<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/A
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 1)
COHO ENERGY, INC.
(Name of Issuer)
COMMON STOCK, $0.01 PAR VALUE
(Title of Class of Securities)
19248110
(CUSIP Number)
THOMAS O. HICKS
200 CRESCENT COURT
SUITE 1600
DALLAS, TEXAS 75201
(214) 740-7300
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
Copy to:
MICHAEL D. WORTLEY
VINSON & ELKINS L.L.P.
3700 TRAMMELL CROW CENTER
2001 ROSS AVENUE
DALLAS, TEXAS 75201
(214) 220-7732
AUGUST 21, 1998
(Date of Event which Requires Filing of this Statement on Schedule 13D/A)
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<PAGE> 2
CUSIP NO. 19248110 Schedule 13D/A Page 2 of 17
- -------------------------------------------------------------------------------
1 Name of Reporting Person, S.S. or I.R.S. Identification No. of
Above Person
Energy Investment Partnership No. 1
- -------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group (a) [ ]
(b) [ ]
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds
WC
- -------------------------------------------------------------------------------
5 Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization
State of Texas
- -------------------------------------------------------------------------------
Number of Shares 7 Sole Voting Power
0
------------------------------------------------------
Beneficially Owned 8 Shared Voting Power
2,182,084
------------------------------------------------------
by Each Reporting 9 Sole Dispositive Power
0
------------------------------------------------------
Person With 10 Shared Dispositive Power
2,182,084
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
2,182,084
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain
Shares [ ]
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
8.5%
- -------------------------------------------------------------------------------
14 Type of Reporting Person
PN
- -------------------------------------------------------------------------------
<PAGE> 3
CUSIP NO. 19248110 Schedule 13D/A Page 3 of 17
- -------------------------------------------------------------------------------
1 Name of Reporting Person, S.S. or I.R.S. Identification No. of
Above Person
Thomas O. Hicks
- -------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group (a) [ ]
(b) [ ]
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds
PF
- -------------------------------------------------------------------------------
5 Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization
State of Texas
- -------------------------------------------------------------------------------
Number of Shares 7 Sole Voting Power
0
------------------------------------------------------
Beneficially Owned 8 Shared Voting Power
2,182,084
------------------------------------------------------
by Each Reporting 9 Sole Dispositive Power
0
------------------------------------------------------
Person With 10 Shared Dispositive Power
2,182,084
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
2,182,084
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain
Shares [ ]
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
8.5%
- -------------------------------------------------------------------------------
14 Type of Reporting Person
IN
- -------------------------------------------------------------------------------
<PAGE> 4
CUSIP NO. 19248110 Schedule 13D/A Page 4 of 17
- -------------------------------------------------------------------------------
1 Name of Reporting Person, S.S. or I.R.S. Identification No. of
Above Person
John R. Muse
- -------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group (a) [ ]
(b) [ ]
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds
PF
- -------------------------------------------------------------------------------
5 Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization
State of Texas
- -------------------------------------------------------------------------------
Number of Shares 7 Sole Voting Power
0
------------------------------------------------------
Beneficially Owned 8 Shared Voting Power
2,182,084
------------------------------------------------------
by Each Reporting 9 Sole Dispositive Power
0
------------------------------------------------------
Person With 10 Shared Dispositive Power
2,182,084
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
2,182,084
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain
Shares [ ]
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
8.5%
- -------------------------------------------------------------------------------
14 Type of Reporting Person
IN
- -------------------------------------------------------------------------------
<PAGE> 5
CUSIP NO. 19248110 Schedule 13D/A Page 5 of 17
- -------------------------------------------------------------------------------
1 Name of Reporting Person, S.S. or I.R.S. Identification No. of
Above Person
Charles W. Tate
- -------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group (a) [ ]
(b) [ ]
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds
PF
- -------------------------------------------------------------------------------
5 Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization
State of Texas
- -------------------------------------------------------------------------------
Number of Shares 7 Sole Voting Power
0
------------------------------------------------------
Beneficially Owned 8 Shared Voting Power
2,182,084
------------------------------------------------------
by Each Reporting 9 Sole Dispositive Power
0
------------------------------------------------------
Person With 10 Shared Dispositive Power
2,182,084
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
2,182,084
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain
Shares [ ]
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
8.5%
- -------------------------------------------------------------------------------
14 Type of Reporting Person
IN
- -------------------------------------------------------------------------------
<PAGE> 6
CUSIP NO. 19248110 Schedule 13D/A Page 6 of 17
- -------------------------------------------------------------------------------
1 Name of Reporting Person, S.S. or I.R.S. Identification No. of
Above Person
Jack D. Furst
- -------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group (a) [ ]
(b) [ ]
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds
PF
- -------------------------------------------------------------------------------
5 Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization
State of Texas
- -------------------------------------------------------------------------------
Number of Shares 7 Sole Voting Power
0
------------------------------------------------------
Beneficially Owned 8 Shared Voting Power
2,182,084
------------------------------------------------------
by Each Reporting 9 Sole Dispositive Power
0
------------------------------------------------------
Person With 10 Shared Dispositive Power
2,182,084
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
2,182,084
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain
Shares [ ]
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
8.5%
- -------------------------------------------------------------------------------
14 Type of Reporting Person
IN
- -------------------------------------------------------------------------------
<PAGE> 7
CUSIP NO. 19248110 Schedule 13D/A Page 7 of 17
- -------------------------------------------------------------------------------
1 Name of Reporting Person, S.S. or I.R.S. Identification No. of
Above Person
Lawrence D. Stuart, Jr.
- -------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group (a) [ ]
(b) [ ]
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds
PF
- -------------------------------------------------------------------------------
5 Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization
State of Texas
- -------------------------------------------------------------------------------
Number of Shares 7 Sole Voting Power
0
------------------------------------------------------
Beneficially Owned 8 Shared Voting Power
2,182,084
------------------------------------------------------
by Each Reporting 9 Sole Dispositive Power
0
------------------------------------------------------
Person With 10 Shared Dispositive Power
2,182,084
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
2,182,084
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain
Shares [ ]
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
8.5%
- -------------------------------------------------------------------------------
14 Type of Reporting Person
IN
- -------------------------------------------------------------------------------
<PAGE> 8
CUSIP NO. 19248110 Schedule 13D/A Page 8 of 17
- -------------------------------------------------------------------------------
1 Name of Reporting Person, S.S. or I.R.S. Identification No. of
Above Person
Michael J. Levitt
- -------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group (a) [ ]
(b) [ ]
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds
PF
- -------------------------------------------------------------------------------
5 Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization
State of Texas
- -------------------------------------------------------------------------------
Number of Shares 7 Sole Voting Power
0
------------------------------------------------------
Beneficially Owned 8 Shared Voting Power
2,182,084
------------------------------------------------------
by Each Reporting 9 Sole Dispositive Power
0
------------------------------------------------------
Person With 10 Shared Dispositive Power
2,182,084
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
2,182,084
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain
Shares [ ]
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
8.5%
- -------------------------------------------------------------------------------
14 Type of Reporting Person
IN
- -------------------------------------------------------------------------------
<PAGE> 9
CUSIP NO. 19248110 Schedule 13D/A Page 9 of 17
- -------------------------------------------------------------------------------
1 Name of Reporting Person, S.S. or I.R.S. Identification No. of
Above Person
Dan H. Blanks
- -------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group (a) [ ]
(b) [ ]
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds
PF
- -------------------------------------------------------------------------------
5 Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization
State of Texas
- -------------------------------------------------------------------------------
Number of Shares 7 Sole Voting Power
0
------------------------------------------------------
Beneficially Owned 8 Shared Voting Power
2,182,084
------------------------------------------------------
by Each Reporting 9 Sole Dispositive Power
0
------------------------------------------------------
Person With 10 Shared Dispositive Power
2,182,084
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
2,182,084
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain
Shares [ ]
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
8.5%
- -------------------------------------------------------------------------------
14 Type of Reporting Person
IN
- -------------------------------------------------------------------------------
<PAGE> 10
CUSIP NO. 19248110 Schedule 13D/A Page 10 of 17
- -------------------------------------------------------------------------------
1 Name of Reporting Person, S.S. or I.R.S. Identification No. of
Above Person
David B. Deniger
- -------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group (a) [ ]
(b) [ ]
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds
PF
- -------------------------------------------------------------------------------
5 Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization
State of Texas
- -------------------------------------------------------------------------------
Number of Shares 7 Sole Voting Power
0
------------------------------------------------------
Beneficially Owned 8 Shared Voting Power
2,182,084
------------------------------------------------------
by Each Reporting 9 Sole Dispositive Power
0
------------------------------------------------------
Person With 10 Shared Dispositive Power
2,182,084
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
2,182,084
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain
Shares [ ]
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
8.5%
- -------------------------------------------------------------------------------
14 Type of Reporting Person
IN
- -------------------------------------------------------------------------------
<PAGE> 11
Schedule 13D/A Page 11 of 17
This Amendment No. 1 to Schedule 13D is being filed by Energy
Investment Partnership No. 1, a Texas general partnership (the "Purchaser"),
Thomas O. Hicks, a United States citizen ("Hicks"), John R. Muse, a United
States citizen ("Muse"), Charles W. Tate, a United States citizen ("Tate"), Jack
D. Furst, a United States citizen ("Furst"), Lawrence D. Stuart, Jr., a United
States citizen ("Stuart"), Michael J. Levitt, a United States citizen
("Levitt"), Dan H. Blanks, a United States citizen ("Blanks"), and David B.
Deniger, a United States citizen ("Deniger"). The Purchaser, Hicks, Muse, Tate,
Furst, Stuart, Levitt, Blanks and Deniger are collectively referred to herein as
the "Reporting Persons." This Amendment to Schedule 13D amends and supplements
Items 3, 4, 6 and 7 contained in the Reporting Persons' original Schedule 13D,
dated May 18, 1998. Items 1, 2 and 5 of the original Schedule 13D remain
unchanged. Each Reporting Person disclaims responsibility for the completeness
and accuracy of the information contained in this statement concerning the other
Reporting Persons.
ITEM 3. SOURCES AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The Purchaser utilized $15,530,802 of its working capital to purchase
2,182,084 shares of common stock, par value $0.01 per share (the "Common Stock")
beneficially owned by the Purchaser (the "Shares") and pay related fees and
expenses. This working capital was provided by capital contributions from Hicks,
Muse, Tate, Furst, Stuart, Levitt, Blanks and Deniger. Each of Hicks, Muse,
Tate, Furst, Stuart, Levitt, Blanks and Deniger obtained the funds contributed
to the Purchaser from personal funds.
On August 21, 1998, HM 4 Coho, L.P., a Texas limited partnership (the
"Partnership"), and the Company entered into a Stock Purchase Agreement (the
"Stock Purchase Agreement") which provides that the Partnership shall purchase
41,666,666 shares of Common Stock (the "Additional Shares") for $249,999,996 by
wire transfer of immediately available funds (the "Purchase Price"). Hicks, Muse
Fund IV, LLC, a Texas limited liability company (the "LLC"), of which Hicks is
the sole member, is the general partner of the Partnership. Because Hicks is the
sole member of the LLC, Hicks will also be considered to be a beneficial
owner of the Additional Shares. The Partnership will utilize its working
capital to pay the Purchase Price and to pay related fees and expenses. The
Partnership expects to obtain its working capital funds from the capital
contributions of its partners.
ITEM 4. PURPOSE OF THE TRANSACTION.
Pursuant to the Stock Purchase Agreement, the Partnership will purchase
the Additional Shares in two allotments for the Purchase Price. At the initial
closing, the Partnership will, subject to regulatory approval, acquire up to
5,095,098 Additional Shares (the "Initial Shares"). The remaining Additional
Shares (the "Remaining Shares") are expected to be issued, after the issuance of
the Additional Shares and an amendment to the Company's Articles of
Incorporation have been approved by the shareholders of the Company.
The purpose of the acquisition of the Additional Shares is to implement
the Partnership's plan to obtain a majority interest in the Company for
investment purposes.
(a) Except as described herein, neither the Partnership nor
the Reporting persons have any current plans to purchase additional shares of
Common Stock in open market or private transactions from shareholders of the
Company or to purchase additional shares of Common Stock or Common Stock
equivalents directly from the Company. Any change with respect to these plans
shall be reported promptly in an amendment to the Purchaser's Schedule 13D.
(b), (c), (f), (g), (h), (i) and (j) Neither the Partnership
nor the Reporting Persons have current plans or proposals which relate to or
would result in (i) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its subsidiaries,
(ii) a sale or transfer of a material amount of assets of the Company or any of
its subsidiaries, (iii) any other material change to the Company's business or
corporate structure, (iv) subject to the matters discussed in paragraphs (d) and
(e) of this Item 4, any changes in the Company's articles of incorporation or
bylaws, or other actions which may impede the acquisition or control of the
Company by any person, (v) the Common Stock ceasing to be authorized to be
quoted on the NASDAQ National Market System, (vi) the Common Stock becoming
eligible for termination of registration pursuant to Section 12(g)(4) of the
Securities Exchange Act of 1934 (the "Exchange Act"), or (vii) any action
similar to any of the foregoing. Any change with respect to these plans shall be
promptly reported in an amendment to the Purchaser's Schedule 13D.
(d) On May 12, 1998, the Company and the Purchaser entered
into a Shareholder Agreement (the "Shareholder Agreement") which provided for
(i) certain demand and piggyback registration rights with respect to the shares
of Common Stock owned at such time or in the future by the Purchaser or its
transferees who become a party to the Shareholder Agreement and (ii) the
appointment or election and annual nomination to the Board of Directors of the
Company and the Board's Compensation Committee and Audit Committee and any
Executive Committee of two designees of the Purchaser (the "Purchaser
Designees") and any of its transferees who become a party to the Shareholder
<PAGE> 12
Schedule 13D/A Page 12 of 17
Agreement, subject to certain Common Stock ownership requirements. Pursuant to
the Shareholder Agreement, the Purchaser Designees, Muse and Stuart, were added
to the Board of Directors on May 12, 1998, to serve until the next annual
meeting of shareholders of the Company. There are currently seven directors
serving on the Company's Board of Directors, including the Purchaser's
Designees.
Pursuant to the Stock Purchase Agreement, the Company and the Purchaser
have agreed to enter into an Amended and Restated Shareholder Agreement (the
"Amended and Restated Shareholder Agreement") upon the closing of the purchase
and sale of the Initial Shares (the "First Closing"). The Amended and Restated
Shareholder Agreement will provide for (i) certain demand and piggyback
registration rights with respect to the Additional Shares and any other shares
of Common Stock owned in the future by the Purchaser and the Partnership and
their transferees who become a party to the Amended and Restated Shareholder
Agreement (each, a "Holder") (see Item 6) and (ii) upon the purchase and sale of
the Remaining Shares (the "Second Closing"), the increase in the size of the
Board of Directors of the Company to nine members and, in addition to the
existing Purchaser Designees, the appointment or election and annual nomination
to the Board of Directors of the Company two designees of the Partnership or the
Partnership's transferees who become a party to the Amended and Restated
Shareholder Agreement (the "Partnership Designees," together with the Purchaser
Designees the "Holder Designees"). The Company shall appoint a Partnership
Designee and a Purchaser Designee serving on the Board of Directors of the
Company to be members of the Board of Directors' Compensation Committee and
Audit Committee, and, if established, the Executive Committee of the Board of
Directors. The Purchaser's right to designate directors of the Company shall
continue as long as the Purchaser and its affiliates own at least 1,000,000
shares of Common Stock. The right of the Partnership to designate directors of
the Company shall continue as long as the Partnership and its affiliates or any
single transferee of the Partnership (and affiliates thereof) who becomes a
party to the Amended and Restated Shareholder Agreement owns at least 5% of the
outstanding shares of Common Stock. In addition, if the Purchaser or any single
transferee or group of related transferees of the Purchaser ceases to own at
least 1,000,000 shares of Common Stock and the Partnership and its affiliates or
any single transferee or group of related transferees of the Partnership or its
affiliates continue to own at least 5% of the outstanding shares of Common
Stock, the Purchaser shall cease to have the right to designate any Holder
Designees and the Partnership shall have the right to designate all four Holder
Designees, unless or until such time as the Purchaser's right to designate
directors of the Company has terminated as provided in the preceding sentence.
To the extent that the Company's proxy statement for any annual meeting of
shareholders of the Company includes a recommendation regarding the election of
any other nominees to the Company's Board of Directors, the Company has agreed
to include a recommendation of its Board of Directors that shareholders of the
Company also vote in favor of the Holder Designees.
(e) The Second Closing is subject to Company shareholder authorization
of articles of amendment to the Company's Articles of Incorporation increasing
the number of authorized shares of Common Stock to 100,000,000 (the "Articles
of Amendment"). The Company has agreed to recommend that the Company's
shareholders approve the Articles of Amendment and not to withdraw, modify or
change such recommendation. The Reporting Persons have no plans or proposals
which relate to or would result in any material change in the present dividend
policy of the Company.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
The following summaries of the Stock Purchase Agreement and the
Financial Advisory Agreement are qualified in their entirety by reference to
such agreements, copies of which are attached hereto as Exhibits 10.2 and 10.3,
respectively, and incorporated herein by reference.
Stock Purchase Agreement. On August 21, 1998, the Partnership and the
Company entered into the Stock Purchase Agreement (see Item 4) pursuant to which
the Partnership will purchase the Additional Shares in two allotments for the
Purchase Price. The Stock Purchase Agreement provides that the Partnership will
initially purchase up to 5,095,098 Additional Shares. The Second Closing is
subject to approval by the shareholders of the Company of the issuance of the
Additional Shares in accordance with the rules and regulations of the NASDAQ
National Market System and an amendment to the Company's Articles of
Incorporation to increase the number of authorized shares of Common Stock to
100,000,000.
Amended and Restated Shareholder Agreement. Pursuant to the terms of
the Stock Purchase Agreement, the Purchaser and the Company agreed to enter into
the Amended and Restated Shareholder Agreement (see Item 4) upon the First
Closing. In addition to the provisions of the Amended and Restated Shareholder
Agreement described in Item 4, the Amended and Restated Shareholder Agreement
provides each Holder with unlimited demand registrations (in firm commitment
underwritten offerings) and unlimited piggyback registration rights with respect
to the Additional Shares and all shares of Common Stock acquired by each Holder
in the future, subject to certain requirements. With certain exceptions, the
Company will pay all costs of such registration except for underwriting
discounts and commissions and transfer taxes. The Company shall have certain
rights to delay the filing of a registration statement, and parties to other
registration rights agreements with the Company shall have a right, under
certain circumstances, to sell shares of Common Stock in connection with
registrations involving shares owned by each Holder as long as the managing
underwriter or underwriters shall advise each Holder in writing that the
inclusion of such securities will not materially and adversely affect the price
or success of the offering.
<PAGE> 13
Schedule 13D/A Page 13 of 17
Each Holder under the Amended and Restated Shareholder Agreement shall
agree therein until May 11, 2000, not to (i) deposit any shares of Common
Stock in a voting trust or grant any proxy with respect to any shares of Common
Stock to any person not designated by the Company (other than another Holder or
any affiliate or partner of a Holder) or subject any shares of Common Stock to
any arrangement or agreement with respect to the voting of such shares of
Common Stock, (ii) act with one or more persons (other than another Holder or
any affiliate or partner of a Holder) as a partnership, limited partnership,
syndicate or "group" (as such term is used in Section 13(d)(3) of the Exchange
Act) for the purpose of acquiring, holding, voting or disposing of shares of
Common Stock, (iii) directly or indirectly, sell or transfer, or offer to sell
or transfer, (A) shares of Common Stock that represent more than 10% of the
fully diluted common equity of the Company to any single person or any
"Affiliated Group" (with respect to any person, such person and each Affiliate
Associate (within the meaning of Rule 12b-2 promulgated under the Exchange Act)
of such person and each other person with whom such person is acting "as a
partnership, limited partnership, syndicate, or other group for the purpose of
acquiring, holding or disposing of" shares (within the meaning of Section
13(d)(3) of the Exchange Act)) or (B) shares of Common Stock that represent
more than 5% of the outstanding Common Stock of the Company to any holder of
10% of the outstanding shares of Common Stock. The foregoing prohibition is
subject to certain exceptions.
