SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 8-K
CURRENT REPORT
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PURSUANT TO SECTION 13 OR 15 (d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
--------------------------
Date of Report (Date of earliest event reported): September 25, 1996
FLORES & RUCKS, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Delaware 0-25058 72-1277752
(State or Other Jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
</TABLE>
8440 Jefferson Highway, Suite 420
Baton Rouge, Louisiana 70809
(Address of principal
executive offices, including zip code)
(504) 927-1450
(Registrant's telephone number, including area code)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT
See Item 5.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 10, 1996, Flores & Rucks, Inc. a Delaware corporation (the
"Company") entered into a Purchase and Sale Agreement with Mobil Oil Exploration
& Producing Southeast Inc. ("Mobil") to acquire (the "Central Gulf Acquisition")
interests in certain oil and gas producing fields and related production
facilities primarily situated in the shallow waters of the Central Gulf of
Mexico, offshore Louisiana. The closing of the Central Gulf Acquisition occurred
on September 26, 1996, and the Company acquired 11 properties (the "Central Gulf
Properties") for a gross purchase price of $118.8 million (subject to reduction
by $4 million if certain preferential purchase rights of third parties on
interests in two of the properties are exercised). The purchase price was
determined based upon the Company's estimates of the oil and gas reserves
underlying the Central Gulf Properties, and through negotiations between the
Company and Mobil. Subject to assignment of the applicable operating agreements,
the Company anticipates that it will become the operator of approximately 75% of
the properties. As of June 30, 1996, the Central Gulf Properties had estimated
proved reserves of approximately 13.8 MMBbls of oil and 50.8 Bcf of natural gas,
or an aggregate of approximately 22.3 MMBOE, with a Present Value of Future Net
Revenues of approximately $147.0 million and a Standardized Measure of
Discounted Future Net Cash Flows of approximately $113.4 million. For the six
months ended June 30, 1996, estimated average net daily production on the
Central Gulf Properties was approximately 4,800 Bbls of oil and 27,500 Mcf of
natural gas from approximately 125 producing wells on 87,514 gross (49,248 net)
acres. Pro forma for the Central Gulf Acquisition, the Company's average daily
production is expected to increase by approximately 30%, and its proved reserve
mix is expected to shift to approximately 76% oil and 24% gas from the current
mix of 83% oil and 17% gas.
The Company funded the Central Gulf Acquisition with a portion of the
proceeds of its sale of $160,000,000 principal amount of 9 3/4% Senior
Subordinated Notes Due 2006 (the "Notes Offering"). The closing of the Notes
Offering occurred concurrently with the closing of the Central Gulf Acquisition.
ITEM 5. OTHER EVENTS
(i) On September 25, 1996, William W. Rucks, IV, a member of the Board
of Directors of the Company, and formerly Vice Chairman of the Board of
Directors and President of the Company, sold 1,550,000 shares of the common
stock, par value $0.01 of the Company ("Common Stock") in an underwritten public
offering (the "Common Stock Offering").
In addition, pursuant to an Option Agreement dated August 11, 1996, Mr.
Rucks and the Rucks Family Limited Partnership, a Texas limited partnership of
which Mr. Rucks is a general partner (the "Rucks Partnership"), granted James C.
Flores, Chairman of the Board of Directors and Chief Executive Officer of the
Company, an option (the "Option") effective September 25, 1996 to purchase
1,600,000 shares (the "Option Shares") of Common Stock. The term of the Option
is two years, and may be extended for an additional year (the "Extension
Period") upon payment of an extension fee of $1,000,000. In connection with the
grant of the Option, Mr. Rucks and the Rucks Partnership also granted Mr. Flores
an irrevocable proxy (the "Proxy") to vote the Option Shares for the term of the
Option. Each of the Option and the Proxy is filed as an exhibit to this Form 8-K
and is incorporated herein by reference. The exercise price of the Option is
initially $30 per share, increasing to $35 per share after one year and
increasing to $37.63 per share during the Extension Period. The Option is
exercisable in minimum increments of 300,000 shares during the initial term but
must be exercised in full for any remaining Option Shares if exercised during
the Extension Period.
In connection with the Common Stock Offering and the Option, Mr. Rucks
resigned as President and Vice Chairman of the Board of Directors of the
Company, though he remains a member of the Board of Directors.
