the Persons listed as Members on Exhibit A.
"O'SULLIVAN" - O'Sullivan Oil & Gas Company, Inc.
"O'SULLIVAN MEMBERS" - the Members listed as such on Exhibit A.
"OTHER CLASS A MEMBERS" - See Section 10.1(b)(3).
"OUTSTANDING" - with respect to Units or other Company Securities, all
Units or other Company Securities that are issued by the Company and reflected
as outstanding on the Company's books and records as of the date of
determination.
"PAYOUT NO. 1" - the point at which aggregate distributions (including
tax credits treated as distributions pursuant to Section 5.1(a)) to the Members
and Assignees pursuant to, or in accordance with, Section 5.1(a)(1) equal Net
Investment Equity.
"PAYOUT NO. 2" - the point at which aggregate distributions (including
tax credits treated as distributions pursuant to Section 5.1(a)) to the Members
and Assignees pursuant to, or in accordance with, Section 5.1(a)(2) (i.e.,
after Payout No. 1) equal the product of (i) Net Investment Equity multiplied
by (ii) 0.375.
"PERSON" - a natural person or an Entity.
"PRE-EXISTING INVESTMENT" - the .0055 working interest in the
Northeast Blanco unit, formerly belonging to Wintergreen Energy Corp.
"PROCEEDING" - See Section 8.1.
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"PROFIT" and "LOSS" - for each fiscal year of the Company (or other
period for which Profit or Loss must be computed), the Company's taxable income
or loss determined in accordance with the principles of Code Section 703(a).
"PROPERTY COMMITMENT" - with respect to each Member, the number of
Trust Units to be contributed by that Member as specified in Exhibit A.
"PROPERTIES" - See Section 2.4(a).
"PRO RATA" - with respect to the Members or any subgroup of Members,
in accordance with their relative Sharing Ratios.
"PURCHASE PRICE" - See Section 11.3.
"QUALIFIED INVESTMENTS" - bank deposits, commercial paper rated at
least "AA," certificates of deposit, treasury bills, and other money market
investments with maturities less than thirty (30) days.
"REGULATIONS" - this Amended and Restated Limited Liability
Regulations of San Juan Partners, L.L.C., as hereafter amended from time to
time.
"REGULATORY REQUIREMENT" - See Section 14.16.
"RESIGN," "RESIGNING" or "RESIGNATION" - the resignation, withdrawal
or retirement of a Member from the Company as a member. These terms shall not
include any Dispositions of Company Interests (which are governed by Section
10.1), even though the Member making a Disposition may cease to be a Member as
a result of the Disposition.
"SECRETARY OF STATE" - the Secretary of State of the State of Texas.
"SELLER" - See Section 11.3.
"SELLING MEMBER" - See Section 10.1(b)(3).
"SELLING MEMBER'S NOTICE" - See Section 10.1(b)(3).
"SHARING RATIO" - as of the date of determination, (i) as to any
Member or Assignee holding Units, the quotient of the number of Units held by
such Member or Assignee divided by the total number of all Units then
Outstanding; provided, however, that following the issuance of any additional
Company Securities (other than Units) in accordance with the terms of these
Regulations, proper adjustment shall be made by the Manager to the Sharing
Ratio represented by each Unit to reflect the issuance, and (ii) as to the
holders of the additional Company Securities (other than Units) issued by the
Company in accordance with Section 3.2(a), the Sharing Ratio established as a
part of such issuance.
"SHORTFALL" - See Section 4.3(b)(1).
"SHORTFALL NOTICE" - See Section 4.3(b)(1).
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"SPECIAL DISTRIBUTION" - the distributions made by the Company to the
Members pursuant to Section 5.1(b).
"TAX MATTERS PARTNER" - See Section 9.3.
"TENDER OFFER" - the tender offer by the Company to purchase for cash
the Trust Units.
"TREASURY REGULATIONS" - the regulations promulgated by the United
States Department of the Treasury pursuant to and in respect of provisions of
the Code. All references to sections of the Treasury Regulations shall include
any corresponding provision or provisions of succeeding, similar, substitute
proposed or final Treasury Regulations.
"TRUST" - See Section 2.4(a).
"TRUST UNITS" - See Section 2.4(a).
"UNDERLYING PROPERTIES" - See Section 2.4(a).
"UNITS" - Class A Units, Class B Units or any other Company Interest
of a Member or Assignee representing a fractional part of the Company Interests
of all Members and Assignees and having the rights and obligations specified
with respect to Units in these Regulations.
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