Financial Advisory Agreement. On August 21, 1998, the Company and
Hicks, Muse & Co. Partners, L.P., a Texas limited partnership ("HMCo"), entered
into a Financial Advisory Agreement (the "Financial Advisory Agreement"). HM
Partners, Inc., in which Hicks owns a majority equity interest, is the general
partner of HMCo and Hicks, Muse, Tate, Furst, Stewart, Levitt, Blanks and
Deniger are HMCo's limited partners. Pursuant to the Financial Advisory
Agreement, HMCo has been engaged to render financial advisory services to the
Company and its subsidiaries in connection with the negotiation of the
Partnership's purchase of the Additional Shares and also to render financial
advisory, investment banking and other similar services to the Company with
respect to any future proposals for (i) the acquisition by any person or group
of beneficial ownership of (A) a majority of the combined voting power of the
then outstanding securities of the Company entitled to vote generally in the
election of directors, or (B) a majority of the Company's outstanding capital
stock, (ii) a reorganization, recapitalization, merger, consolidation or similar
business combination or transaction or sale or other disposition (whether in a
single transaction or series of related transactions) of all or substantially
all of the assets of the Company and its subsidiaries taken as a whole (unless
the holders of the outstanding securities of the Company entitled to vote
generally in the election of directors prior to such transaction continue to own
at least a majority of the securities entitled to vote generally in the election
of directors of the entity resulting from such transaction upon the completion
of such transaction), (iii) the sale of oil and gas properties of the Company or
its subsidiaries involving consideration of $100 million or more, (iv) any
acquisition by the Company or its subsidiaries involving consideration of $100
million or more (collectively, "Additional Transactions") of (A) a majority of
the voting power of the then outstanding voting securities of any corporation
entitled to voting generally in the election of directors or (B) a majority of
the ownership interests of an entity other than a corporation (whether by
merger, tender offer, exchange offer or similar extraordinary transaction), or
(v) any acquisition by the Company or its subsidiaries of oil and gas properties
or other assets involving consideration of $100 million or more. The term of the
Financial Advisory Agreement shall continue until the earlier to occur of August
21, 2008 or the date on which the Partnership and its affiliates cease to own
beneficially, directly or indirectly, at least 5% of the outstanding equity
securities of the Company or its successors.
Pursuant to the terms of the Financial Advisory Agreement, the Company
paid to HMCo a transaction fee of $1,250,000 concurrently with the execution of
the Stock Purchase Agreement. At the First Closing, the Company shall pay to
HMCo a transaction fee in the amount of $1,250,000. If the shareholders of the
Company shall have approved the issuance of the Remaining Shares and the
Articles of Amendment on or before December 31, 1998, the Company shall pay HMCo
a transaction fee in the amount of $7,500,000 on the date of the Second Closing.
If the shareholders of the Company have not approved the issuance of the
Remaining Shares and the Articles of Amendment on or before December 31, 1998,
the Company shall pay HMCo a transaction fee in the amount of $7,500,000
($8,750,000 if the First Closing shall not have occurred) on December 31, 1998;
provided, however, that the Company may elect to pay such transaction fee by
delivering to HMCo the amount of $2,500,000 ($3,750,000 if the First Closing
shall not have occurred) in cash and by issuing to HMCo 1,000,000 shares of
Common Stock. Under the Financial Advisory Agreement, HMCo is entitled to
receive additional compensation at the then current market rates for financial
advisory, investment banking and other similar services rendered to the Company
in connection with Additional Transactions if the Company engages a financial
advisor in connection with such transactions.
<PAGE> 14
Schedule 13D/A Page 14 of 17
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
10.1 Shareholder Agreement, dated May 12, 1998, by and between Coho
Energy, Inc. and Energy Investment Partnership No. 1. (1)
10.2 Stock Purchase Agreement, dated August 21, 1998, by and
between Coho Energy, Inc. and HM 4 Coho, L.P. (2)
10.3 Financial Advisory Agreement, dated August 21, 1998, by and
between Coho Energy, Inc. and Hicks, Muse Partners, L.P.*
24.1 Power of Attorney for Thomas O. Hicks. (1)
24.2 Power of Attorney for John R. Muse. (1)
24.3 Power of Attorney for Charles W. Tate. (1)
24.4 Power of Attorney for Jack D. Furst. (1)
24.5 Power of Attorney for Lawrence D. Stuart, Jr. (1)
24.6 Power of Attorney for Michael J. Levitt. (1)
24.7 Power of Attorney for Dan H. Blanks. (1)
24.8 Power of Attorney for David B. Deniger. (1)
24.9 Power of Attorney for Energy Investment Partnership No. 1. (1)
99.1 Joint Filing Agreement, dated May 18, 1998, among Energy
Investment Partnership No. 1, Thomas O. Hicks, John R. Muse,
Charles W. Tate, Jack D. Furst, Lawrence D. Stuart, Jr.,
Michael J. Levitt, Dan H. Blanks, and David B. Deniger. (1)
- ---------
* Filed herewith.
(1) Previously filed as an Exhibit to Schedule 13D filed by the Reporting
Persons on May 18, 1998, and incorporated herein by reference.
(2) The Stock Purchase Agreement is filed herewith without attached exhibits
and schedules, but such omitted exhibits and schedules will be provided
by the Partnership upon written request.
<PAGE> 15
Schedule 13D/A Page 15 of 17
SIGNATURES
After due inquiry and to the best of my knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
Dated: August 25, 1998 ENERGY INVESTMENT PARTNERSHIP NO. 1
By: /s/ DAVID W. KNICKEL
-------------------------------------
David W. Knickel
Attorney-in-Fact
Dated: August 25, 1998 THOMAS O. HICKS
/s/ THOMAS O. HICKS
-----------------------------------------
By: David W. Knickel, Attorney-in-Fact
Dated: August 25, 1998 JOHN R. MUSE
/s/ JOHN R. MUSE
-----------------------------------------
By: David W. Knickel, Attorney-in-Fact
Dated: August 25, 1998 CHARLES W. TATE
/s/ CHARLES W. TATE
-----------------------------------------
By: David W. Knickel, Attorney-in-Fact
Dated: August 25, 1998 JACK D. FURST
/s/ JACK D. FURST
-----------------------------------------
By: David W. Knickel, Attorney-in-Fact
<PAGE> 16
Schedule 13D/A Page 16 of 17
Dated: August 25, 1998 LAWRENCE D. STUART, JR.
/s/ LAWRENCE D. STUART, JR.
-----------------------------------------
By: David W. Knickel, Attorney-in-Fact
Dated: August 25, 1998 MICHAEL J. LEVITT
/s/ MICHAEL J. LEVITT
-----------------------------------------
By: David W. Knickel, Attorney-in-Fact
Dated: August 25, 1998 DAN H. BLANKS
/s/ DAN H. BLANKS
-----------------------------------------
By: David W. Knickel, Attorney-in-Fact
Dated: August 25, 1998 DAVID B. DENIGER
/s/ DAVID B. DENIGER
-----------------------------------------
By: David W. Knickel, Attorney-in-Fact
<PAGE> 17
CUSIP NO. 19248110 Schedule 13D/A
EXHIBIT INDEX
10.1 Shareholder Agreement, dated May 12, 1998, by and between
Coho Energy, Inc. and Energy Investment Partnership No. 1.
(1)
10.2 Stock Purchase Agreement, dated August 21, 1998, by and
between Coho Energy, Inc. and HM 4 Coho, L.P. (2)
10.3 Financial Advisory Agreement, dated August 21, 1998, by and
between Coho Energy, Inc. and Hicks, Muse Partners, L.P.*
24.1 Power of Attorney for Thomas O. Hicks. (1)
24.2 Power of Attorney for John R. Muse. (1)
24.3 Power of Attorney for Charles W. Tate. (1)
24.4 Power of Attorney for Jack D. Furst. (1)
24.5 Power of Attorney for Lawrence D. Stuart, Jr. (1)
24.6 Power of Attorney for Michael J. Levitt. (1)
24.7 Power of Attorney for Dan H. Blanks. (1)
24.8 Power of Attorney for David B. Deniger. (1)
24.9 Power of Attorney for Energy Investment Partnership No. 1. (1)
99.1 Joint Filing Agreement, dated May 18, 1998, among Energy
Investment Partnership No. 1, Thomas O. Hicks, John R. Muse,
Charles W. Tate, Jack D. Furst, Lawrence D. Stuart, Jr.,
Michael J. Levitt, Dan H. Blanks, and David B. Deniger. (1)
- ---------
* Filed herewith.
(1) Previously filed as an Exhibit to Schedule 13D filed by the Reporting
Persons on May 18, 1998, and incorporated herein by reference.
(2) The Stock Purchase Agreement is filed herewith without attached exhibits
and schedules, but such omitted exhibits and schedules will be provided
by the Partnership upon written request.
<PAGE> 1
EXHIBIT 10.2
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
COHO ENERGY, INC.
AND
HM 4 COHO, L.P.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
AUGUST 21, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.1 Definitions.....................................................................................1
Section 1.2 References and Titles...........................................................................7
ARTICLE II
PURCHASE OF COMMON STOCK
Section 2.1 Purchase of Shares..............................................................................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of the Company...................................................8
Section 3.2 Representations and Warranties of Purchaser....................................................30
ARTICLE IV
COVENANTS
Section 4.1 Furnishing of Information......................................................................32
Section 4.2 Shareholder Approval; Proxy Statement..........................................................32
Section 4.3 Nasdaq Listing.................................................................................32
Section 4.4 Affirmative Covenants of the Company...........................................................32
Section 4.5 Negative Covenants of the Company..............................................................33
Section 4.6 Approvals......................................................................................35
Section 4.7 Shareholder Agreement, Financial Advisory Agreement and Monitoring Agreement...................35
Section 4.8 HSR Act Notification...........................................................................35
Section 4.9 Indemnification of Directors; Insurance........................................................36
Section 4.10 Notification of Certain Matters................................................................37
Section 4.11 Board of Directors.............................................................................37
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
<S> <C> <C>
Section 5.1 Conditions Precedent to Each Party's Obligation................................................37
Section 5.2 Conditions Precedent to Obligation of Purchaser at the First Closing...........................38
Section 5.3 Conditions Precedent to Obligations of Company at the First Closing............................39
Section 5.4 Conditions Precedent to Obligation of Purchaser at the Second Closing..........................39
Section 5.5 Conditions Precedent to Obligations of Company at the Second Closing...........................40
ARTICLE VI
CLOSINGS
Section 6.1 Closings.......................................................................................41
Section 6.2 Actions to Occur at the First Closing..........................................................41
Section 6.3 Actions to Occur at the Second Closing.........................................................42
ARTICLE VII
TERMINATION
Section 7.1 Termination....................................................................................43
Section 7.2 Effect of Termination..........................................................................44
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification of Purchaser............................................................................44
8.2 Indemnification of Company..............................................................................44
8.3 Defense of Third-Party Claims...........................................................................44
8.4 Direct Claims...........................................................................................45
8.5 Tax Related Adjustments.................................................................................46
ARTICLE IX
MISCELLANEOUS
Section 9.1 Survival of Provisions.........................................................................46
Section 9.2 No Waiver; Modification in Writing.............................................................46
Section 9.3 Specific Performance...........................................................................47
Section 9.4 Severability...................................................................................47
Section 9.5 Fees and Expenses..............................................................................47
Section 9.6 Parties in Interest............................................................................48
Section 9.7 Notices........................................................................................48
Section 9.8 Counterparts...................................................................................49
Section 9.9 Entire Agreement...............................................................................49
Section 9.10 Governing Law..................................................................................50
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
Section 9.11 Public Announcements...........................................................................50
Section 9.12 Assignment.....................................................................................50
Section 9.13 Director and Officer Liability.................................................................50
EXHIBITS
Exhibit A Form of Amended and Restated Shareholder Agreement
Exhibit B Form of Legal Opinion of Fulbright & Jaworski L.L.P.
Exhibit C Financial Advisory Agreement
Exhibit D Form of Monitoring and Oversight Agreement
Exhibit E Form of Indemnification Agreement
</TABLE>
-iii-
<PAGE> 5
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of August 21, 1998, by and between
Coho Energy, Inc., a Texas corporation (the "Company"), and HM 4 Coho, L.P., a
Texas limited partnership (together with its permitted assigns, "Purchaser").
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Additional D&O Policies" has the meaning set forth in Section 4.9(b).
"Affiliate" means, with respect to any Person, any other Person
directly, or indirectly through one or more intermediaries, controlling,
controlled by or under common control with such Person. For purposes of this
definition and this Agreement, the term "control" (and correlative terms) means
the power, whether by contract, equity ownership or otherwise, to direct the
policies or management of a Person.
"Agreement" means this Stock Purchase Agreement, as the same may be
amended, supplemented or modified from time to time in accordance with the terms
hereof.
"Alternative Transaction" has the meaning set forth in Section 4.4(e).
"Approval" means any approval, authorization, grant of authority,
consent, order, qualification, permit, license, variance, exemption, franchise,
concession, certificate, filing or registration, or any waiver of the foregoing,
or any notice, statement or other communication required to be filed with or
delivered to any Governmental Entity or any other Person.
"Articles of Amendment" means articles of amendment to the Articles of
Incorporation increasing the number of authorized shares of Common Stock to
100,000,000 to be submitted to the shareholders of the Company for their
approval at the Shareholders' Meeting.
"Articles of Incorporation" means the Articles of Incorporation of the
Company as amended to the date of this Agreement and as filed with the Secretary
of State of the State of Texas.
"Authorized Preferred Stock" has the meaning set forth in Section
3.1(c)(i).
<PAGE> 6
"Benefit Program or Agreement" has the meaning set forth in Section
3.1(q)(i).
"Board" means the Board of Directors of the Company or any committee
authorized by such Board of Directors to perform any of its obligations
thereunder.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in New York, New
York or Dallas, Texas generally are authorized or required by law or other
government actions to close.
"Bylaws" means the bylaws of the Company as amended to the date of this
Agreement.
"Closings" has the meaning provided therefor in Section 6.1.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations thereunder as in effect on the date hereof.
"Common Stock" means the Company's common stock, par value $.01 per
share.
"Commonly Controlled Entity" has the meaning set forth in Section
3.1(q).
"Company" has the meaning set forth in the introductory paragraph
hereof.
"Company Disclosure Schedule" has the meaning set forth in Section 3.1.
"Company Indemnified Costs" means any and all damages, losses, claims,
liabilities, demands, charges, suits, penalties, costs and expenses (including
court costs and reasonable legal fees and expenses incurred in investigating and
preparing for any litigation or proceeding) that any of the Company Indemnified
Parties incurs and that arise out of (i) any breach or default by Purchaser of
any of the representations or warranties under this Agreement or any agreement
or document executed in connection herewith or (ii) any breach by Purchaser of
any of the covenants or agreements under this Agreement or any other Transaction
Documents.
"Company Indemnified Parties" means each of the Company and its
Subsidiaries and each officer, director, employee, stockholder and Affiliate of
the Company.
"Company Options" has the meaning set forth in Section 3.1(c).
"Company SEC Documents" has the meaning set forth in Section 3.1(e).
"Contracts" means all agreements, contracts, or other binding
commitments, arrangements or plans, written or oral (including any amendments
and other modifications thereto), to which the Company or any of its
Subsidiaries is a party or is otherwise bound.
"Credit Facility" has the meaning set forth in Section 3.1(i).
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<PAGE> 7
"Cure Period" has the meaning set forth in Section 7.1(b)(i).
"Debt", without duplication, means (a) all indebtedness (including the
principal amount thereof or, if applicable, the accreted amount thereof and the
amount of accrued and unpaid interest thereon) of the Company and its
Subsidiaries, whether or not represented by bonds, debentures, notes or other
securities, for the repayment of money borrowed, (b) all deferred indebtedness
of the Company and its Subsidiaries for the payment of the purchase price of
property or assets purchased, (c) all obligations of the Company and its
Subsidiaries to pay rent or other payment amounts under a lease of real or
personal property which is required to be classified as a capital lease or a
liability on the face of a balance sheet prepared in accordance with GAAP, (d)
any outstanding reimbursement obligation of the Company or its Subsidiaries with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of the Company or its Subsidiaries, (e) any payment obligation
of the Company or its Subsidiaries under any interest rate swap agreement,
forward rate agreement, interest rate cap or collar agreement or other financial
agreement or arrangement entered into for the purpose of limiting or managing
interest rate risks, (f) all indebtedness for borrowed money secured by any Lien
existing on property owned by the Company or its Subsidiaries, whether or not
indebtedness secured thereby shall have been assumed, (g) all guaranties,
endorsements, assumptions and other contingent obligations of the Company or its
Subsidiaries in respect of, or to purchase or to otherwise acquire, indebtedness
for borrowed money of others, (h) all other short-term and long-term liabilities
of the Company or its Subsidiaries of any nature, other than accounts payable
and accrued liabilities incurred in the ordinary course of business, and (i) all
premiums, penalties and change of control payments required to be paid or
offered in respect of any of the foregoing as a result of the consummation of
the transactions contemplated by the Transaction Documents regardless if any of
such are actually paid.
"Environmental Laws" has the meaning set forth in Section 3.1(u)(A).
"ERISA" has the meaning set forth in Section 3.1(q)(i).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Financial Advisory Agreement" means that certain Financial Advisory
Agreement between the Company and HMCo dated August 21, 1998 attached as Exhibit
C hereto.
"First Closing" has the meaning set forth in Section 6.1.
"First Closing Date" has the meaning set forth in Section 6.1.
"GAAP" has the meaning set forth in Section 3.1(e).
"Governmental Entity" means any agency, bureau, commission, court,
authority, department, official, political subdivision, tribunal or other
instrumentality of any government, whether (i) regulatory, administrative or
otherwise, (ii) federal, state or local or (iii) domestic or foreign.
-3-
<PAGE> 8
"Hazardous Materials" has the meaning set forth in Section 3.1(u)(B).
"HMCo" has the meaning set forth in Section 6.2.
"HSR Act" has the meaning set forth in Section 3.1(d)(iii).
"Indemnification Agreement" has the meaning set forth in Section
4.9(a).
"Indemnified Parties" means the Purchaser Indemnified Parties or the
Company Indemnified Parties, as the case may be.
"Indemnifying Party" means any person who is obligated to provide
indemnification hereunder.
"Initial Shares" means the Shares to be purchased and sold at the First
Closing.
"Intangible Property" has the meaning set forth in Section 3.1(t).
"IRS" has the meaning set forth in Section 3.1(p)(ii).
"knowledge" has the meaning set forth in Section 3.1(j).
"Law" means any constitutional provision, statute or other law,
ordinance, rule, regulation or interpretation of any thereof and any Order of
any Governmental Entity (including environmental laws).
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
encumbrance, charge or security interest of any kind in or on such asset or the
revenues or income thereon or therefrom.
"Litigation" has the meaning set forth in Section 3.1(k).
"Material Adverse Effect" or "Material Adverse Change" means any
effect, change, event or occurrence that is materially adverse to the business,
operations, properties, condition (financial or otherwise), results of
operations, assets, liabilities or prospects of the Company and its Subsidiaries
taken as a whole.
"Material Contracts" has the meaning given it in Section 3.1(l)(i).
"Monitoring Agreement" means that certain Monitoring and Oversight
Agreement to be entered into between the Company and HMCo. in the form of
Exhibit D hereto.
"Nasdaq" means the Nasdaq Stock Market.