Immediately prior to the consummation of the Common Stock Offering and
the granting of the Option and the Proxy, Mr. Flores and Mr. Rucks beneficially
owned approximately 3,585,751 and 3,513,158 shares of Common Stock,
respectively, or approximately 18.3% and 17.9%, respectively, of the outstanding
Common Stock. As of September 25, 1996 and upon consummation of the Common
Stock Offering, Mr. Flores
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beneficially owned approximately 5,185,751 shares of Common Stock (incuding the
Option Shares) or approximately 26.4% of the outstanding Common Stock, and Mr.
Rucks beneficially owned approximately 363,158 shares of Common Stock (excluding
the Option Shares), or approximately 1.9% of the outstanding Common Stock. On
October 8, 1996, the underwriters for the Common Stock Offering exercised their
over-allotment option for 130,500 shares of Common Stock. Accordingly, Mr. Rucks
will beneficially own approximately 232,658 shares of Common Stock (excluding
the Option Shares), or approximtely 1.2% of the outstanding Common Stock.
(ii) After soliciting and receiving the necessary consents of the
holders of the Company's 13 1/2% Senior Notes Due 2004 (the "Senior Notes"), the
Company and the other parties to the Indenture governing the Senior Notes (the
"Senior Notes Indenture") executed a First Supplemental Indenture, dated as of
September 19, 1996, amending the terms of the Senior Notes Indenture. The
primary effect of the First Supplemental Indenture was to amend the "Permitted
Indebtedness" definition related to the Company's revolving credit facility to
allow borrowings thereunder to increase in proportion to increases in the
Company's asset base in order to enhance its ongoing financial and operating
flexibility.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
The Statements of Combined Oil and Gas Revenues and Direct Operating
Expenses of the Central Gulf Properties for the years ended December
31, 1995, 1994 and 1993, and for the six months ended June 30,1996
(unaudited), together with the Notes thereto, are incorporated herein
by reference to the Company's Registration Statement on Form S-3
(Registration No. 333-10365).
(B) PRO FORMA FINANCIAL INFORMATION.
The Company's Unaudited Pro Forma Balance Sheet as of June 30, 1996,
and Unaudited Pro Forma Statements of Operations for the year ended
December 31, 1995 and for the six months ended June 30, 1996, together
with the Notes thereto, are incorporated herein by reference to the
Company's Registration Statement on Form S-3 (Registration No.
33-10365).
(C) EXHIBITS.
2.1 Purchase and Sale Agreement, dated July 10, 1996, between
the Company and Mobil Oil Exploration & Producing
Southeast Inc. (incorporated by reference to Exhibit 10.1 to
the Company's Registration Statement on Form S-3,
Registration No. 333-10365).
*2.2 First Amendment to Purchase and Sale Agreement, dated
September 26, 1996, between the Company and Mobil Oil
Exploration & Producing Southeast Inc.
*4.1 First Supplemental Indenture, dated as of September 19,
1996, among the Company, the Subsidiary Guarantors named
therein, and Fleet National Bank, trustee.
*23.1 Consent of Independent Auditors.
*99.1 Option Agreement, dated August 11, 1996, by and among
James C. Flores, Cherie Hair Flores and William W. Rucks,
IV and Catherine May Rucks (both individually and as sole
general partners of the Rucks Family Limited Partnership).
*99.2 Irrevocable Proxy, dated September 25, 1996, in favor
of James C. Flores.
----------------
* Filed herewith.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 10, 1996 FLORES & RUCKS, INC.
By:/s/ Robert K. Reeves
-----------------------------
Name: Robert K. Reeves
Title: Senior Vice President, General
Counsel and Secretary
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EXHIBIT INDEX
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Exhibit
Number Description
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2.1 Purchase and Sale Agreement, dated July 10, 1996, between the Company and Mobil Oil
Exploration & Producing Southeast Inc. (incorporated by reference to Exhibit 10.1 to the
Company's Registration Statement on Form S-3, Registration No. 333-10365).
*2.2 First Amendment to Purchase and Sale Agreement, dated September 26, 1996, between the
Company and Mobil Oil Exploration & Producing Southeast Inc.
*4.1 First Supplemental Indenture, dated as of September 19,
1996, among the Company, the Subsidiary Guarantors named
therein, and Fleet National Bank, trustee.