"Oil and Gas Properties" has the meaning set forth in Section 3.1(bb).
-4-
<PAGE> 9
"Order" means any decree, injunction, judgment, order, ruling,
assessment or writ.
"PBGC" has the meaning set forth in Section 3.1(q)(ii).
"Plan" has the meaning set forth in Section 3.1(q)(i).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, limited liability company, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Proxy Statement" has the meaning set forth in Section 3.1(d)(iii).
"Purchase Price" has the meaning set forth in Section 2.1(b).
"Purchaser" has the meaning set forth in the introductory paragraph
hereto.
"Purchaser Designees" has the meaning set forth in Section 4.11.
"Purchaser Indemnified Costs" means any and all damages, losses,
claims, liabilities, demands, charges, suits, penalties, costs and expenses
(including court costs and reasonable legal fees and expenses incurred in
investigating and preparing for any litigation or proceeding) that any of the
Purchaser Indemnified Parties incurs and that arise out of (i) any breach or
default by the Company of any of the representations or warranties under this
Agreement or any agreement or document executed in connection herewith, (ii) any
breach by the Company of any of the covenants or agreements (other than breaches
of covenants to be performed by the Company after the Closing) of the Company
under this Agreement or any other Transaction Document executed in connection
herewith or (iii) are incurred in connection with any litigation or proceedings
brought by any shareholder of the Company (whether such action is brought in
such shareholder's name or derivatively on behalf of the Company) in respect of
the transactions contemplated by this Agreement.
"Purchaser Indemnified Parties" means Purchaser and each officer,
director, employee, stockholder and Affiliate of Purchaser.
"Purchaser's Expenses" means all reasonable out-of-pocket fees, costs
and expenses incurred by Purchaser in connection with its due diligence efforts
or the transactions contemplated by this Agreement, including (i) fees, costs
and expenses of its accountants and counsel and (ii) fees paid to any
Governmental Entity, but expressly excluding any fees paid to Credit Suisse
First Boston Corporation, Purchaser's financial advisor.
"Release" has the meaning set forth in Section 3.1(u)(C).
"Remaining Shares" means the Shares purchased and sold at the Second
Closing.
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<PAGE> 10
"Remedial Action" has the meaning set forth in Section 3.1(u)(D).
"Reserve Report" means the most recent reserve information prepared by
the Company's engineers estimating the proved reserves attributable to the Oil
and Gas Properties as of December 31, 1997 and described in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997.
"Rights Agreement" has the meaning set forth in Section 3.1(x).
"Rule 144" means Rule 144 under the Securities Act of 1933, as amended,
and any successor rule thereto.
"SEC" means the Securities and Exchange Commission.
"Second Closing" has the meaning set forth in Section 6.1.
"Second Closing Date" has the meaning set forth in Section 6.1.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Shareholder Agreement" means the Amended and Restated Shareholder
Agreement to be entered into among the Company, Purchaser and the other party
thereto, substantially in the form attached hereto as Exhibit A.
"Shareholders' Meeting" has the meaning set forth in Section 4.2.
"Share Issuance" has the meaning set forth in Section 3.1(c)(ii).
"Shares" means the shares of Common Stock purchased by Purchaser at
either of the Closings to this Agreement.
"Stock Plans" means the Company's 1993 Stock Option Plan, as amended,
and the 1993 Non-Employee Director Stock Option Plan, as amended.
"Subsidiary" means, (i) a corporation, a majority of whose stock with
voting power, under ordinary circumstances, to elect directors is at the time,
directly or indirectly, owned by the Company, by a Subsidiary of the Company or
by the Company and another Subsidiary, or (ii) any other Person (other than a
corporation) in which the Company, a Subsidiary or the Company and a Subsidiary,
directly or indirectly, at the date of determination thereof has at least a
majority ownership interest.
"Tax" or "Taxes" has the meaning set forth in Section 3.1(p).
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<PAGE> 11
"Tax Return" has the meaning set forth in Section 3.1(p).
"Transaction Documents" means this Agreement, the Shareholders
Agreement and any other documents executed in connection herewith or therewith.
"Transfer" has the meaning set forth in Section 3.2(e).
Section 1.2 References and Titles. All references in this Agreement to
Exhibits, Schedules, Articles, Sections, subsections, and other subdivisions
refer to the corresponding Exhibits, Schedules, Articles, Sections, subsections,
and other subdivisions of this Agreement unless expressly provided otherwise.
Titles appearing at the beginning of any Articles, Sections, subsections, or
other subdivisions of this Agreement are for convenience only, do not constitute
any part of such Articles, Sections, subsections or other subdivisions, and
shall be disregarded in construing the language contained therein. The words
"this Agreement," "herein," "hereby," "hereunder," and "hereof," and words of
similar import, refer to this Agreement as a whole and not to any particular
subdivision unless expressly so limited. The words "this Section," "this
subsection," and words of similar import, refer only to the Sections or
subsections hereof in which such words occur. The word "including" (in its
various forms) means "including without limitation." Pronouns in masculine,
feminine, or neuter genders shall be construed to state and include any other
gender and words, terms, and titles (including terms defined herein) in the
singular form shall be construed to include the plural and vice versa, unless
the context otherwise expressly requires. Unless the context otherwise requires,
all defined terms contained herein shall include the singular and plural and the
conjunctive and disjunctive forms of such defined terms.
ARTICLE II
PURCHASE OF COMMON STOCK
Section 2.1 Purchase of Shares.
(a) Subject to the terms and conditions herein set forth, the
Company will issue and sell to Purchaser, and Purchaser will purchase from the
Company, at the times indicated below, a number of shares of Common Stock equal
to the sum of the following:
(i) at the First Closing, up to 5,095,098 Shares; and
(ii) at the Second Closing, a number of Shares equal to
41,666,666 Shares minus the number of Shares, if any, purchased
at the First Closing.
(b) The purchase price payable for the Shares to be purchased
hereunder shall be $6.00 per Share (or $249,999,996 in the aggregate)
(collectively, the "Purchase Price").
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<PAGE> 12
(c) Delivery of the Shares shall be made at each Closing by
delivery to Purchaser, against payment of the Purchase Price therefor as
provided herein, of a share certificate representing the total number of Shares
to be purchased at such Closing by Purchaser hereunder.
(d) Payment of the Purchase Price for the Shares to be purchased
hereunder shall be made by or on behalf of Purchaser by wire transfer of
immediately available funds to an account of the Company (the number for which
account shall have been furnished to Purchaser at least two Business Days prior
to the applicable Closing Date).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of the Company. The Company
represents and warrants to Purchaser as follows (in each case as qualified by
matters reflected on the disclosure schedule dated as of the date of this
Agreement and delivered by the Company to Purchaser on or prior to the date of
this Agreement (the "Company Disclosure Schedule") and made a part hereof by
reference):
(a) Organization, Standing and Power. Each of the Company and
each of its Subsidiaries is a corporation or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated or organized and has the requisite corporate or other
such entity power and authority to carry on its business as now being conducted.
Each of the Company and each of its Subsidiaries is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed or to be in good standing, individually
or in the aggregate, has not had and could not reasonably be expected to have a
Material Adverse Effect on the Company. The Company has delivered (or, in the
case of the Company's Subsidiaries, made available) to Purchaser prior to the
execution of this Agreement complete and correct copies of its Articles of
Incorporation and Bylaws, as in effect on the date of this Agreement, and the
certificate of incorporation and bylaws (or comparable organizational documents)
of its Subsidiaries, in each case as amended to date.
(b) Subsidiaries. Schedule 3.1(b)(i) of the Company Disclosure
Schedule sets forth a true and complete list, as of the date hereof, of each
Subsidiary of the Company, together with the jurisdiction of incorporation or
organization and the percentage of each Subsidiary's outstanding capital stock
(or other voting or equity securities or interests, as applicable) owned by the
Company or another Subsidiary of the Company. Except as set forth in Schedule
3.1(b)(ii) of the Company Disclosure Schedule, all the outstanding shares of
capital stock (or other voting or equity securities or interests, as applicable)
of each Subsidiary of the Company have been validly issued and (with respect to
corporate Subsidiaries) are fully paid and nonassessable and are owned directly
or indirectly by the Company, free and clear of all Liens. Except for the
capital stock of its Subsidiaries
-8-
<PAGE> 13
and the partnership interests listed in Schedule 3.1(b)(iii) of the Company
Disclosure Schedule, as of the date hereof, the Company does not own, directly
or indirectly, any capital stock (or other voting or equity securities or
interests, as applicable) of any corporation, limited liability company,
partnership, joint venture or other entity.
(c) Capital Structure.
(i) The authorized capital stock of Company consists of
50,000,000 shares of Common Stock and 10,000,000 shares of preferred
stock, par value $.01 per share (the "Authorized Preferred Stock"). (A)
25,603,512 shares of Common Stock are issued and outstanding, (B) no
shares of Authorized Preferred Stock are issued and outstanding, (C) no
shares of Common Stock are held by the Company in its treasury and (D)
no shares of Common Stock are held by any of the Company's
Subsidiaries.
(ii) As of the date hereof, there are no bonds, debentures,
notes or other indebtedness issued or outstanding having the right to
vote on any matters on which holders of Common Stock or Authorized
Preferred Stock may vote, including without limitation the approval of
the Articles of Amendment and issuance of the Remaining Shares to the
Purchaser (the "Share Issuance").
(iii) Except as set forth in Schedule 3.1(c)(iii) of the
Company Disclosure Schedule, there are no outstanding warrants, stock
options, stock appreciation rights or other rights to receive any
capital stock of the Company granted under the Stock Plans or
otherwise. Schedule 3.1(c)(iii) of the Company Disclosure Schedule sets
forth a complete and correct list, as of the date hereof, of the
number, class and series of shares subject to all warrants, options,
stock appreciation rights or other rights to receive any of the capital
stock of the Company (collectively, "Company Options"), and the
exercise or base prices thereof. Except for the Company Options and,
except as set forth above or in Schedule 3.1(c)(iii) of the Company
Disclosure Schedule, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company or any of its
Subsidiaries is a party or by which any of them is bound obligating the
Company or any of its Subsidiaries to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock (or
other voting or equity securities or interests, as applicable) of the
Company or of any of its Subsidiaries or obligating the Company or any
of its Subsidiaries to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. Except as set forth in Schedule 3.1(c)(iii)
of the Company Disclosure Schedule, there are no outstanding
contractual obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock (or
other voting or equity securities or interests, as applicable) of the
Company or any of its Subsidiaries.
(iv) All outstanding shares of capital stock (or other
voting or equity securities or interests, as applicable) of the Company
and its Subsidiaries are, and all shares
-9-
<PAGE> 14
which may be issued will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive or
similar rights.
(v) Except as contemplated hereby or in the other
Transaction Documents or as set forth in Schedule 3.1(c)(iii) of the
Company Disclosure Schedule, there are not as of the date hereof and
there will not be at the time of either Closing any shareholder
agreements, voting agreements or trusts, proxies or other agreements or
contractual obligations to which the Company or any Subsidiary is a
party or bound with respect to the voting or disposition of any shares
of the capital stock (or other voting or equity securities or
interests, as applicable) of the Company or any of its Subsidiaries
and, to the Company's knowledge, as of the date hereof, there are no
other shareholder agreements, voting agreements or trusts, proxies or
other agreements or contractual obligations among the shareholders of
the Company with respect to the voting or disposition of any shares of
the capital stock (or other voting or equity securities or interests,
as applicable) of the Company or any of its Subsidiaries.
(d) Authority; No Violations; Approvals.
(i) The Board has approved this Agreement and each of the
transactions contemplated hereby, and declared this Agreement to be in
the best interests of the shareholders of the Company. The Company has
all requisite corporate power and authority to enter into this
Agreement and to consummate each of the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of each of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the
Company, other than the approval of the Articles of Amendment and the
Share Issuance by the requisite votes of the shareholders of the
Company as provided in Section 4.2. This Agreement has been duly
executed and delivered by the Company and, assuming this Agreement
constitutes the valid and binding obligation of Purchaser, constitutes
a valid and binding obligation of Company enforceable in accordance
with its terms, subject, as to enforceability, to bankruptcy,
insolvency, reorganization, moratorium and other laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(ii) Except as set forth in Schedule 3.1(d)(ii) of the
Company Disclosure Schedule, the execution and delivery of this
Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof will not,
conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any material
obligation or to the loss of a material benefit under, or give rise to
a right of purchase under, result in the creation of any Lien upon any
of the properties or assets of the Company or any of its Subsidiaries
under, or otherwise result in a material detriment to the Company or
any of its Subsidiaries under, any provision of (A) the Articles of
Incorporation or Bylaws or any provision of the comparable charter or
organizational documents of any of
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<PAGE> 15
its Subsidiaries, (B) any loan or credit agreement, note, bond,
mortgage, indenture, lease, other agreement or Approval applicable to
the Company or any of its Subsidiaries, (C) any joint venture or other
ownership arrangement or (D) assuming the Approvals referred to in
Section 3.1(d)(iii) are duly and timely obtained or made, any Law or
Order applicable to the Company or any of its Subsidiaries or any of
their respective properties or assets, other than, in the case of
clause (B) or (D), any such conflicts, violations, defaults, rights,
Liens, detriments, Laws or Orders that, individually or in the
aggregate, have not had and could not reasonably be expected to (x)
have a Material Adverse Effect on the Company, (y) impair the ability
of the Company to perform its obligations under any of the Transaction
Documents in any material respect, or (z) delay in any material respect
or prevent the consummation of any of the transactions contemplated by
any of the Transaction Documents.
(iii) No Approval from any Governmental Entity is required
by or with respect to the Company or any of its Subsidiaries in
connection with the execution and delivery of this Agreement or any
other Transaction Document by the Company or the consummation by the
Company of the transactions contemplated hereby or thereby, except for:
(A) if applicable, the filing of a notification report by Company under
the Hart-Scott- Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the expiration or termination of the applicable
waiting period with respect thereto; (B) the filing with the SEC of (x)
a proxy statement in preliminary and definitive form relating to the
meeting of the shareholders of the Company to be held in connection
with the approval of the Articles of Amendment and the Share Issuance
(the "Proxy Statement") and (y) such reports under Section 13(a) of the
Exchange Act and such other compliance with the Exchange Act and the
rules and regulations thereunder, as may be required in connection with
this Agreement, the other Transaction Documents and the transactions
contemplated hereby and thereby; (C) such Approvals as may be required
by any applicable state securities or "blue sky" laws; (D) such
Approvals as may be required by any foreign securities, corporate or
other Laws; and (E) any such Approval the failure of which to be made
or obtained has not had and could not reasonably be expected (1) impair
the ability of the Company to perform its obligations under any of the
Transaction Documents in any material respect or (2) delay in any
material respect or prevent the consummation of any of the transactions
contemplated by any of the Transaction Documents.
(e) SEC Documents. The Company has made available to Purchaser
a true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by the Company with the SEC since December 31,
1995 and prior to or on the date of this Agreement (the "Company SEC
Documents"), which are all the documents (other than preliminary materials) that
the Company was required to file with the SEC between December 31, 1995 and the
date of this Agreement. As of their respective dates, the Company SEC Documents
complied in all material respects with the requirements of the Securities Act,
or the Exchange Act, as the case may be, and the rules and regulations of the
SEC thereunder applicable to such Company SEC Documents, and none of the Company
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The
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<PAGE> 16
financial statements of the Company included in the Company SEC Documents
complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto or,
in the case of the unaudited statements, as permitted by Rule 10-01 of
Regulation S-X of the SEC) and fairly present in accordance with applicable
requirements of GAAP (subject, in the case of the unaudited statements, to
normal, recurring adjustments, none of which are material) the consolidated
financial position of the Company and its consolidated Subsidiaries as of their
respective dates and the consolidated results of operations and the consolidated
cash flows of the Company and its consolidated Subsidiaries for the periods
presented therein. Except as disclosed in the Company SEC Documents, there are
no agreements, arrangements or understandings between the Company and any party
who is or was at any time prior to the date hereof but after December 31, 1996
an Affiliate of the Company that are required to be disclosed in the Company SEC
Documents.
(f) Information Supplied. None of the information included or
incorporated by reference in the Proxy Statement will, at the date mailed to
shareholders of the Company or at the time of the Shareholders' Meeting or as of
either Closing, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. If at any time prior to the Shareholders Meeting any event with
respect to the Company or any of its Subsidiaries, or with respect to other
information in the Proxy Statement, shall occur which is required to be
described in an amendment of, or a supplement to, the Proxy Statement, such
event shall be so described, and such amendment or supplement shall be promptly
filed with the SEC and, as required by Law, disseminated to the shareholders of
the Company. The Proxy Statement, insofar as it relates to the Company or its
Subsidiaries, will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
(g) Absence of Certain Changes or Events. Except as disclosed
in Schedule 3.1(g) to the Company Disclosure Schedule or as disclosed in, or
reflected in the financial statements included in, the Company SEC Documents, or
except as contemplated by this Agreement, since December 31, 1997, each of the
Company and its Subsidiaries have conducted their business only in the ordinary
course consistent with past practice, and there has not occurred: (i) any event
that would have been prohibited by Section 4.5 if the terms of such Section had
been in effect as of and after December 31, 1997; (ii) any material casualties
affecting the Company or any of its Subsidiaries or any material loss, damage or
destruction to any of their respective properties or assets, including the Oil
and Gas Properties; or (iii) any event, circumstance or fact that has had or
could reasonably be expected to (x) have a Material Adverse Effect on the
Company, (y) impair the ability of the Company to perform its obligations under
any of the Transaction Documents in any material respect, or (z) delay in any
material respect or prevent the consummation of any of the transactions
contemplated by any of the Transaction Documents.
(h) No Undisclosed Material Liabilities. Except as disclosed
in the Company SEC Documents, there are no material liabilities or obligations
of the Company or any of its Subsidiaries of any kind whatsoever, whether
accrued, contingent, absolute, determined,
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<PAGE> 17
determinable or otherwise, required by GAAP to be recognized or disclosed on a
consolidated balance sheet of the Company and its consolidated Subsidiaries or
in the notes thereto, other than: (i) liabilities adequately provided for on the
balance sheet of the Company dated as of March 31, 1998 (including the notes
thereto) contained in the Company's Quarterly Report on Form 10-Q for the three
months ended March 31, 1998; (ii) liabilities incurred in the ordinary course of
business consistent with past practice since March 31, 1998; and (iii)
liabilities arising under the Transaction Documents.
(i) No Default. Neither the Company nor any of its
Subsidiaries is in default or violation (and no event has occurred which, with
notice or the lapse of time or both, would constitute a default or violation) of
any term, condition or provision of (i) Articles of Incorporation or Bylaws of
the Company or the comparable charter or organizational documents of any of its
Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease, instrument, permit, concession, franchise, license or any
other contract, agreement, arrangement or understanding to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective properties or assets is bound, or (iii)
any Law applicable to the Company or any of its Subsidiaries, except in the case
of clause (ii) and (iii), for violations or defaults that, individually or in
the aggregate, have not had and could not reasonably be expected to (x) have a
Material Adverse Effect on the Company, (y) impair the ability of the Company to
perform its obligations under any of the Transaction Documents in any material
respect, or (z) delay in any material respect or prevent the consummation of any
of the transactions contemplated by any of the Transaction Documents. The
Company (i) is not in breach of or default under any financial covenant under
the Company's Fourth Amended and Restated Credit Agreement among the Company,
its Subsidiaries, Banque Paribas, Houston Agency, and the other parties thereto
dated December 18, 1997 (the "Credit Facility") and (ii) does not have any
reason to believe that it will be in breach of or default under any financial
covenant under the Credit Facility as of the next date on which the Company is
required to be in compliance with any such financial covenant (other than any
breaches or defaults which the Company reasonably believes will be waived by the
lenders under the Credit Facility).
(j) Compliance with Applicable Laws. The Company and each of
its Subsidiaries has in effect all Approvals of all Governmental Entities
necessary for the lawful conduct of their respective businesses, and there has
occurred no default or violation (and no event has occurred which, with notice
or the lapse of time or both, would constitute a default or violation) under any
such Approval, except for failures to obtain, or for defaults or violations
under, Approvals which failures, defaults or violations, individually or in the
aggregate, have not had and could not reasonably be expected to (i) have a
Material Adverse Effect on the Company, (ii) impair the ability of the Company
to perform its obligations under any of the Transaction Documents in any
material respect, or (iii) delay in any material respect or prevent the
consummation of any of the transactions contemplated by any of the Transaction
Documents. Except as disclosed in the Company SEC Documents, the businesses of
the Company and its Subsidiaries are in compliance with all applicable Laws and
Orders, except for possible noncompliance, which individually or in the
aggregate, has not had and could not reasonably be expected to have any effect
referred to in clause (i), (ii) or (iii) above. No investigation or review by
any Governmental Entity with respect to the Company, any
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<PAGE> 18
of its Subsidiaries, the transactions contemplated by this Agreement and the
other Transaction Documents, is pending or, to the knowledge of the Company,
threatened, nor has any Governmental Entity indicated to the Company or any of
its Subsidiaries any intention to conduct the same, other than those the outcome
of which, individually or in the aggregate, has not had and could not reasonably
be expected to have any effect referred to in clause (i), (ii) or (iii) above.
For purposes of this Agreement "knowledge" means the actual knowledge of the
officers, directors or senior managers of Purchaser or the Company, as the case
may be, after reasonable inquiry.
(k) Litigation. Except as disclosed in the Company SEC
Documents or Schedule 3.1(k) of the Company Disclosure Schedule, there is no
suit, action, proceeding or indemnification claim, at law or in equity, pending
before any Governmental Entity, or, to the knowledge of the Company, threatened,
against or affecting the Company or any of its Subsidiaries ("Litigation"), and
the Company is not a party to any Litigation, and the Company and its
Subsidiaries have no knowledge of any facts that are likely to give rise to any
Litigation, that (in any case) has had or could reasonably be expected to (i)
have a Material Adverse Effect on the Company, (ii) impair the ability of the
Company to perform its obligations under any of the Transaction Documents in any
material respect, or (iii) delay in any material respect or prevent the
consummation of any of the transactions contemplated by any of the Transaction
Documents, nor is there any Order of any Governmental Entity or arbitrator
outstanding against the Company or any of its Subsidiaries which has had or
could reasonably be expected to have any effect referred to in clause (i), (ii)
or (iii) above. Schedule 3.1(k) of the Company Disclosure Schedule contains an
accurate and complete list of all Litigation and all Orders to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective assets or properties are bound.
(l) Certain Agreements; Contract Interests.
(i) Except as disclosed in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, the Company's
Quarterly Report on Form 10-Q for the three months ended March 31, 1998
and Schedule 3.1(l)(i) of the Company Disclosure Schedule, there are no
(A) employment or consulting Contracts (unless such employment or
consulting Contracts are terminable without liability or penalty on 30
days or less notice), (B) Contracts under which any party thereto
remains obligated to provide goods or services having a value, or to
make payments aggregating (for Debt or otherwise), in excess of
$1,000,000 per year, (C) other Contracts that are material to the
Company and its Subsidiaries, taken as a whole, or their respective
business, and (D) Contracts with Affiliates, in any such case, to which
the Company or any Subsidiary is a party or to which the Company or any
Subsidiary or their respective assets is bound (such Contracts
disclosed or required to be disclosed, the "Material Contracts"). Each
Material Contract is a valid and binding obligation of the Company or
one of its Subsidiaries and, to the knowledge of the Company, of each
party thereto other than the Company or its respective Subsidiary and
is in full force and effect without amendment.
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<PAGE> 19
(ii) The Company or the relevant Subsidiary and, to
the knowledge of the Company, each other party to the Material
Contracts, has performed in all material respects the obligations
required to be performed by it under the Material Contracts and is not
(with or without lapse of time or the giving of notice, or both) in
breach or default thereunder.
(iii) Schedule 3.1(l)(iii) of the Company Disclosure
Schedule identifies, as to each Material Contract listed thereon, (A)
whether the consent of the other party thereto is required, (B) whether
notice must be provided to any party thereto (and the length of such
notice) and (C) whether any payments are required (and the amount of
such payments), in each case in order for such Material Contract to
continue in full force and effect upon the consummation of the
transactions contemplated hereby and by the other Transaction
Documents, and (D) whether such Material Contract can be canceled by
the other party without liability to such other party due to the
consummation of the transactions contemplated hereby and by the other
Transaction Documents.
(iv) A complete copy of each written Material
Contract and a written description of each oral Material Contract has
been made available to Purchaser prior to the date of this Agreement.
(v) Except as disclosed in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 or in Schedule
3.1(l)(v) of the Company Disclosure Schedule, none of the Company or of
its Subsidiaries is a party to any oral or written agreement, plan or
arrangement with any employee (whether an employee, consultant or an
independent contractor) of the Company or its Subsidiary (A) the
benefits of which are contingent, or the terms of which are materially
altered, upon, or result from, the occurrence of a transaction
involving the Company or its Subsidiary of the nature of any of the
transactions contemplated by this Agreement, (B) providing severance
benefits longer than 45 days or other benefits after the termination of
employment or other contractual relationship regardless of the reason
for such termination and regardless of whether such termination is
before or after a change of control, (C) under which any person may
receive payments subject to the tax imposed by Section 4999 of the Code
or (D) any of the benefits of which will be increased, or the vesting
of benefits of which will be accelerated, by the occurrence of any of
the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement.
(vi) The Company has made available to Purchaser (A)
true and correct copies of all loan or credit agreements, notes, bonds,
mortgages, indentures and other agreements and instruments pursuant to
which any Debt of the Company or any of its Subsidiaries is outstanding
or may be incurred and (B) accurate information regarding the
respective principal amounts currently outstanding thereunder.
(m) Title to Properties. Except as disclosed in the
Company SEC Documents or on Schedule 3.1(m), to the Company Disclosure Schedule,
the Company and its Subsidiaries have
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<PAGE> 20
or will have good and defensible title to all the producing oil and gas
properties described in the Company SEC Documents as being owned by them or to
be owned by them at the time of each Closing, title investigations have been
conducted with respect to such properties in accordance with customary practices
in the oil and gas industry, free and clear of any Liens except for (i) Liens
for taxes not yet due, and (ii) other Liens that, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
(n) Intentionally omitted.
(o) Status of Shares. Subject to receipt of the approval of
the Share Issuance and the Articles of Amendment by the Company's shareholders
as contemplated by Section 4.2, the issuance and sale of the Shares have been
duly authorized by all necessary corporate action on the part of the Company and
such Shares, when delivered to Purchaser at the Closing against payment therefor
as provided herein, will be validly issued, fully paid and non-assessable and
the issuance and sale of the Shares is not and will not be subject to preemptive
rights of any other shareholder of the Company.
(p) Taxes. Except as disclosed in the Company's Annual Report
on Form 10-K for the year ended December 31, 1997 or Schedule 3.1(p) of the
Company Disclosure Schedule:
(i) Each of the Company, each of its Subsidiaries and any
affiliated, consolidated, combined, unitary or similar group of which
the Company or any of its Subsidiaries is or was a member has (A) duly
filed on a timely basis (taking into account any extensions) all U.S.
federal income Tax Returns (as hereinafter defined), and all other
material Tax Returns, required to be filed or sent by or with respect
to it, and all such Tax Returns are true, correct and complete in all
material respects, (B) duly paid or deposited on a timely basis all
Taxes (as hereinafter defined) that are shown to be due and payable on
or with respect to such Tax Returns (including all required estimated
Tax payments sufficient to avoid material under payment penalties), and
all material Taxes that are otherwise due and payable (except for audit
adjustments not material in the aggregate or to the extent that
liability therefor is reserved for in the Company's most recent audited
financial statements) for which the Company or any of its Subsidiaries
may be liable, (C) established reserves that are adequate for the
payment of all material Taxes not yet due and payable with respect to
the results of operations of the Company and its Subsidiaries through
the date hereof, and (D) complied in all material respects with all
applicable Laws relating to the reporting, payment and withholding of
Taxes that are required to be withheld from payments to employees,
independent contractors, creditors, shareholders or any other third
party and has in all material respects timely withheld from employee
wages and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over.
(ii) Schedule 3.1(p)(ii) of the Company Disclosure Schedule
sets forth (A) the last taxable period through which the federal income
Tax Returns of the Company and any of its Subsidiaries have been
examined by the Internal Revenue Service ("IRS") or for which the
statute of limitations for assessment has otherwise closed and (B) any
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<PAGE> 21
affiliated, consolidated, combined, unitary or similar group or Tax
Return in which the Company or any of its Subsidiaries is or has been a
member or joins or has joined in the filing. Except to the extent being
contested in good faith, all material deficiencies asserted as a result
of such examinations and any examination by any applicable taxing
authority have been paid, fully settled or adequately provided for in
the Company's most recent audited financial statements. Except as
disclosed in or adequately provided for in the Company SEC Documents or
disclosed in Schedule 3.1(p)(ii) of the Company Disclosure Schedule, no
audits or other administrative proceedings or court proceedings are
presently pending, or to the knowledge of the Company, threatened, with
regard to any Taxes for which the Company or any of its Subsidiaries
would be liable, and no material deficiency for any Taxes has been
proposed, asserted or assessed (whether by examination report or prior
to completion of examination by means of notices of proposed adjustment
or other similar requests or notices) pursuant to such examination
against the Company or any of its Subsidiaries by any taxing authority
with respect to any period.
(iii) Neither the Company nor any of its Subsidiaries has
executed or entered into (or prior to the close of business on the
Closing Date will execute or enter into) with the IRS or any taxing
authority (A) any agreement or other document extending or having the
effect of extending the period for assessment or collection of any
income or franchise Taxes for which the Company or any of its
Subsidiaries would be liable or (B) a closing agreement pursuant to
Section 7121 of the Code or any similar provision of state, local,
foreign or other income tax Law, which will require any increase in
taxable income or alternative minimum taxable income, or any reduction
in tax credits, for the Company or any of its Subsidiaries for any
taxable period ending after the Closing Date.
(iv) Except as set forth in the Company SEC Documents or
Schedule 3.1(p)(iv) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries is a party to an agreement that
provides for the payment of any amount that would constitute a
"parachute payment" within the meaning of Section 280G of the Code or
that would constitute compensation whose deductibility is limited under
Section 162(m) of the Code.
(v) Except as set forth in the Company SEC Documents,
neither the Company nor any of its Subsidiaries is a party to, is bound
by or has any obligation under, any tax sharing or allocation agreement
or similar agreement or arrangement.
(vi) There are no requests for rulings or outstanding
subpoenas from any taxing authority for information with respect to
Taxes of the Company or any of its Subsidiaries and, to the knowledge
of the Company, no material reassessments (for property or ad valorem
tax purposes) of any assets or any property owned or leased by the
Company or any of its Subsidiaries have been proposed in written form.
(vii) No consent to the application of Section 341(f)(2) of
the Code has been made or filed by or with the Company or any of its
Subsidiaries. Neither the Company
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<PAGE> 22
nor any of its Subsidiaries has agreed to make any adjustment pursuant
to Section 481(a) of the Code (or any predecessor provision) by reason
of any change in any accounting method of the Company or any of its
Subsidiaries, and neither the Company nor any of its Subsidiaries has
any application pending with any taxing authority requesting permission
for any changes in any accounting method of the Company or any of its
Subsidiaries. To the knowledge of the Company, neither the IRS nor any
other taxing authority has proposed in writing, and neither the Company
nor any of its Subsidiaries is otherwise required to make, any such
adjustment or change in accounting method.
(viii) Except as set forth on Schedule 3.1(p)(viii) of the
Company Disclosure Schedule, there are no material excess loss accounts
or deferred intercompany transactions between the Company and/or any of
its Subsidiaries within the meaning of Treas. Reg. Section 1.1502-13 or
1.1502-19, respectively.
For purposes of this Agreement, "Tax" (and, with correlative
meaning, "Taxes") means (i) any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid by the Company or any
of its Subsidiaries, payroll, employment, excise, production, severance, stamp,
occupation, premium, property, environmental or windfall profit tax, custom,
duty or other tax, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest and/or any penalty, addition to tax
or additional amount imposed by any taxing authority, (ii) any liability of the
Company or any of its Subsidiaries for the payment of any amounts of the type
described in (i) as a result of being a member of an affiliated or consolidated
group, or arrangement whereby liability of the Company or any of its
Subsidiaries for payment of such amounts was determined or taken into account
with reference to the liability of any other person for any period and (iii)
liability of the Company or any of its Subsidiaries with respect to the payment
of any amounts of the type described in (i) or (ii) as a result of any express
or implied obligation to indemnify any other Person.
"Tax Return" means all returns, declarations, reports,
estimates, information returns and statements required to be filed by or with
respect to the Company or any of its Subsidiaries in respect of any Taxes,
including (i) any consolidated federal income tax return in which Company or any
of its Subsidiaries is included and (ii) any state, local or foreign income tax
returns filed on a consolidated, combined or unitary basis (for purposes of
determining Tax liability) in which the Company or any of its Subsidiaries is
included.
(q) Employee Benefit Matters.
(i) Schedule 3.1(q) of the Company Disclosure
Schedule provides a description of each of the following which is
sponsored, maintained or contributed to by the Company for the benefit
of the employees of the Company, former employees of the Company,
directors of the Company, former directors of the Company, or any
agents, consultants, or similar representatives providing services to
or for the Company, or has been
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<PAGE> 23
so sponsored, maintained or contributed to within six years prior to
the First Closing Date for the benefit of such individuals:
(A) each "employee benefit plan," as such term
is defined in section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") (including, but not
limited to, employee benefit plans, such as foreign plans,
which are not subject to the provisions of ERISA) ("Plan");
(B) each personnel policy, stock option plan,
stock purchase plan, stock appreciation rights, phantom stock
plan, collective bargaining agreement, bonus plan or
arrangement, incentive award plan or arrangement, vacation
policy, severance pay plan, policy or agreement, deferred
compensation agreement or arrangement, executive compensation
or supplemental income arrangement, consulting agreement,
employment agreement and each other employee benefit plan,
agreement, arrangement, program, practice or understanding
which is not described in Section 3.1(9)(i) ("Benefit Program
or Agreement").
(ii) True, correct and complete copies of each of the
Plans, related trusts, insurance or group annuity contracts and each
other funding or financing arrangement relating to any Plan, including
all amendments thereto, have been furnished to Purchaser. There has
also been furnished to Purchaser, with respect to each Plan required to
file such report and description, the most recent report on Form 5500
and the summary plan description. True, correct and complete copies or
descriptions of all Benefit Programs and Agreements have also been
furnished to Purchaser. The Purchaser has also been furnished a recent
actuarial report or valuation for each Plan subject to Title IV of
ERISA. Additionally, the most recent determination letter from the
Internal Revenue Service for each of the Plans intended to be qualified
under section 401 of the Internal Revenue Code of 1986, as amended (the
"Code"), and any outstanding determination letter application for such
plans has been furnished.
(iii) Except as otherwise set forth on Schedule
3.1(q) of the Company Disclosure Schedule,
(A) The Company has substantially performed all
obligations, whether arising by operation of law or by
contract, required to be performed by it in connection with
the Plans and the Benefit Programs and Agreements, and to the
knowledge of the Company there have been no defaults or
violations by any other party to the Plans, Benefit Programs
or Agreements;
(B) All reports and disclosures relating to the
Plans required to be filed with or furnished to governmental
agencies, Plan participants or Plan beneficiaries have been
filed or furnished in accordance with applicable Law in a
timely manner, and each Plan and each Benefit Program or
Agreement has been administered in substantial compliance with
its governing documents;
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<PAGE> 24
(C) Each of the Plans intended to be qualified
under section 401 of the Code satisfies the requirements of
such section and has received a favorable determination letter
from the Internal Revenue Service regarding such qualified
status and has not, since receipt of the most recent favorable
determination letter, been amended or, to the knowledge of the
Company, operated in a way which would adversely affect such
qualified status;
(D) Each Plan, Benefit Program, and Agreement
has been administered in material compliance with its terms,
the applicable provisions of ERISA, the Code and all other
applicable laws and the terms of all applicable collective
bargaining agreements;
(E) There are no actions, suits or claims
pending (other than routine claims for benefits) or, to the
knowledge of the Company threatened against, or with respect
to, any of the Plans, Benefit Programs or Agreements or their
assets;
(F) All contributions required to be made to the
Plans by the Company on behalf of the Company or its employees
pursuant to their terms and provisions have been made timely;
(G) No Plan is subject to Title IV of ERISA;
(H) As to any Plan intended to be qualified
under section 401 of the Code, there has been no termination
or partial termination of the Plan within the meaning of
section 411(d)(3) of the Code;
(I) No act, omission or transaction has occurred
which would result in imposition on the Company of (1) breach
of fiduciary duty liability damages under section 409 of
ERISA, (2) a civil penalty assessed pursuant to subsections
(c), (i) or (l) of section 502 of ERISA or (3) a Tax imposed
pursuant to Chapter 43 of Subtitle D of the Code;
(J) To the knowledge of Company, there is no
matter pending (other than routine qualification determination
filings) with respect to any of the Plans before the Internal
Revenue Service, the Department of Labor or the PBGC;
(K) Each trust funding a Plan, which trust is
intended to be exempt from federal income taxation pursuant to
section 501(c)(9) of the Code, satisfies the requirements of
such section and has received a favorable determination letter
from the Internal Revenue Service regarding such exempt status
and has not, since receipt of the most recent favorable
determination letter, been amended or operated in a way which
would materially adversely affect such exempt status;
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<PAGE> 25
(L) With respect to any employee benefit plan,
within the meaning of section 3(3) of ERISA, which is not
listed in Schedule 3.1(q) of the Company Disclosure Statement
but which is sponsored, maintained or contributed to, or has
been sponsored, maintained or contributed to within six years
prior to the First Closing Date, by any corporation, trade,
business or entity under common control with the Company,
within the meaning of section 414(b), (c) or (m) of the Code
or section 4001 of ERISA ("Commonly Controlled Entity"), (1)
no withdrawal liability, within the meaning of section 4201 of
ERISA, has been incurred, which withdrawal liability has not
been satisfied, (2) no liability to the PBGC has been incurred
by any Commonly Controlled Entity, which liability has not
been satisfied, (3) no accumulated funding deficiency, whether
or not waived, within the meaning of section 302 of ERISA or
section 412 of the Code has been incurred, and (4) all
contributions (including installments) to such plan required
by section 302 of ERISA and section 412 of the Code have been
timely made; and
(M) The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby
will not (1) require the Company to make a larger contribution
to, or pay greater benefits under, any Plan, Benefit Program
or Agreement than it otherwise would or (2) create or give
rise to any additional vested rights or service credits under
any Plan, Benefit Program, or Agreement.
(iv) Except as otherwise set forth in Schedule 3.1(q)
of the Company Disclosure Schedule, the Company is not a party to any
agreement, nor has it established any policy or practice, requiring it
to make a payment or provide any other form of compensation or benefit
to any person performing services for the Company upon termination of
such services which would not be payable or provided in the absence of
the consummation of the transactions contemplated by this Agreement.
(v) Except as otherwise set forth in Schedule 3.1(q)
of the Company Disclosure Schedule, no payments have or are expected to
be made under the Plans, Benefit Programs and Agreements which, in the
aggregate, would result in all or part of such payments not being
deductible by the payor under sections 280G and or 162(m) of the Code.
(vi) Except as otherwise set forth in Schedule 3.1(q)
of the Company Disclosure Schedule, the Company is not a party to or is
bound by any severance agreement involving $50,000 or more.