*23.1 Consent of Independent Auditors.
*99.1 Option Agreement, dated August 11, 1996, by and among James
C. Flores, Cherie Hair Flores and William W. Rucks, IV and
Catherine May Rucks (both individually and as sole general
partners of the Rucks Family Limited Partnership).
*99.2 Irrevocable Proxy, dated September 25, 1996, in favor of James C. Flores.
</TABLE>
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* Filed herewith.
FIRST AMENDMENT AND SUPPLEMENT TO
PURCHASE AND SALE AGREEMENT
This FIRST AMENDMENT AND SUPPLEMENT TO PURCHASE AND SALE AGREEMENT (the
"Amendment") is made and entered into as of the 26th day of September, 1996, by
and between MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST INC., a Delaware
corporation ("Seller"), with a place of business at 12450 Greenspoint Drive,
Houston, Texas 77060-1991, and FLORES & RUCKS, INC., a Louisiana corporation
("Purchaser"), with a place of business at 500 Dover Boulevard, Suite 300,
Lafayette, Louisiana 70503.
WHEREAS, Seller and Purchaser have entered into that certain Purchase
and Sale Agreement dated July 10, 1996 (the "Purchase and Sale Agreement "); and
WHEREAS, pursuant to the Purchase and Sale Agreement, Purchaser
delivered to Seller a Notice of Title Defects, by letter dated September 13,
1996 (the "Notice of Title Defects"); and
WHEREAS, Seller and Purchaser desire to amend and supplement the
Purchase and Sale Agreement to advance the Closing Date, substitute certain
Exhibits and to agree with respect to certain closing and post closing matters.
NOW, THEREFORE, in consideration of the mutual benefits and obligations
of Seller and Purchaser included herein and in the Purchase and Sale Agreement,
Seller and Purchaser do hereby agree as follows:
1. Closing Date: Article 4 of the Purchase and Sale Agreement is hereby
amended to delete "September 30, 1996," and to substitute therefor
"September 26, 1996."
2. Operations: Article 17 of the Purchase and Sale Agreement is hereby amended
to delete the first two sentences and to substitute therefor the following:
Seller, as to the portion of the Interests to be conveyed
which it now operates, shall, from the date of execution of
this Agreement, continue to operate the same in a good and
workmanlike manner until October 1, 1996, at 7:00 a.m., when
such operations shall be turned over to and become the
responsibility of Purchaser, unless an applicable unit,
pooling, communitization or operating agreement requires
otherwise or any necessary Designation of Operator forms have
not been executed and filed with the Minerals Management
Service ("MMS"), in which case (unless Purchaser and Seller
otherwise agree) Seller shall continue the physical operation
of such portion of the Interests pursuant to and under the
terms of such applicable agreement or as required by the MMS
until such time as such applicable agreement may require or
until any necessary
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Designation of Operator forms have been executed and filed
with the MMS; provided, however, that Seller shall have no
liability as operator to Purchaser for losses or damages
sustained, or liabilities incurred, WHETHER OR NOT THE LOSSES,
COSTS, EXPENSES AND DAMAGE IN QUESTION AROSE SOLELY OR IN PART
FROM THE ACTIVE, PASSIVE, CONCURRENT, SIMPLE OR SOLE
NEGLIGENCE, OR STRICT LIABILITY OR OTHER FAULT OF SELLER OR
ANY OTHER THEORY OF LIABILITY OR FAULT, WHETHER IN LAW
(WHETHER COMMON OR STATUTORY) OR EQUITY, except as may result
directly from Seller's gross negligence or willful misconduct.
Any operations from and after the Effective Time shall be
conducted by Seller for and on behalf of Purchaser and, after
the Closing Date, subject to Purchaser's sole direction and
right of control. Seller shall make appropriate charges to the
Purchaser for such services as operator of the Interests (or
any portion thereof) performed by Seller from and after the
Effective Time.
3. Exhibits: Exhibits "A-1" though "A-13" and "B" to the Purchase and Sale
Agreement are hereby amended by deleting same in their entirety and
substituting therefor Exhibits "A-1" though "A-13" and "B" attached hereto
as Attachment No. 1.