(vii) Each Plan which is an "employee welfare benefit
plan", as such term is defined in section 3(1) of ERISA, may be
unilaterally amended or terminated in its entirety without liability
except as to benefits accrued thereunder prior to such amendment or
termination.
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<PAGE> 26
(viii) Except as otherwise set forth in Schedule
3.1(q) of the Company Disclosure Schedule, no Plan, Benefit Program or
Agreement provides retiree medical or retiree life insurance benefits
to any person and the Company is not contractually or otherwise
obligated (whether or not in writing) to provide any person with life
insurance or medical benefits upon retirement or termination of
employment, other than as required by the provisions of section 601
through 608 of ERISA and section 4980B of the Code.
(ix) As to each Plan described on Schedule 3.1(q) of
the Company Disclosure Schedule which is a multiemployer plan within
the meaning of section 3(37) of ERISA, Schedule 3.1(i) of the Company
Disclosure Schedule accurately describes the dollar amount of
withdrawal liability which would be owed by the Company to such Plan if
the Company ceased contributing to such Plan immediately after
consummation of the transaction contemplated by this Agreement.
(x) Except as otherwise set forth in Schedule 3.1(q)
of the Company Disclosure Schedule, no Plan, Benefit Program or
Agreement provides that payments pursuant to such Plan, Benefit Program
or Agreement may be made in securities of the Company or a Commonly
Controlled Entity, nor does any trust maintained pursuant to any Plan,
Benefit Program or Agreement hold any securities of the Company or a
Commonly Controlled Entity.
(r) Schedule 3.1(r) of the Company Disclosure Schedule sets
forth by number and employment classification the approximate numbers of
employees employed by the Company as of the date of this Agreement, and, except
as set forth therein, none of said employees are subject to union or collective
bargaining agreements with the Company. Except as otherwise set forth in
Schedule 3.1(r) of the Company Disclosure Schedule, the Company has not at any
time on or after January 1, 1995 had or, to the knowledge of Company, been
threatened with any work stoppages or other labor disputes or controversies with
respect to its employees which had a material adverse effect on the Company.
(s) Labor Matters. Except as set forth in Schedule 3.1(s) of
the Company Disclosure Schedule or in the Company SEC Documents:
(i) neither the Company nor any of its Subsidiaries
is a party to any collective bargaining agreement or other current
labor agreement with any labor union or organization, and there is no
current union representation question involving employees of the
Company or any of its Subsidiaries, nor does the Company or any of its
Subsidiaries know of any activity or proceeding of any labor
organization (or representative thereof) or employee group (or
representative thereof) to organize any such employees;
(ii) there is no unfair labor practice charge or
grievance arising out of a collective bargaining agreement or other
grievance procedure against the Company or any of its Subsidiaries
pending, or, to the knowledge of the Company or any of its
Subsidiaries, threatened, that, individually or in the aggregate, has
had or could reasonably be expected
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<PAGE> 27
to (A) have a Material Adverse Effect on the Company, (B) impair the
ability of the Company to perform its obligations under any of the
Transaction Documents in any material respect, or (C) delay in any
material respect or prevent the consummation of any of the transactions
contemplated by any of the Transaction Documents;
(iii) there is no complaint, lawsuit or proceeding in
any forum by or on behalf of any present or former employee, any
applicant for employment or any classes of the foregoing alleging
breach of any express or implied contract of employment, any Law
governing employment or the termination thereof or other
discriminatory, wrongful or tortious conduct in connection with the
employment relationship against the Company or any of its Subsidiaries
pending, or, to the knowledge of the Company or any of its
Subsidiaries, threatened, that, individually or in the aggregate, has
had or could reasonably be expected to (A) have a Material Adverse
Effect on the Company, (B) impair the ability of the Company to perform
its obligations under any of the Transaction Documents in any material
respect, or (C) delay in any material respect or prevent the
consummation of any of the transactions contemplated by any of the
Transaction Documents;
(iv) there is no strike, dispute, slowdown, work
stoppage or lockout pending, or, to the knowledge of the Company or any
of its Subsidiaries, threatened, against or involving the Company or
any of its Subsidiaries that, individually or in the aggregate, has had
or could reasonably be expected to (A) have a Material Adverse Effect
on the Company, (B) impair the ability of the Company to perform its
obligations under any of the Transaction Documents in any material
respect, or (C) delay in any material respect or prevent the
consummation of any of the transactions contemplated by any of the
Transaction Documents;
(v) The Company and each of its Subsidiaries are in
compliance with all applicable Laws respecting employment and
employment practices, terms and conditions of employment, wages, hours
of work and occupational safety and health, except for non-compliance
that, individually or in the aggregate, has not had and could not
reasonably be expected to (A) have a Material Adverse Effect on the
Company, (B) impair the ability of the Company to perform its
obligations under any of the Transaction Documents in any material
respect, or (C) delay in any material respect or prevent the
consummation of any of the transactions contemplated by any of the
Transaction Documents; and
(vi) There is no proceeding, claim, suit, action or
governmental investigation pending or, to the knowledge of the Company
or any of its Subsidiaries, threatened, in respect to which any current
or former director, officer, employee or agent of the Company or any of
its Subsidiaries is or may be entitled to claim indemnification from
the Company or any of its Subsidiaries pursuant to the Articles of
Incorporation or Bylaws of the Company or any provision of the
comparable charter or organizational documents of any of its
Subsidiaries, as provided in any indemnification agreement to which the
Company or any Subsidiary of the Company is a party or pursuant to
applicable Law that, individually or in the aggregate, has had or could
reasonably be expected to (A) have a Material Adverse
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<PAGE> 28
Effect on the Company, (B) impair the ability of the Company to perform
its obligations under any of the Transaction Documents in any material
respect, or (C) delay in any material respect or prevent the
consummation of any of the transactions contemplated by any of the
Transaction Documents.
(t) Intangible Property. The Company and its Subsidiaries
possess or have adequate rights to use all material trademarks, trade names,
patents, service marks, brand marks, brand names, computer programs, databases,
industrial designs and copyrights necessary for the operation of the businesses
of each of the Company and its Subsidiaries (collectively, the "Intangible
Property"), except where the failure to possess or have adequate rights to use
such properties, individually or in the aggregate, has not had and could not
reasonably be expected to (i) have a Material Adverse Effect on the Company,
(ii) impair the ability of the Company to perform its obligations under any of
the Transaction Documents in any material respect, or (iii) delay in any
material respect or prevent the consummation of any of the transactions
contemplated by any of the Transaction Documents. All of the Intangible Property
is owned or licensed by the Company or its Subsidiaries free and clear of any
and all Liens, except those that, individually or in the aggregate, have not had
and could not reasonably be expected to (i) have a Material Adverse Effect on
the Company, (ii) impair the ability of the Company to perform its obligations
under any of the Transaction Documents in any material respect, or (iii) delay
in any material respect or prevent the consummation of any of the transactions
contemplated by any of the Transaction Documents, and neither the Company nor
any such Subsidiary has forfeited or otherwise relinquished any Intangible
Property which forfeiture, individually or in the aggregate, has had or could
reasonably be expected to have any effect referred to in clause (i), (ii) or
(iii) above. To the knowledge of the Company, the use of the Intangible Property
by the Company or its Subsidiaries does not, in any material respect, conflict
with, infringe upon, violate or interfere with or constitute an appropriation of
any right, title, interest or goodwill, including any intellectual property
right, trademark, trade name, patent, service mark, brand mark, brand name,
computer program, database, industrial design, copyright or any pending
application therefor of any other person and there have been no claims made and
neither the Company nor any of its Subsidiaries has received any notice of any
claim or otherwise knows that any of the Intangible Property is invalid or
conflicts with the asserted rights of any other person or has not been used or
enforced or has failed to have been used or enforced in a manner that would
result in the abandonment, cancellation or unenforceability of any of the
Intangible Property, except for any such conflict, infringement, violation,
interference, claim, invalidity, abandonment, cancellation or unenforceability
that, individually or in the aggregate, has not had and could not reasonably be
expected to (i) have a Material Adverse Effect on the Company, (ii) impair the
ability of the Company to perform its obligations under any of the Transaction
Documents in any material respect, or (iii) delay in any material respect or
prevent the consummation of any of the transactions contemplated by any of the
Transaction Documents.
(u) Environmental Matters.
For purposes of this Agreement:
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<PAGE> 29
(A) "Environmental Laws" means all federal, state and
local laws (including common laws), rules, regulations, ordinances,
orders, decrees of any Governmental Entity, whether now in existence or
hereafter enacted and in effect at the time of Closing, relating to
pollution or the protection of human health, safety or the environment
of any jurisdiction in which the applicable party hereto owns or
operates assets or conducts business or owned or operated assets or
conducted business (whether or not through a predecessor entity)
(including ambient air, surface water, groundwater, land surface,
subsurface strata, natural resources or wildlife), including laws and
regulations relating to Releases or threatened Releases of Hazardous
Materials or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of solid waste or Hazardous Materials, and any similar laws, rules,
regulations, ordinances, orders and decrees of any foreign jurisdiction
in which the applicable party hereto owns or operates assets or
conducts business;
(B) "Hazardous Materials" means (x) any radioactive
materials, asbestos in any form that is or could become friable, urea
formaldehyde foam insulation, polychlorinated biphenyls or transformers
or other equipment that contain dielectric fluid containing
polychlorinated biphenyls, (y) any chemicals, materials or substances
which are now defined as or included in the definition of "solid
wastes," "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous substances," "restricted hazardous
wastes," "toxic substances" or "toxic pollutants," or words of similar
import, under any Environmental Law and (z) any other chemical,
material, substance or waste, exposure to which is now prohibited,
limited or regulated under any Environmental Law in a jurisdiction in
which the Company or any of its Subsidiaries operates (for purposes of
this Section 3.1(t)).
(C) "Release" means any spill, effluent, emission,
leaking, pumping, pouring, emptying, escaping, dumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
indoor or outdoor environment, or into or out of any property owned,
operated or leased by the applicable party or its Subsidiaries; and
(D) "Remedial Action" means all actions, including
any capital expenditures, required by a Governmental Entity or required
under any Environmental Law, or voluntarily undertaken to (w) clean up,
remove, treat, or in any other way ameliorate or address any Hazardous
Materials or other substance in the indoor or outdoor environment; (x)
prevent the Release or threat of Release, or minimize the further
Release of any Hazardous Material so it does not endanger or threaten
to endanger the public or employee health or welfare of the indoor or
outdoor environment; (y) perform pre-remedial studies and
investigations or post-remedial monitoring and care pertaining or
relating to a Release; or (z) bring the applicable party into
compliance with any Environmental Law.
Except as disclosed in the Company SEC Documents or on
Schedule 3.1(u) of the Company Disclosure Schedule:
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<PAGE> 30
(i) The operations of the Company and its
Subsidiaries have been conducted, are and, as of each Closing Date,
will be, in compliance with all Environmental Laws, except where the
failure to so comply, individually or in the aggregate, has not had and
could not reasonably be expected to (A) have a Material Adverse Effect
on the Company, (B) impair the ability of the Company to perform its
obligations under any of the Transaction Documents in any material
respect, or (C) delay in any material respect or prevent the
consummation of any of the transactions contemplated by any of the
Transaction Documents;
(ii) The Company and its Subsidiaries have obtained
and will maintain all permits, licenses and registrations, or
applications relating thereto, and have made and will make all filings,
reports and notices required under applicable Environmental Laws for
the continued operations of their respective businesses, except such
matters the lack or failure of which, individually or in the aggregate,
has not had and could not reasonably be expected to (A) have a Material
Adverse Effect on the Company, (B) impair the ability of the Company to
perform its obligations under any of the Transaction Documents in any
material respect, or (C) delay in any material respect or prevent the
consummation of any of the transactions contemplated by any of the
Transaction Documents;
(iii) The Company and its Subsidiaries are not
subject to any outstanding written orders issued by, or contracts with,
any Governmental Entity or other person respecting (A) Environmental
Laws, (B) Remedial Action, (C) any Release or threatened Release of a
Hazardous Material or petroleum or petroleum products or (D) an
assumption of responsibility for environmental liabilities of another
person, except such orders or contracts the compliance with which,
individually or in the aggregate, has not had and could not reasonably
be expected to (x) have a Material Adverse Effect on the Company, (y)
impair the ability of the Company to perform its obligations under any
of the Transaction Documents in any material respect, or (z) delay in
any material respect or prevent the consummation of any of the
transactions contemplated by any of the Transaction Documents;
(iv) The Company and its Subsidiaries have not
received any written communication alleging, with respect to any such
party, the violation of or liability under any Environmental Law, which
violation or liability, individually or in the aggregate, has not had
and could not reasonably be expected to (A) have a Material Adverse
Effect on the Company, (B) impair the ability of the Company to perform
its obligations under any of the Transaction Documents in any material
respect, or (C) delay in any material respect or prevent the
consummation of any of the transactions contemplated by any of the
Transaction Documents;
(v) Neither the Company nor any of its Subsidiaries
has any contingent liability in connection with any existing Release of
any Hazardous Material or petroleum or petroleum products into the
indoor or outdoor environment (whether on-site or off-site) or employee
or third party exposure to Hazardous Materials that, individually or in
the aggregate, has had or could reasonably be expected to (A) have a
Material Adverse Effect
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<PAGE> 31
on the Company, (B) impair the ability of the Company to perform its
obligations under any of the Transaction Documents in any material
respect, or (C) delay in any material respect or prevent the
consummation of any of the transactions contemplated by any of the
Transaction Documents;
(vi) The operations of the Company or its
Subsidiaries involving the generation, transportation, treatment,
storage or disposal of hazardous or solid waste, as defined and
regulated under 40 C.F.R. Parts 260-270 (in effect as of the date of
this Agreement) or any applicable state equivalent, are in compliance
with applicable Environmental Laws, except where the failure to so
comply, individually or in the aggregate, has not had and could not
reasonably be expected to (A) have a Material Adverse Effect on the
Company, (B) impair the ability of the Company to perform its
obligations under any of the Transaction Documents in any material
respect, or (C) delay in any material respect or prevent the
consummation of any of the transactions contemplated by any of the
Transaction Documents; and
(vii) To the knowledge of the Company, there is not
now on or in any property of the Company or its Subsidiaries or any
property for which the Company or its Subsidiaries is potentially
liable any of the following: (A) any underground storage tanks or
surface impoundments or (B) any on-site disposal of Hazardous Material,
any of which ((A) or (B) preceding), individually or in the aggregate,
has had or could reasonably be expected to (x) have a Material Adverse
Effect on the Company, (y) impair the ability of the Company to perform
its obligations under any of the Transaction Documents in any material
respect, or (z) delay in any material respect or prevent the
consummation of any of the transactions contemplated by any of the
Transaction Documents.
(v) Insurance. Schedule 3.1(v) of the Company Disclosure
Schedule sets forth an insurance schedule of the Company's and each of its
Subsidiaries' directors' and officers' liability insurance. The Company
maintains insurance in such amounts and covering such risks as are in accordance
with normal industry practice for companies engaged in businesses similar to
those of the Company and each of its Subsidiaries (taking into account the cost
and availability of such insurance).
(w) Vote. Pursuant to Section 4.2, the Company will seek, at
the Shareholders' Meeting, the approval of (i) the Share Issuance by the
affirmative vote of a majority of the total votes cast by the holders of Common
Stock present at the Shareholders' Meeting and entitled to vote thereon, and
(ii) the Articles of Amendment by the affirmative vote of the holders of the
greater of (A) a majority of the issued and outstanding shares of Common Stock
entitled to vote thereon or (B) two-thirds of the shares of Common Stock present
at the Shareholders' Meeting in person or by proxy and entitled to vote thereon.
There are no approvals required of the holders of any class or series of capital
stock of the Company necessary to approve this Agreement and the transactions
contemplated hereby other than as set forth in the preceding sentence.
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<PAGE> 32
(x) Amendment to Rights Agreement. The Board has taken, or
will take, all necessary action to amend the Rights Agreement, dated as of
September 13, 1994, as amended (the "Rights Agreement"), between the Company and
Chemical Bank, as Rights Agent, so that none of the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby will
cause (i) the rights issued pursuant to the Rights Agreement to become
exercisable under the Rights Agreement or (ii) the distribution of Rights
Certificates (as defined in the Rights Agreement).
(y) Texas Business Combination Law. The Board has approved the
acquisition of the Shares by Purchaser prior to Purchaser's "share acquisition
date" (as defined in Article 13.02 of the Texas Business Corporation Act) in
accordance with the provisions of Article 13.03(A)(1) of the Texas Business
Corporation Act.
(z) No Brokers or Finders. Except as set forth on Schedule
3.1(z), no agent, broker, finder or investment or commercial banker, or other
Person or firm engaged by or acting on behalf of the Company in connection with
the negotiation, execution or performance of this Agreement is or will be
entitled to any brokerage or finder's or similar fee or other commission as a
result of this Agreement, other than any such fees or commissions that have been
disclosed to Purchaser and as to which the Company shall have full
responsibility.
(aa) Oil and Gas Operations. In those instances in which the
Company serves as operator of a well that is currently a producing well or
undergoing drilling operations, it has drilled and completed (if applicable)
such well, and operated and produced such well, in accordance with generally
accepted oil and gas field practices and in compliance in all material respects
with applicable oil and gas leases and all applicable Laws, except where any
failure or violation could not reasonably be expected to have a Material Adverse
Effect on the Company. All proceeds from the sale of oil, gas and other
hydrocarbons produced by the Company are being received by the Company in a
timely manner and are not being held in suspense for any reason (except for
amounts, individually or in the aggregate, not in excess of $2,000,000 and held
in suspense in the ordinary course of business).
(bb) Marketing of Production. Except for Contracts listed in
the Company SEC Documents or on Schedule 3.1(l) of the Company Disclosure
Schedule (with respect to all of which Contracts the Company represents that it
or its Subsidiaries are receiving a price for all production sold thereunder
which is computed in accordance with the terms of the relevant Contract), there
exist no Material Contracts for the sale of production from the leasehold and
other interests in oil gas and other mineral properties owned by the Company or
its Subsidiaries (collectively, the "Oil and Gas Properties") other than (i)
Contracts pertaining to the sale of production at a price equal to or greater
than a price that is the market price from time to time existing in the areas
where the Oil and Gas Properties subject to such agreement or arrangement are
located, and (ii) Contracts that are cancelable on 60 days notice or less
without penalty or detriment.
(cc) Prepayments. Neither the Company nor any Subsidiary is
obligated, by virtue of a prepayment arrangement, make-up right under a
production sales Contract containing a "take
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<PAGE> 33
or pay" or similar provision, production payment or any other arrangement, to
deliver hydrocarbons, or proceeds from the sale thereof, attributable to any of
its properties at some future time without then or thereafter being entitled to
received payment of the contract price therefor, except where any such
arrangement would not have a Material Adverse Effect.
(dd) Gas Imbalances. Except as disclosed in the Company SEC
Documents, neither the Company nor any Subsidiary has (i) any obligation to
deliver gas from the Oil and Gas Properties (or cash in lieu thereof) to other
owners of interests in those properties as a result of past production by the
Company, any Subsidiary or any of their predecessors in excess of the share to
which they were entitled nor (ii) any right to receive deliveries of gas from
the Oil and Gas Properties (or cash in lieu there) from other owners of
interests in those properties as a result of past production by the company, any
Subsidiary or any of their predecessors of less than the share to which they
were entitled; in either case where any such gas imbalance would have a Material
Adverse Effect.
(ee) Customers and Suppliers. None of the current customers or
suppliers of the Company has refused, or communicated in writing to the Chief
Executive Officer of the Company that it will or may refuse, to purchase or
supply products or services from or to the Company or has communicated in
writing that it will or may substantially reduce the amount of production, goods
or services that it is willing to purchase from or supply to the Company where
any such refusal or reduction would have a Material Adverse Effect.
(ff) Reserve Report. The Company acknowledges and agrees that
Purchaser has been provided with a copy of the Reserve Report. The Company's and
each Subsidiary's ownership of the Oil and Gas Properties described in the
Reserve Report entitle the respective owner to receive a percentage of the oil,
gas and other hydrocarbons produced from each well or unit equal to not less
than the percentage set forth in the Reserve Report as the "Net Revenue
Interest" for such well or unit and cause the respective owner to be obligated
to bear a percentage of the cost of operation of such well or unit not greater
than the percentage set forth in the Reserve Report as the "Working Interest"
for such well or unit, and to the extent such percentages of production which
the respective owner is entitled to receive, and shares of expenses which the
respective owner is obligate to bear, may change after the date of such report,
such changes were properly reflected (based on reasonable assumptions) in
preparing such report. The underlying historical information used for
preparation of the Reserve Report was, at the time of delivery, true and correct
in all material respects.
(gg) Nonconsent Operations. Except as set forth in Schedule
3.1(gg) of the Company Disclosure Schedule, there are no operations on the Oil
and Gas Properties in which the Company's or any Subsidiary's commitment would
have exceeded $5,000,000, being conducted as of January 1, 1998, or any time
thereafter, in which the Company or any subsidiary has elected not to
participate.
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Section 3.2 Representations and Warranties of Purchaser.
(a) Organization, Standing and Power. Purchaser is a limited
partnership duly organized, validly existing, and in good standing under the
laws of the State of Texas and has all requisite corporate power and authority
to own, lease, and operate its properties and to carry on its business as now
being conducted.
(b) Authority. Purchaser represents and warrants to the
Company that, assuming the accuracy of the representations and warranties of the
Company in Section 3.1(d) hereof, (i) the purchase of the Shares to be purchased
by it has been duly and properly authorized and this Agreement has been duly
executed and delivered by it or on its behalf and constitutes the valid and
legally binding obligation of Purchaser, enforceable against it in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights generally and to general principles of equity;
(ii) the purchase of the Shares to be purchased by it does not conflict with or
violate (A) its certificate of incorporation or bylaws or (B) any law applicable
to it in a manner that could materially hinder or impair the completion of any
of the transactions contemplated hereby; and (iii) the purchase of Shares to be
purchased by it does not impose any penalty or other onerous condition on
Purchaser that could materially hinder or impact the completion of any of the
transactions contemplated hereby.
(c) Litigation. As of the time of the execution of this
Agreement, there is no claim, action, suit, inquiry, judicial or administrative
proceeding pending or, to the knowledge of Purchaser, threatened against it
relating to any of the transactions contemplated by this Agreement or any other
Transaction Document.
(d) Investment Intent. Purchaser represents and warrants to
the Company that the Shares to be acquired by it hereunder are being acquired
for its own account for investment and with no intention of distributing or
reselling such Shares or any part thereof or interest therein in any transaction
which would be in violation of the securities Laws of the United States of
America or any state or any foreign country or jurisdiction.
(e) Transfer Restrictions. If Purchaser should decide to
dispose of any of the Shares to be purchased by it, Purchaser understands and
agrees that it may do so only pursuant to an effective registration statement
under the Securities Act or pursuant to an exemption from registration under the
Securities Act. In connection with any offer, resale, pledge or other transfer
(individually and collectively, a "Transfer") of any Shares other than pursuant
to an effective registration statement, the Company may require that the
transferor of such Shares provide to the Company an opinion of counsel which
opinion shall be reasonably satisfactory in form and substance to the Company,
to the effect that such Transfer is being made pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of the Securities
Act and any State or foreign securities Laws. Purchaser agrees to the
imprinting, so long as appropriate, of substantially the following legend on
certificates representing the Shares:
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THE SHARES OF COMMON STOCK (THE "SHARES") EVIDENCED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER AGREES THAT IT WILL NOT OFFER, RESELL, PLEDGE OR
OTHERWISE TRANSFER (INDIVIDUALLY AND COLLECTIVELY, A "TRANSFER") THE
SHARES EVIDENCED HEREBY, EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR (B) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT SUCH AS THE
EXEMPTION SET FORTH IN RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE). IF THE PROPOSED TRANSFER IS TO BE MADE OTHER THAN PURSUANT
TO CLAUSE (A) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH
TO THE COMPANY AND THE TRANSFER AGENT SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OR ANY STATE OR FOREIGN SECURITIES LAW.
The legend set forth above may be removed if and when the Shares, as
the case may be, represented by such certificate are disposed of pursuant to an
effective registration statement under the Securities Act or the opinion of
counsel referred to above has been provided to the Company. The share
certificates shall also bear any additional legends required by applicable
federal, state or foreign securities Laws, which legends may be removed when, in
the opinion of counsel to the Company, the same are no longer required under the
applicable requirements of such securities Laws. Purchaser agrees that, in
connection with any Transfer of Shares by it pursuant to an effective
registration statement under the Securities Act, Purchaser will comply with all
prospectus delivery requirements of the Securities Act. The Company makes no
representation, warranty or agreement as to the availability of any exemption
from registration under the Securities Act with respect to any resale of Shares.
(f) Purchaser Status. Purchaser represents and warrants to,
and covenants and agrees with the Company that (i) at the time it was offered
the Shares, it was, (ii) at the date hereof, it is, and (iii) at each Closing
Date, it will be, an accredited investor as defined in Rule 501(a) under the
Securities Act, and has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the Company and
an investment in the Shares, and is able to bear the economic risk of such
investment.
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ARTICLE IV
COVENANTS
Section 4.1 Furnishing of Information. As long as Purchaser owns Shares
representing at least 5% of the aggregate number of shares of Common Stock then
outstanding, from and after the Closing Date the Company will promptly furnish
to Purchaser all reports filed by it pursuant to Section 13(a) or 15(d) of the
Exchange Act (or if the Company is not at the time required to file reports
pursuant to said Section 13(a) or 15(d), annual and quarterly reports comparable
to those required by Sections 13(a) or 15(d) of the Exchange Act).
Section 4.2 Shareholder Approval; Proxy Statement. The Company shall
take all actions necessary in accordance with the Articles of Incorporation, the
Bylaws, the rules of Nasdaq and other applicable Law to call a meeting of its
shareholders (the "Shareholders' Meeting") to be held as promptly as practicable
after the date hereof for the purpose of approving the Share Issuance and the
Articles of Amendment. The Company and Purchaser shall consult with each other
in connection with Shareholders' Meeting. The Company shall cause the Board (a)
to recommend to the Company's shareholders approval of the Share Issuance and
the Articles of Amendment, (b) not to withdraw, modify or change such
recommendation and (c) to continue to recommend to the shareholders of the
Company the approval and the adoption of such matters. The record date for the
Shareholders' Meeting shall not be on or prior to the First Closing Date. As
promptly as practicable after the execution of this Agreement, the Company shall
prepare and file with the SEC the Proxy Statement with respect to the approval
and adoption by the Company's shareholders of the Share Issuance and the
Articles of Amendment. As promptly as practicable after the clearance of the
Proxy Statement by the SEC but subject to the fourth sentence of this Section
4.2, the Company shall mail the Proxy Statement to its shareholders of record at
least 20 calendar days prior to the Shareholders' Meeting and shall use its
reasonable best efforts to solicit and obtain the affirmative vote of the
requisite percentage of the shareholders of the Company with respect to approval
of the Share Issuance and the Articles of Amendment.
Section 4.3 Nasdaq Listing. The Company shall submit a listing
application with Nasdaq with respect to the Shares within five business days
after the date hereof and Purchaser shall be entitled to review and comment on
such listing application and the submission of any other materials to Nasdaq in
connection with the listing of the Shares. The Company shall use its reasonable
best efforts to cause the Shares to be approved for listing on Nasdaq, subject
to official notice of issuance.
Section 4.4 Affirmative Covenants of the Company. The Company hereby
covenants and agrees that, until the earlier of the Second Closing or the
termination of this Agreement, except as set forth on Schedule 4.4 to the
Company Disclosure Schedule, and unless otherwise expressly contemplated by this
Agreement or consented to in writing by Purchaser, the Company will and will
cause each of its Subsidiaries to:
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(a) operate its business in the usual and ordinary course
consistent with past practices except as contemplated by this Agreement or as
provided in or contemplated by the Company Disclosure Schedule;
(b) use all reasonable efforts to preserve substantially
intact its business organization, maintain its rights and franchises, retain the
services of its respective officers and key employees and maintain its
relationships with its respective customers and suppliers;
(c) maintain and keep its properties and assets in as good a
repair and condition as at present, ordinary wear and tear excepted, and use
commercially reasonable efforts to maintain supplies and inventories in
quantities consistent with its customary business practices;
(d) use all reasonable efforts to keep in full force and
effect insurance and bonds comparable in amount and scope of coverage to that
currently maintained;
(e) immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any Alternative Transaction (as hereinafter defined). For
purposes of this Agreement, "Alternative Transaction" shall mean any sale or
lease of a material portion of the Company's assets, merger, consolidation,
share exchange, business combination or similar transaction involving the
Company or any of its Subsidiaries or the acquisition in any manner, directly or
indirectly, of a material interest in any voting stock, interests or other
securities of, or a material portion of the assets of, the Company or any of its
Subsidiaries, other than the transactions contemplated by this Agreement.
Section 4.5 Negative Covenants of the Company. Except as expressly
contemplated by this Agreement or otherwise consented to in writing by Purchaser
or as set forth on Schedule 4.5 to the Company Disclosure Schedule, from the
date of this Agreement until earlier of the Second Closing or the termination of
this Agreement, the Company shall not do, and shall not permit any of its
Subsidiaries to do, any of the following:
(a) acquire or agree to acquire (whether pursuant to a
definitive agreement, a non-binding letter of intent or otherwise), by merging
or consolidating with, by purchasing an equity interest in or a portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets of any other Person (other than the
purchase of assets from suppliers or vendors in the ordinary course of business
and consistent with past practice);
(b) sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge,
transfer or otherwise dispose of, any of its assets or any assets of any of its
Subsidiaries, except for pledges or dispositions of assets in the ordinary
course of business and consistent with past practice;
(c) initiate, solicit or encourage (including by way of
furnishing information or assistance), or take any other action to facilitate,
directly or indirectly, any inquiries or the making
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of any proposal or offer relating to, or that could reasonably be expected to
lead to, any Alternative Transaction, or enter into discussions or negotiate
with any person or entity in furtherance of such inquiries or to obtain an
Alternative Transaction, or agree to, or endorse, any Alternative Transaction,
or authorize or permit any of the officers, directors, employees or agents of
the Company or any of its Subsidiaries or any investment banker, financial
advisor, attorney, accountant or other representative retained by the Company or
any of the Company's Subsidiaries to take any such action, and the Company shall
immediately notify Purchaser of all relevant terms of any such inquiries or
proposals received by the Company or any of its Subsidiaries or by any such
officer, director, employee, agent, investment banker, financial advisor,
attorney, accountant or other representative relating to any proposed
Alternative Transaction and if such inquiry or proposal is in writing, the
Company shall immediately deliver or cause to be delivered to Purchaser a copy
of such inquiry or proposal; provided, however, that nothing contained in this
subsection (c) shall prohibit the Board from complying with Rule 14e-2 or Rule
14d-9 promulgated under the Exchange Act with regard to an Alternative
Transaction;
(d) release any third party from its obligations under any
existing standstill agreement or arrangement relating to an Alternative
Transaction or otherwise under any confidentiality or other similar agreement
relating to information material to the Company or any of its Subsidiaries;
(e) adopt or propose to adopt any amendments to its Articles
of Incorporation or Bylaws; reclassify any shares of its capital stock; adopt
resolutions authorizing a liquidation, dissolution, merger, consolidation,
restructuring, recapitalization, or other reorganization of the Company or any
Subsidiary; or make any other material changes in its capital structure;
(f) (i) change any of its significant accounting policies or
(ii) make or rescind any express or deemed election relating to Taxes, settle or
compromise any claim, action, suit, Litigation, audit or controversy relating to
Taxes, or change any of its methods of reporting income or deductions for
federal or other income Tax purposes from those employed in the preparation of
the federal or other income Tax Returns or other Tax Returns for the taxable
year ending December 31, 1997, except, in the case of either clause (i) or
clause (ii), as may be required by Law or GAAP;
(g) other than borrowings in the ordinary course under the
Credit Facility, incur any Debt, whether or not evidenced by a note, bond,
debenture or similar instrument or under any financing lease, whether pursuant
to a sale-and-leaseback transaction or otherwise, which would exceed $5,000,000;
(h) make any loans or advances to any Person, other than (i)
advances to employees in the ordinary and usual course of business and (ii)
transactions among or between the Company and its Subsidiaries with respect to
cash management conducted in the ordinary and usual course of the Company's
business;
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(i) declare or pay any dividend or make any other distribution
with respect to its capital stock, other than dividends paid by any Subsidiary
to the Company or another Subsidiary in the ordinary and usual course of the
Company's business;
(j) issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to purchase,
or otherwise) any of its capital stock or other securities other than as
contemplated herein or pursuant to awards issued and outstanding as of the date
hereof under the Stock Plans or purchase or otherwise acquire any of its capital
stock, employee or director stock options, warrants or other equity securities
or debt securities;
(k) enter into, adopt, or (except as may be required by law)
amend or terminate any collective bargaining agreement or any Benefit Plan;
approve or implement any employment severance arrangements (other than payments
made under the Company's severance policy in accordance with past practice) or
retain or discharge any officers and executive management personnel; authorize
or enter into any employment, severance, consulting services or other agreement
with any officers and executive management personnel; or change the compensation
or benefits provided to any director, officer, or employee as of August 1, 1998;
(l) materially amend, terminate, or fail to use all
commercially reasonable efforts to renew any Material Contract (provided that
the Company or its Subsidiaries shall not be required to renew any Material
Contract on terms that are less favorable to the Company or its Subsidiaries),
or default in any material respect (or take or omit to take any action that,
with or without the giving of notice of passage of time, would constitute a
material default) under any Material Contract; or
(m) agree in writing or otherwise to do any of the foregoing.
Section 4.6 Approvals. The Company and Purchaser each agree to
cooperate and use their best efforts to obtain (and will immediately prepare all
registrations, filings and applications, requests and notices preliminary to
all) Approvals that may be necessary or which may be reasonably requested by the
Company or Purchaser to consummate the transactions contemplated by this
Agreement and the other Transaction Documents.
Section 4.7 Shareholder Agreement, Financial Advisory Agreement and
Monitoring Agreement. On or before the First Closing Date, the Company and
Purchaser shall enter into the Shareholder Agreement, the Financial Advisory
Agreement and the Monitoring Agreement.
Section 4.8 HSR Act Notification. To the extent it is determined that
the HSR Act will be applicable to the acquisition of the Shares by Purchaser,
each of the parties hereto shall (a) file or cause to be filed, as promptly as
practicable after the execution and delivery of this Agreement and in no event
later than ten Business Days after the date of this Agreement, with the Federal
Trade Commission and the United States Department of Justice, all reports and
other documents required to be filed by such party under the HSR Act concerning
the transactions contemplated hereby and (b) promptly comply with or cause to be
complied with any requests by the Federal Trade Commission or the United States
Department of Justice for additional information concerning the
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Transaction, in each case so that the waiting period applicable to this
Agreement and the Transaction contemplated hereby under the HSR Act shall expire
as soon as practicable after the execution and delivery of this Agreement. Each
party hereto agrees to request, and to cooperate with the other party or parties
in requesting, early termination of any applicable waiting period under the HSR
Act.
Section 4.9 Indemnification of Directors; Insurance.
(a) At or prior to the First Closing, the Company shall enter
into indemnification agreements with each of its directors substantially in the
form of Exhibit E hereto with such changes thereto as may be agreed upon by
Purchaser and the Company (each an "Indemnification Agreement"). In addition, at
or prior to the Second Closing the Company shall enter into Indemnification
Agreements with each of the Purchaser Designees.
(b) At or prior to the First Closing Date, the Company shall
obtain directors' and officers' liability insurance policies providing an
aggregate of $25,000,000 in additional coverage to the coverage provided by the
Company's current directors' and officers' insurance policy (the "Additional D&O
Policies"). The Company shall use all commercially reasonable efforts to ensure
that the Additional D&O Policies shall, in addition to customary coverage,
provide coverage for any claims arising out of or relating to the activities of
any of the Company's directors and the Purchaser Designees in connection with
the transactions contemplated by this Agreement and shall provide coverage for
Purchaser and any of its Affiliates with respect to any claims brought against
Purchaser or any of its Affiliates arising out of or relating to any act or
omission of any director of the Company in his or her capacity as a director of
the Company.
(c) The Company shall, from and after the date of this
Agreement and for four years from the First Closing Date, maintain in effect the
current directors' and officers' liability insurance policies maintained by the
Company (provided that the Company may substitute therefor policies no less
favorable in terms and amounts of coverage so long as substitution does not
result in gaps of lapses in coverage) with respect to matters occurring on or
prior to the First Closing Date; provided, however, that in no event shall the
Company be required to expend pursuant to this Section more than an amount per
year equal to 150% of current annual premiums paid by the Company for such
insurance and, in the event the cost of such coverage shall exceed that amount,
the Company shall purchase as much coverage as possible for such amount, and in
any event the Company shall provide the Covered Parties with the same terms and
amounts of coverage as the Company provides to those persons who are directors
and officers of the Company at the time such policies terminate.
(d) The Company shall amend its existing insurance coverage
under the Company's current policies of directors' and officers' liability
insurance, or obtain comparable replacement policies on terms no less favorable
in terms of coverage and amounts than those in effect on the date hereof, so
that Purchaser's purchase of the Shares pursuant to this Agreement shall not
constitute a "change of control" of the Company or otherwise cause any director
of the Company or any of persons who become directors of the Company on or after
the First Closing Date to be excluded from the coverage provided by such
insurance policies.
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(e) In the event the Company or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any Person, then, and in each such case, proper provision shall be made so
that the successors and assigns of the Company shall assume the obligations set
forth in this Section 4.9. The rights of the Covered Parties under this Section
shall be in addition to, and not in lieu of, any rights to indemnity that such
persons may have under the Articles of Incorporation of the Company or any other
provisions herein or in other agreements.
Section 4.10 Notification of Certain Matters. The Company shall give
prompt notice to Purchaser, and Purchaser shall give prompt notice to the
Company, of (a) the occurrence, or failure to occur, of any event that causes
any representation or warranty contained in any Transaction Document to be
untrue or inaccurate at any time from the date of this Agreement to either
Closing Date and (b) any failure of the Company or Purchaser to comply with or
satisfy, in any material respect, any covenant, condition or agreement to be
complied with or satisfied by it under any Transaction Document.
Section 4.11 Board of Directors. As of the date of this Agreement the
Board is comprised of the individuals listed on Schedule 4.11 to the Company
Disclosure Schedule. The Company shall take, or cause to be taken, such action
as may be necessary or advisable, including increasing the size of the Board by
one member, to ensure that simultaneously with the Second Closing the Board
shall consist of nine individuals, including (a) two individuals designated by
Purchaser (the "Purchaser Designees"), and (b) the individuals listed in
Schedule 4.11 of the Company Disclosure Schedule less one director whose
resignation shall be agreed upon by Purchaser and the Company. The Company shall
take, or cause to be taken, such action as may be necessary or advisable to
ensure that simultaneously with the Second Closing each of the audit and
compensation committees and the executive committee, if any, of the Board shall
include one or more of the Purchaser Designees.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
Section 5.1 Conditions Precedent to Each Party's Obligation. The
respective obligations of Purchaser and the Company to effect the transactions
contemplated hereby are subject to the satisfaction on or prior to each Closing
Date of the following conditions:
(a) Approvals. All Approvals of, or expirations of waiting
periods imposed by, any Governmental Entity necessary for the consummation of
the transactions contemplated by this Agreement shall have been filed, occurred,
or been obtained, including the expiration or termination of any applicable
waiting period under the HSR Act.
(b) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction, or other order issued by any court
of competent jurisdiction or other legal
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restraint or prohibition preventing the consummation of the transactions
contemplated hereby shall be in effect.
(c) No Action. No action shall have been taken nor any
statute, rule, or regulation shall have been enacted by any Governmental Entity
that makes the consummation of the transactions contemplated hereby illegal.
Section 5.2 Conditions Precedent to Obligation of Purchaser at the
First Closing. The obligation of Purchaser to effect the transactions
contemplated by this Agreement to be consummated at the First Closing is subject
to the satisfaction of the following conditions unless waived, in whole or in
part, by Purchaser:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
in all material respects (provided that any representation or warranty of the
Company contained herein that is qualified by a materiality standard or a
Material Adverse Effect qualification shall not be further qualified hereby) as
of the date of this Agreement and as of the First Closing Date as though made on
and as of the First Closing Date, and Purchaser shall have received a
certificate to the foregoing effect signed on behalf of the Company and its
Subsidiaries by the chief executive officer or by the chief financial officer of
the Company.
(b) Performance of Obligations. The Company shall have
performed in all material respects (provided that any covenant or agreement that
is qualified by a materiality standard or Material Adverse Effect qualification
shall not be further qualified hereby) all obligations required to be performed
by it or them under this Agreement prior to the First Closing Date, and
Purchaser shall have received a certificate to such effect signed on behalf of
the Company and its Subsidiaries by the chief executive officer or by the chief
financial officer of the Company.
(c) Consents Under Agreements. Purchaser shall have been
furnished with evidence reasonably satisfactory to it of the consent or approval
of each person that is a party to a Material Contract (including evidence of the
payment or any required payment) and whose consent or approval shall be required
in order to permit the consummation of each of the transactions contemplated by
this Agreement or to prevent a breach of such Contract or the creation of a
right to terminate such Contract, and such consent or approval shall be in form
and substance reasonably satisfactory to Purchaser.
(d) Legal Opinion. Purchaser shall have received from
Fulbright & Jaworski L.L.P., corporate counsel to the Company, and its
Subsidiaries, an opinion dated the First Closing Date, in substantially the form
attached as Exhibit B hereto, which opinion, if requested by Purchaser, shall
expressly provide that they may be relied upon by Purchaser's lenders,
underwriters, or other sources of financing with respect to the transactions
contemplated hereby.
(e) Nasdaq Listing. The Initial Shares shall have been
approved for listing on Nasdaq, subject to official notice of issuance.
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(f) Closing Deliveries. All documents, instruments,
certificates or other items required to be delivered by the Company pursuant to
Section 6.2(b) shall have been delivered.
Section 5.3 Conditions Precedent to Obligations of Company at the First
Closing. The obligation of the Company to effect the transactions contemplated
by this Agreement to be consummated at the First Closing is subject to the
satisfaction of the following conditions unless waived, in whole or in part, by
the Company:
(a) Representations and Warranties. The representations and
warranties of Purchaser set forth in this Agreement shall be true and correct in
all material respects (provided that any representation or warranty of Purchaser
contained herein that is qualified by a materiality standard or a Material
Adverse Effect qualification shall not be further qualified hereby) as of the
date of this Agreement and as of the First Closing Date as though made on and as
of the First Closing Date, and the Company shall have received a certificate to
the foregoing effect signed on behalf of Purchaser by the chief executive
officer or by the chief financial officer of Purchaser.
(b) Performance of Obligations of Purchaser. Purchaser shall
have performed in all material respects (provided that any covenant or agreement
that is qualified by a materiality standard shall not be further qualified
hereby) the obligations required to be performed by it under this Agreement
prior to the First Closing Date, and the Company shall have received a
certificate to such effect signed on behalf of Purchaser by the chief executive
officer or by the chief financial officer of Purchaser.
(c) Nasdaq Listing. The Initial Shares shall have been
approved for listing on Nasdaq, subject to official notice of issuance.
(d) Closing Deliveries. All documents, instruments,
certificates or other items required to be delivered by Purchaser pursuant to
Section 6.2(a) shall have been delivered.
Section 5.4 Conditions Precedent to Obligation of Purchaser at the
Second Closing. The obligation of Purchaser to effect the transaction
contemplated by this Agreement to be consummated at the Second Closing is
subject to the following conditions when waived, in whole or in part, by
Purchaser:
(a) Shareholder Approval. The shareholders of the Company
shall have approved the Share Issuance and the Articles of Amendment by the
requisite votes at the Shareholders' Meeting.
(b) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
in all material respects (provided that any representation or warranty of the
Company contained herein that is qualified by a materiality standard or a
Material Adverse Effect qualification shall not be further qualified hereby) as
of the date of this Agreement and as of the Second Closing Date as though made
on and as of the Second Closing Date, and Purchaser shall have received a
certificate to the foregoing effect signed on behalf
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of the Company and its Subsidiaries by the chief executive officer or by the
chief financial officer of the Company.
(c) Performance of Obligations. The Company shall have
performed in all material respects (provided that any covenant or agreement that
is qualified by a materiality standard or Material Adverse Effect qualification
shall not be further qualified hereby) all obligations required to be performed
by it or them under this Agreement prior to the Second Closing Date, and
Purchaser shall have received a certificate to such effect signed on behalf of
the Company and its Subsidiaries by the chief executive officer or by the chief
financial officer of the Company.
(d) Nasdaq Listing. All of the Shares shall have been approved
for listing on Nasdaq, subject to official notice of issuance.
(e) Legal Opinion. Purchaser shall have received from
Fulbright & Jaworski, L.L.P. corporate counsel to the Company and its
Subsidiaries, an opinion dated the Second Closing Date, in substantially the
form attached as Exhibit B hereto, which opinion, if requested by Purchaser,
shall expressly provide that they may be relied upon by Purchaser's lenders,
underwriters, or other sources of financing with respect to the transactions
contemplated hereby.
(f) Closing Deliveries. All documents, instruments,
certificates or other items required to be delivered by the Company pursuant to
Section 6.3(b) shall have been delivered.
Section 5.5 Conditions Precedent to Obligations of Company at the
Second Closing. The obligation of the Company to effect the transactions
contemplated by this Agreement to be consummated at the Second Closing is
subject to the satisfaction of the following conditions unless waived, in whole
or in part, by the Company.
(a) Shareholder Approval. The shareholders of the Company
shall have approved Share Issuance and the Articles of Amendment by the
requisite votes at the Shareholders' Meeting.
(b) Representations and Warranties. The representations and
warranties of Purchaser set forth in this Agreement shall be true and correct in
all material respects (provided that any representation or warranty of Purchaser
contained herein that is qualified by a materiality standard or a Material
Adverse Effect qualification shall not be further qualified hereby) as of the
date of this Agreement and as of the Second Closing Date as though made on and
as of the Second Closing Date, and the Company shall have received a certificate
to the foregoing effect signed on behalf of Purchaser by the chief executive
officer or by the chief financial officer of Purchaser.
(c) Performance of Obligations of Purchaser. Purchaser shall
have performed in all material respects (provided that any covenant or agreement
that is qualified by a materiality standard shall not be further qualified
hereby) the obligations required to be performed by it under this Agreement
prior to the Second Closing Date, and the Company shall have received a
certificate to such effect signed on behalf of Purchaser by the chief executive
officer or by the chief financial officer of Purchaser.
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(d) Nasdaq Listing. All of the Shares shall have been approved
for listing on Nasdaq, subject to official notice of issuance.
(e) Closing Deliveries. All documents, instruments,
certificates or other items required to be delivered by Purchaser pursuant to
Section 6.3(a) shall have been delivered.
ARTICLE VI
CLOSINGS
Section 6.1 Closings. Subject to the satisfaction or waiver of the
conditions set forth in Article V, the purchase and sale of the Shares to be
purchased by Purchaser hereunder will take place at two closings (the
"Closings"). The closing of the purchase and sale of the Initial Shares pursuant
to Section 2.1(a)(i) (the "First Closing"), if any, and the closing of the
purchase and sale of the Remaining Shares pursuant to Section 2.1(a)(ii) (the
"Second Closing") shall occur (a) at the offices of Vinson & Elkins L.L.P., 2001
Ross Avenue, Suite 3700, Dallas, Texas 75201, at 10:00 a.m., local time, on the
thirteenth Business Day following the satisfaction or waiver (subject to
applicable Law) of each of the conditions to the obligations of the parties to
effect the transactions to occur at each such Closing as set forth in Sections
5.1, 5.2, 5.3, 5.4 and 5.5, respectively, or (b) at such other location and time
as may be mutually agreed upon by the parties hereto. The failure of the First
Closing to occur because all of the conditions to the parties' obligations to
effect the First Closing have not been satisfied or waived shall not prevent the
Second Closing from occurring. The date on which the First Closing is required
to take place is herein referred to as the "First Closing Date" and the date on
which the Second Closing is required to take place is herein referred to as the
"Second Closing Date." All closing transactions at the First Closing shall be
deemed to have occurred simultaneously, and all closing transactions at the
Second Closing shall be deemed to have occurred simultaneously.
Section 6.2 Actions to Occur at the First Closing.
(a) At the First Closing, Purchaser shall deliver to the
Company the following:
(i) Purchase Price. The Purchase Price for the
Initial Shares in accordance with Article II hereof;
(ii) Shareholder Agreement. Counterparts of the
Shareholder Agreement executed by Purchaser;
(iii) Monitoring Agreement. Counterparts of the
Monitoring Agreement executed by Hicks, Muse & Co. Partners, L.P.
("HMCo"); and
(iv) Certificates. The certificates described in
Sections 5.3(a) and 5.3(b).
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(b) At the First Closing, the Company shall deliver to
Purchaser (or to its designee as indicated otherwise) the following:
(i) Share Certificates. Certificates representing the
Initial Shares;
(ii) Shareholder Agreement. Counterparts of the
Shareholder Agreement executed by the Company;
(iii) Monitoring Agreement. Counterparts of the
Monitoring Agreement executed by the Company;
(iv) Purchaser's Expenses. An amount equal to
Purchaser's Expenses incurred through the First Closing Date in
connection with the transactions contemplated hereby as provided in
Section 9.5 by wire transfer of immediately available funds to an
account of Purchaser (which amount and account number shall have been
furnished to the Company at least two Business Days prior to the
Closing Date);
(v) Certificates. The certificates described in
Sections 5.2(a) and 5.2(b);
(vi) Consents Under Agreements. The original of each
consent or approval, if any, pursuant to Section 5.2(c); and
(vii) Legal Opinion. The opinion of counsel referred
to in Section 5.2(d).
Section 6.3 Actions to Occur at the Second Closing.
(a) At the Second Closing, Purchaser shall deliver to the
Company the following:
(i) Purchase Price. An amount equal to the Purchase
Price for the Remaining Shares in accordance with Article II hereof;
and
(ii) Certificates. The certificates described in
Sections 5.5(b) and 5.5(c).
(b) At the Second Closing, the Company shall deliver to
Purchaser (or to its designee as indicated otherwise) the following:
(i) Share Certificates. Certificates representing the
Remaining Shares;
(ii) Purchaser's Expenses. An amount equal to
Purchaser's Expenses incurred in connection with the transactions
contemplated hereby between the First Closing Date and the Second
Closing Date as provided in Section 8.5 by wire transfer of immediately
available funds to an account of Purchaser (which amount of such costs
and expenses and account number shall have been furnished to the
Company at least two Business Days prior to the Closing Date);
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(iii) Certificates. The certificates described in
Sections 5.4(b) and 5.4(c); and
(iv) Legal Opinion. The opinion of counsel referred
to in Section 5.4(e).
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated prior
to either Closing:
(a) by mutual consent of Purchaser and the Company;
(b) by either Purchaser or the Company:
(i) in the event of a breach by the other party of
any representation, warranty, covenant or agreement contained in this
Agreement which (A) would give rise to the failure of a condition set
forth in Section 5.2(a) or 5.2(b) or Section 5.3(a) or 5.3(b) with
respect to the First Closing, or Section 5.4(b) or 5.4(c) or Section
5.5(b) or 5.5(c), with respect to the Second Closing, as applicable,
and (B) cannot be or has not been cured within 20 days (the "Cure
Period") following receipt by the breaching party of written notice of
such breach (it is acknowledged and agreed that there shall not be a
Cure Period for breaches of the covenants set forth in the third
sentence of Section 4.2 or in Section 4.5(c));
(ii) if a court of competent jurisdiction or other
Governmental Entity shall have issued an order, decree, or ruling or
taken any other action (which order, decree, or ruling Purchaser and
the Company shall use their best efforts to lift), in each case
permanently restraining, enjoining, or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree,
ruling, or other action shall have become final and nonappealable;
(iii) if the required approval of the shareholders of
the Company shall not have been obtained by reason of the failure to
obtain the required vote upon a vote held at a duly held meeting of
shareholders, or at any adjournment thereof; or
(iv) if the Closing shall not have occurred by the
later of (A) the first anniversary of the date hereof, and (B) the date
to which the Closing Date is extended pursuant to Section 6.1;
provided, however, that the right to terminate this Agreement under
this clause (iv) shall not be available to any party whose breach of
this Agreement has been the cause of, or resulted in, the failure of
the Closing to occur on or before such date.
The right of any party hereto to terminate this Agreement pursuant to
this Section 7.1 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf
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of any party hereto, any person controlling any such party or any of their
respective officers, directors, employees, accountants, consultants, legal
counsel, agents, or other representatives whether prior to or after the
execution of this Agreement. Notwithstanding anything in the foregoing to the
contrary, a party that is in material breach of this Agreement shall not be
entitled to terminate this Agreement except, in the case of a default by the
Company, with the consent of Purchaser, or in the case of a default by
Purchaser, with the consent of the Company.
Section 7.2 Effect of Termination. In the event of the termination of
this Agreement, written notice thereof shall forthwith be given to the other
party specifying the provision hereof pursuant to which such termination is
made, and this Agreement (except for the provisions of this Section 7.2, Section
4.9, Article VIII and Article IX, which shall survive such termination) shall
forthwith become null and void. Subject to the provisions of Section 9.5, in the
event of a termination of this Agreement by either the Company or Purchaser as
provided above, there shall be no liability on the part of the Company or
Purchaser, except for liability arising out of a breach of, or misrepresentation
under, this Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification of Purchaser. Subject to the provisions of this
Article VIII, the Company agrees to indemnify and hold harmless the Purchaser
Indemnified Parties from and against any and all Purchaser Indemnified Costs.
8.2 Indemnification of Company. Subject to the provisions of this
Article VIII, Purchaser agrees to indemnify and hold harmless the Company from
and against any and all Company Indemnified Costs.
8.3 Defense of Third-Party Claims. An Indemnified Party shall give
prompt written notice to any person who is obligated to provide indemnification
hereunder (an "Indemnifying Party") of the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") in respect of which such Indemnified Party shall seek
indemnification hereunder. Any failure so to notify an Indemnifying Party shall
not relieve such Indemnifying Party from any liability that it, he, or she may
have to such Indemnified Party under this Section 8.3 unless the failure to give
such notice materially and adversely prejudices such Indemnifying Party. The
Indemnifying Party shall have the right to assume control of the defense of,
settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Indemnified Party shall be entitled, at its own
expense, to participate in the defense of such third-party action (provided,
however, that the Indemnifying Party shall pay the attorneys' fees of one
counsel (provided that if any such third-party action is brought in a
jurisdiction other than Texas, the Indemnifying Party shall also pay the
attorney's fees of one local counsel) to
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the Indemnified Party if (i) the employment of separate counsel shall have been
authorized in writing by any such Indemnifying Party in connection with the
defense of such third-party action, (ii) the Indemnifying Parties shall not have
employed counsel reasonably satisfactory to the Indemnified Party to have charge
of such third-party action, (iii) counsel to the Indemnified Party shall have
reasonably concluded that there may be defenses available to the Indemnified
Party that are different from or additional to those available to the
Indemnifying Party, (iv) counsel to the Indemnified Party and the Indemnifying
Party shall have advised their respective clients in writing, with a copy
delivered to the other party, that there is a conflict of interest that could
make it inappropriate under applicable standards of professional conduct to have
common counsel), or (v) the third-party action is a proceeding brought by a
shareholder of the Company (in such shareholder's name or derivatively on behalf
of the Company) in respect of the transacations contemplated by this Agreement;
(b) The Indemnifying Party shall obtain the prior written
approval of the Indemnified Party before entering into or making any settlement,
compromise, admission, or acknowledgment of the validity of such third-party
action or any liability in respect thereof if, pursuant to or as a result of
such settlement, compromise, admission, or acknowledgment, injunctive or other
equitable relief would be imposed against the Indemnified Party or if, in the
opinion of the Indemnified Party, such settlement, compromise, admission, or
acknowledgment could have a material adverse effect on its business;
(c) No Indemnifying Party shall consent to the entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by each claimant or plaintiff to each Indemnified Party
of a release from all liability in respect of such third-party action; and
(d) The Indemnifying Party shall not be entitled to control
(but shall be entitled to participate at its own expense in the defense of), and
the Indemnified Party shall be entitled to have sole control over, the defense
or settlement, compromise, admission, or acknowledgment of any third-party
action (i) as to which the Indemnifying Party fails to assume the defense within
a reasonable length of time; or (ii) to the extent the third-party action seeks
an order, injunction, or other equitable relief against the Indemnified Party
which, if successful, would materially adversely affect the business,
operations, assets, or financial condition of the Indemnified Party; provided,
however, that the Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment that would give rise to liability on the part of
any Indemnifying Party without the prior written consent of such Indemnifying
Party.
The parties hereto shall extend reasonable cooperation in connection with the
defense of any third-party action pursuant to this Article VIII and, in
connection therewith, shall furnish such records, information, and testimony and
attend such conferences, discovery proceedings, hearings, trials, and appeals as
may be reasonably requested.
8.4 Direct Claims. In any case in which an Indemnified Party seeks
indemnification hereunder which is not subject to Section 8.3 because no
third-party action is involved, the Indemnified Party shall notify the
Indemnifying Party in writing of any Indemnified Costs which
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such Indemnified Party claims are subject to indemnification under the terms
hereof. The failure of the Indemnified Party to exercise promptness in such
notification shall not amount to a waiver of such claim unless the resulting
delay materially prejudices the position of the Indemnifying Party with respect
to such claim.
8.5 Tax Related Adjustments. The Company and Purchaser agree that any
payment of Indemnified Costs made hereunder will be treated by the parties on
their Tax Returns as an adjustment to the Purchase Price. If, notwithstanding
such treatment by the parties, any payment of Indemnified Costs is determined to
be taxable income rather than adjustment to Purchase Price and counsel to the
Indemnified Party shall have advised the Indemnified Party and the Indemnifying
Counsel in writing thereof, then the Indemnifying Party shall indemnify the
Indemnified Party for any Taxes payable by the Indemnified Party or any
subsidiary by reason of the receipt of such payment (including any payments
under this Section 8.5), determined at an assumed marginal tax rate equal to the
highest marginal tax rate then in effect for corporate taxpayers in the relevant
jurisdiction.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Survival of Provisions. The representations, warranties and
covenants (including the indemnification obligations) of the Company and
Purchaser made herein or in any other Transaction Document shall remain
operative and in full force and effect pursuant to their terms regardless of (a)
any investigation made by or on behalf of Purchaser or the Company, as the case
may be, or (b) acceptance of any of the Shares and payment by Purchaser
therefor.
Section 9.2 No Waiver; Modification in Writing. No failure or delay on
the part of the Company or a Purchaser in exercising any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to the Company or Purchaser at law or in equity.
The provisions of this Agreement, including the provisions of this sentence, may
not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given without the written consent of the
Company, on the one hand, and Purchaser or its permitted assigns, on the other
hand, provided that notice of any such waiver shall be given to each party
hereto as set forth below. Any amendment, supplement or modification of or to
any provision of this Agreement, or any waiver of any provision of this
Agreement, shall be effective only in the specific instance and for the specific
purpose for which made or given. Except where notice is specifically required by
this Agreement, no notice to or demand on any party hereto in any case shall
entitle the other party to any other or further notice or demand in similar or
other circumstances.
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Section 9.3 Specific Performance. The parties recognize that in the
event the Company should refuse to perform under the provisions of this
Agreement or any other Transaction Document, monetary damages alone will not be
adequate. Purchaser shall therefore be entitled, in addition to any other
remedies which may be available, including money damages, to obtain specific
performance of the terms of this Agreement. In the event of any action to
enforce this Agreement or any other Transaction Document specifically, the
Company hereby waive the defense that there is an adequate remedy at law.
Section 9.4 Severability. If any term or other provision of this
Agreement is invalid, illegal, or incapable of being enforced by any rule of
applicable law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated herein are not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal, or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated herein are consummated as originally contemplated to the fullest
extent possible.
Section 9.5 Fees and Expenses.
(a) At each Closing pursuant to Sections 6.2(b)(iv) and
6.3(b)(ii), the Company shall pay to Purchaser an amount equal to the
Purchaser's Expenses incurred through the applicable Closing Date in connection
with the transactions contemplated by this Agreement.
(b) Concurrently with a termination of this Agreement pursuant
to Section 7.1(b)(ii), (iii) or (iv) by the Purchaser or the Company (and as a
condition to any such termination by the Company), the Company shall pay to
Purchaser by wire transfer of immediately available funds an amount equal to the
Purchaser's Expenses.
(c) If this Agreement is terminated pursuant to Section
7.1(b)(iii) by the Purchaser or the Company, and within one year of such
termination definitive documentation with respect to an Alternative Transaction
has been entered into or 50% or more of the outstanding Common Stock has been
acquired pursuant to a tender or exchange offer in connection with an
Alternative Transaction, then the Company shall pay $3,000,000 to Purchaser in
immediately available funds within three Business Days after the occurrence of
such event.
(d) Pursuant to the terms of the Financial Advisory Agreement,
the Company is paying to HMCo a transaction fee of $1,250,000 by wire transfer
of immediately available funds concurrently with the execution of this
Agreement. At the First Closing, the Company shall pay to HMCo a transaction fee
in the amount of $1,250,000 by wire transfer of immediately available funds. If
the shareholders of the Company shall have approved the Share Issuance and the
Articles of Amendment on or before December 31, 1998, the Company shall pay HMCo
a transaction fee in the amount of $7,500,000 ($8,750,000 if the First Closing
shall not have occurred) by wire transfer of immediately available funds on the
Second Closing Date. If the shareholders of the Company
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shall not have approved the Share Issuance and the Articles of Amendment on or
before December 31, 1998, the Company shall pay HMCo a transaction fee of
$7,500,000 ($8,750,000 if the First Closing shall not have occurred) in
immediately available funds on December 31, 1998; provided however, that the
Company may elect to pay such transaction fee by delivering to HMCo the amount
of $2,500,000 ($3,750,000 if the First Closing shall not have occurred) in cash
by wire transfer of immediately available funds and by issuing to HMCo 1,000,000
shares of Common Stock; provided that such shares shall have been approved for
listing on Nasdaq and that all other Approvals with respect to the issuance of
such shares shall have been received.
Except as otherwise expressly provided in this Agreement or as provided by Law,
all reasonable costs and expenses (including legal fees and expenses) incurred
by Purchaser in connection with the consummation of the transactions
contemplated hereby and by the other Transaction Documents shall be borne solely
and entirely by the Company in addition to its own such costs and expenses.
Section 9.6 Parties in Interest. This Agreement shall be binding upon
and, except as provided below, inure solely to the benefit of each party hereto
and their successors and assigns, and nothing in this Agreement, except as set
forth in Section 4.9 (which is expressly intended for the benefit of the Covered
Parties and shall be enforceable by any of the Covered Parties or any of their
respective heirs and representatives) and Article VIII which is intended for the
benefit of all Indemnified Parties, express or implied, is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or
by reason of this Agreement.
Section 9.7 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or mailed
by registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) If to Purchaser, to:
HM 4 Coho, L.P.
c/o Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attention: Lawrence D. Stuart, Jr.
Facsimile: (214) 740-7313
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with a copy to:
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Michael D. Wortley
Facsimile: (214) 999-7732
(b) If to the Company, to:
Coho Energy, Inc.
14785 Preston Road, Suite 860
Dallas, Texas 75240
Attention: President
Facsimile: (972) 991-2257
with a copy to:
Fulbright & Jaworski L.L.P.
2200 Ross Avenue, Suite 2800
Dallas, Texas 75201
Attention: Harva Dockery
Facsimile: (214) 855-8200
Any of the above addresses may be changed at any time by notice given
as provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered, on the date of receipt, if telecopied, three Business Days
after the date of mailing, if mailed by registered or certified mail, return
receipt requested, and one Business Day after the date of sending, if sent by
Federal Express or other recognized overnight courier.
Section 9.8 Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
Section 9.9 Entire Agreement. This Agreement (which term shall be
deemed to include the Exhibits and Schedules hereto and the other certificates,
documents and instruments delivered hereunder) constitutes the entire agreement
of the parties hereto and supersedes all prior agreements, letters of intent and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. There are no representations or warranties, agreements,
or covenants other than those expressly set forth in this Agreement.
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Section 9.10 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT
GIVING EFFECT TO ANY CONFLICTS OF LAW PROVISIONS.
Section 9.11 Public Announcements. The Company, on the one hand, and
Purchaser, on the other, shall consult with each other before issuing any press
release or otherwise making any public statements with respect to this Agreement
or the transactions contemplated hereby, except for statements required by Law
or by any listing agreements with any national securities exchange or the
National Association of Securities Dealers, Inc., or made in disclosures filed
pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934.
Section 9.12 Assignment. Neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be assigned by any of the parties
hereto, whether by operation of Law or otherwise; provided, however, that upon
notice to the Company, (a) Purchaser may assign or delegate any or all of its
rights or obligations under this Agreement to any Affiliate thereof and (b)
nothing in this Agreement shall limit Purchaser's ability to make a collateral
assignment of its rights under this Agreement to any institutional lender that
provides funds to Purchaser without the consent of the Company. The Company
shall execute an acknowledgment of such collateral assignments in such forms as
Purchaser's lenders may from time to time reasonably request; provided, however,
that unless written notice is given to the Company that any such collateral
assignment has been foreclosed upon, the Company shall be entitled to deal
exclusively with Purchaser as to any matters arising under this Agreement or any
of the other agreements delivered pursuant hereto. In the event of such an
assignment, the provisions of this Agreement shall inure to the benefit of and
be binding on Purchaser's assigns. Any attempted assignment in violation of this
Section shall be null and void.
Section 9.13 Director and Officer Liability. The directors, officers,
and stockholders of Purchaser and its Affiliates shall not have any personal
liability or obligation arising under this Agreement (including any claims that
the Company may assert) other than as an assignee of this Agreement.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer as of the date first
written above.
COHO ENERGY, INC.
By: /s/ Jeffrey Clarke
-----------------------------
Name: Jeffrey Clarke
--------------------------
Title: Chief Executive Officer
-------------------------
HM 4 COHO, L.P.
By: Hicks, Muse Fund IV LLC,
its general partner
By: /s/ Daniel S. Dross
----------------------------
Name: Daniel S. Dross
--------------------------
Title: Senior Vice President
-------------------------
[Signature Page - Stock Purchase Agreement]
<PAGE> 1
EXHIBIT 10.3
FINANCIAL ADVISORY AGREEMENT
THIS FINANCIAL ADVISORY AGREEMENT, dated August 21, 1998 (this
"Agreement"), is made and entered into between Coho Energy, Inc., a Texas
corporation (the "Company"), and Hicks, Muse & Co. Partners, L.P., a Texas
limited partnership (together with its successors, "HMCo").
WHEREAS, an affiliate of HMCo, HM 4 Coho, L.P., a Texas partnership
("Purchaser"), is, as of the date of this Agreement, entering into an agreement
(the "Purchase Agreement") with the Company to purchase a portion of the capital
stock of the Company ( the "Transaction"); and
WHEREAS, the Company has requested that HMCo render, and HMCo has
rendered, financial advisory services to the Company and its subsidiaries in
connection with the negotiation of the transaction; and
WHEREAS, the Company has requested that HMCo render financial advisory,
investment banking, and other similar services to the Company and its
subsidiaries with respect to any future proposals for (a) the acquisition by any
person or group of beneficial ownership of (i) a majority of the combined voting
power of the then outstanding securities of the Company entitled to vote
generally in the election of directors, or (ii) a majority of the Company's
outstanding capital stock, (b) a reorganization, recapitalization, merger,
consolidation or similar business combination or transaction or sale or other
disposition (whether in a single transaction or series of related transactions)
of all or substantially all of the assets of the Company and its subsidiaries
taken as a whole (unless the holders of the outstanding securities of the
Company entitled to vote generally in the election of directors prior to such
transaction continue to own at least a majority of the securities entitled to
vote generally in the election of directors of the entity resulting from such
transaction upon the completion of such transaction), (c) the sale of oil and
gas properties of the Company or its subsidiaries involving consideration of
$100 million or more, (d) any acquisition by the Company or its subsidiaries
involving consideration of $100 million or more of (i) a majority of the voting
power of the then outstanding voting securities of any corporation entitled to
voting generally in the election of directors or (ii) a majority of the
ownership interests of an entity other than a corporation (whether by merger,
tender offer, exchange offer or similar extraordinary transaction), or (e) any
acquisition by the Company or its subsidiaries of oil and gas properties or
other assets involving consideration of $100 million or more (collectively,
"Additional Transactions");
NOW, THEREFORE, in consideration of the services rendered and to be
rendered by HMCo to the Company and its subsidiaries and to evidence the
obligations of the Company to HMCo and the mutual covenants herein contained,
the Company and HMCo hereby agree as follows:
<PAGE> 2
1. Retention.
(a) The Company hereby acknowledges that it has retained HMCo
for the benefit of the Company and its subsidiaries, and HMCo acknowledges that
it has acted, as financial advisor to the Company and its subsidiaries in
connection with the Transaction.
(b) The Company acknowledges that, effective as of the First
Closing (as defined in the Purchase Agreement), it has retained HMCo as the
exclusive financial advisor in connection with any Additional Transactions that
may be consummated during the term of this Agreement, and that the Company will
not, and will cause its subsidiaries not to, retain any other person or entity
to provide such services in connection with any such Additional Transaction,
unless the Chief Executive Officer of the Company (the "CEO") and HMCo mutually
agree that the retention by the Company of a second financial advisor in
addition to HMCo would be appropriate with respect to a given Additional
Transaction; and provided, that the Company, at the discretion of the CEO, may
elect not to retain a financial advisor with respect to a particular Additional
Transaction and in such event HMCo shall not be entitled to receive the fee set
forth in Section 3(b) below. HMCo agrees that it shall provide such financial
advisory, investment banking, and other similar services in connection with any
such Additional Transaction as may be requested from time to time by the board
of directors of the Company.
2. Term. The term of this Agreement shall continue until the
earlier to occur of (a) the tenth anniversary of the date hereof or (b) the date
on which Purchaser and its affiliates cease to own beneficially, directly or
indirectly, at least five percent of the outstanding equity securities of the
Company or its successors; provided that no termination of this Agreement shall
eliminate the obligations of the Company under Section 3(a) hereof.
3. Compensation. (a) As compensation for HMCo's services as a
financial advisor to the Company and its subsidiaries in connection with the
Transaction, the Company is paying HMCo a cash fee of $1,250,000 by wire
transfer of immediately available funds concurrently herewith and hereby
irrevocably agrees to pay HMCo:
(i) a cash fee of $1,250,000 by wire transfer of
immediately available funds on the First Closing Date (as defined in
the Purchase Agreement);
(ii) if the shareholders of the Company shall have
approved the transactions contemplated by the Purchase Agreement on or
before December 31, 1998, a cash fee of $7,500,000 by wire transfer of
immediately available funds on the Second Closing Date (as defined in
the Purchase Agreement); and
(iii) if the shareholders of the Company shall not
have approved the transactions contemplated by the Purchase Agreement
on or before December 31, 1998, a fee of $7,500,000 ($8,750,000 if the
First Closing shall not have occurred (as defined in the Purchase
Agreement) by wire transfer of immediately available funds on December
31, 1998; provided however, that the Company may elect to satisfy such
obligation through the
2
<PAGE> 3
payment of $2,500,000 ($3,750,000) if the First Closing shall not have
occurred) by wire transfer of immediately available funds and the
issuance to HMCo of 1,000,000 shares of common stock, par value $.01
per share, of the Company; and provided further that such shares shall
have been approved for listing on The Nasdaq Stock Market National
Market System and that the Company shall have received all other
required consents and approvals to the issuance of such shares.
(b) As compensation for HMCo's financial advisory, investment
banking, and other similar services rendered in connection with any Additional
Transaction pursuant to Section 1(b) hereof, the Company shall pay to HMCo, at
the closing of any such Additional Transaction, a fee payable in cash in an
amount equal to the amount of fees then charged by first tier investment banking
firms for similar advisory services rendered in connection with transactions
similar to such Additional Transaction; provided, however, that (c) such fee
shall be divided equally between HMCo and any additional financial advisor
retained by the Company as provided in the first sentence of Section 1(b) and
(d) HMCo shall not be entitled to a fee with respect to any Additional
Transaction for which the CEO elects not to retain a financial advisor.
4. Reimbursement of Expenses. In addition to the compensation to
be paid pursuant to Section 3 hereof, the Company agrees to reimburse HMCo,
promptly following demand therefor, together with invoices or reasonably
detailed descriptions thereof, for all reasonable disbursements and
out-of-pocket expenses (including fees and disbursements of counsel) incurred by
HMCo (a) as financial advisor to the Company or any of its subsidiaries in
connection with the Transaction or (b) in connection with the performance by it
of the services contemplated by Section 1(b) hereof.
5. Indemnification. The Company shall indemnify and hold harmless
each of HMCo, its affiliates, and their respective directors, officers,
partners, members, controlling persons (within the meaning of Section 15 of the
Securities Act of 1933 or Section 20(a) of the Securities Exchange Act of 1934),
if any, agents and employees (HMCo, its affiliates, and such other specified
persons being collectively referred to as "Indemnified Persons" and individually
as an "Indemnified Person") from and against any and all claims, liabilities,
losses, damages and expenses incurred by any Indemnified Person (including those
resulting from the negligence of the Indemnified Person and fees and
disbursements of the respective Indemnified Person's counsel) which (a) are
related to or arise out of (i) actions taken or omitted to be taken (including
any untrue statements made or any statements omitted to be made) by the Company
or any of its subsidiaries or (ii) actions taken or omitted to be taken by an
Indemnified Person with the Company's or any of its subsidiaries' consent or in
conformity with the Company's or any such subsidiaries' instructions or the
Company's or any such subsidiaries' actions or omissions or (b) are otherwise
related to or arise out of HMCo's engagement, and will reimburse each
Indemnified Person for all costs and expenses, including fees of any Indemnified
Person's counsel, as they are incurred, in connection with investigating,
preparing for, defending, or appealing any action, formal or informal claim,
investigation, inquiry or other proceeding, whether or not in connection with
pending or threatened litigation, caused by or arising out of or in connection
with HMCo's acting pursuant to the engagement, whether or not any Indemnified
Person is named as a party thereto and whether or not any liability results
therefrom. The Company will not however, be responsible for any claims,
liabilities, losses,
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damages, or expenses pursuant to clause (b) of the preceding sentence that have
resulted primarily from HMCo's bad faith, gross negligence or willful
misconduct. The Company also agrees that neither HMCo nor any other Indemnified
Person shall have any liability to the Company or any of its subsidiaries for or
in connection with such engagement except for any claims, liabilities, losses,
damages, or expenses incurred by the Company or any such subsidiary to the
extent the same have resulted from HMCo's bad faith, gross negligence or willful
misconduct. The Company further agrees that it will not, and the Company will
cause its subsidiaries to not, without the prior written consent of HMCo, settle
or compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which indemnification
may be sought hereunder (whether or not any Indemnified Person is an actual or
potential party to such claim, action, suit or proceeding) unless such
settlement, compromise or consent includes an unconditional release of HMCo and
each other Indemnified Person hereunder from all liability arising out of such
claim, action, suit or proceeding. THE COMPANY HEREBY ACKNOWLEDGES THAT THE
FOREGOING INDEMNITY SHALL BE APPLICABLE TO ANY CLAIMS, LIABILITIES, LOSSES,
DAMAGES, OR EXPENSES THAT HAVE RESULTED FROM OR ARE ALLEGED TO HAVE RESULTED
FROM THE ACTIVE OR PASSIVE OR THE SOLE, JOINT OR CONCURRENT ORDINARY NEGLIGENCE
OF HMCO OR ANY OTHER INDEMNIFIED PERSON.
The foregoing right to indemnity shall be in addition to any rights
that HMCo and/or any other Indemnified Person may have at common law or
otherwise and shall remain in full force and effect following the completion or
any termination of the engagement. The Company hereby consents, and shall cause
its subsidiaries to consent, to personal jurisdiction and to service and venue
in any court in which any claim which is subject to this agreement is brought
against HMCo or any other Indemnified Person.
It is understood that, in connection with HMCo's engagement, HMCo may
also be engaged to act for the Company or any of its subsidiaries in one or more
additional capacities, and that the terms of this engagement or any such
additional engagement may be embodied in one or more separate written
agreements. This indemnification shall apply to the engagement specified in the
first paragraph hereof as well as to any such additional engagement(s) (whether
written or oral) and any modification of said engagement or such additional
engagement(s) and shall remain in full force and effect following the completion
or termination of said engagement or such additional engagements.
The Company further understands that if HMCo is asked to furnish the
Company or any of its subsidiaries a financial opinion letter or to act for the
Company or any such subsidiary in any other formal capacity, such further action
may be subject to a separate agreement containing provisions and terms to be
mutually agreed upon.
6. Confidential Information. In connection with the performance
of the services hereunder, HMCo agrees not to divulge any confidential
information, secret processes or trade secrets disclosed by the Company or any
of its subsidiaries to HMCo solely in its capacity as a financial advisor,
unless the Company consents to the divulging thereof or such information, secret
processes, or trade secrets are publicly available or otherwise available to
HMCo without restriction
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or breach of any confidentiality agreement or unless required by any
governmental authority or in response to any valid legal process.
7. Governing Law. This Agreement shall be construed, interpreted,
and enforced in accordance with the laws of the State of Texas, excluding any
choice-of-law provisions thereof.
8. Assignment. This Agreement and all provisions contained herein
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, neither this Agreement nor
any of the rights, interests, or obligations hereunder shall be assigned (other
than with respect to the rights and obligations of HMCo, which may be assigned
to any one or more of its principals or affiliates) by any of the parties
without the prior written consent of the other parties.
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and the signature of any
party to any counterpart shall be deemed a signature to, and may be appended to,
any other counterpart.
10. Other Understanding. All discussions, understandings, and
agreements theretofore made between any of the parties hereto with respect to
the subject matter hereof are merged in this Agreement, which alone fully and
completely expresses the agreement of the parties hereto.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
COHO ENERGY, INC.
By: /s/ Jeffrey Clarke
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Name: Jeffrey Clarke
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Title: Chief Executive Officer
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<PAGE> 7
HICKS, MUSE & CO. PARTNERS, L.P.
By: HM PARTNERS INC.,
its General Partner
By: /s/ Daniel S. Dross
--------------------------------
Name: Daniel S. Dross
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Title: Senior Vice President
-----------------------------