4. Indemnification for Liens and Judgments: Seller shall defend, indemnify,
save, discharge, release and hold Purchaser harmless from any and all
Claims arising out of or related to the liens and judgments listed in
Sub-Paragraphs "1.a" through "v" and in Paragraph "3" of the Notice of
Title Defects. The provisions of Subsection 21.01(f) and Section 21.02 of
the Purchase and Sale Agreement shall be applicable to claims for indemnity
under this paragraph.
5. Indemnification for Gas Purchase Contracts and Production Payments: Seller
shall defend, indemnify, save, discharge, release and hold Purchaser
harmless from any and all Claims arising out of or related to the Gas
Purchase Contracts, Production Payments and Mortgage listed in Paragraphs
"2," "7," "11.a" through "c", and "12" of the Notice of Title Defects. The
provisions of Subsection 21.01(f) and Section 21.02 of the Purchase and
Sale Agreement shall be applicable to claims for indemnity under this
paragraph.
6. Outstanding Preferential Rights to Purchase: Article 7 of the Purchase and
Sale Agreement provides that Seller and Purchaser may agree on a procedure
to accommodate outstanding Preferential Rights. Seller and Purchaser agree
to the following procedure with regard to any Properties where there are
outstanding Preferential Rights which have not expired or been properly
waived by the Closing Date. Seller shall execute and deliver an assignment
as to any such Property and Purchaser shall pay the allocated Sales Price
for such Property at Closing. Purchaser will hold said assignment and will
not submit same for recordation in any parish or for approval by the MMS
until the Preferential Rights covering such Property expire or are waived.
In the event the Preferential Rights are exercised, within five (5) days of
notification of exercise, Purchaser shall return to Seller the assignment
for such Property as to which the Preferential Rights were exercised and
Seller shall simultaneously return to Purchaser the allocated Sales Price
for such Property. In the event the Preferential Rights are exercised, the
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assignment for such Property shall be null and void and Purchaser shall be
deemed to have not assumed any obligations or liabilities with respect to
such Property.
7. Post Closing Curative: Subsections 6.03 through 6.05 of the Purchase and
Sale Agreement address the notification and handling of Title Defects.
These provisions do not specifically address post closing curative matters.
Article 24 of the Purchase and Sale Agreement provides the further
assurance obligations of Seller and Purchaser. Without limiting the further
assurance obligations of Purchaser or Seller, Purchaser and Seller agree to
the following.
a. Vermilion 215 Field:
i. Vermilion 215 Field Curative: Reference is made to
Paragraphs "5" (including Requirements Nos. "5.a", "b"
and "c" thereunder) and "6" (including Requirement No.
"6" thereunder) of the Notice of Title Defects. The
assignments and other curative required ("Vermilion 215
Field Curative") have not been obtained as of the
Closing Date.
ii. Closing: Seller shall execute and deliver at Closing to
Purchaser: (1) an Assignment of Record Title Interest
and Bill of Sale for Vermilion 215 Field; (2) an
Assignment of Overriding Royalty Interests; (3) an
Assignment of Operating Rights; and (4) an Assignment
of Interests in Wells. Purchaser shall pay at Closing
the allocated Sales Price for the Vermilion 215 Field
Property. Purchaser shall not file in the Parish
Records or with the MMS "(3)" and "(4)," pending
receipt from Seller of the Vermilion 215 Field Curative
or the expiration of the time period under iii below.
iii. Post Closing Curative
(1) Seller shall attempt, for a period of up to six (6)
months after the Closing Date, to obtain the execution
of and deliver to Purchaser the Vermilion 215 Field
Curative.
(2) If said curative is not executed and delivered to
Purchaser within thirty (30) days of the Closing Date,
Purchaser shall have right to demand the return of the
allocated Sales Price for the affected portion of the
Interests(being $9,000,000.00). If Purchaser makes said
demand, Seller shall pay the return payment within five
(5) days after the expiration of the thirty (30) day
period and Purchaser shall simultaneously return to
Seller assignments "(3)" and "(4)" referenced above
under "ii".
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(3) If the return payment has been made and the Vermilion
215 Field Curative is executed and delivered to
Purchaser within the aforesaid six (6) month period,
Purchaser shall repay the allocated Sales Price to
Seller. Said repayment shall be made within five (5)
days of the delivery to Purchaser of said curative and
Seller shall simultaneously redeliver to Purchaser
assignments "(3)" and "(4)" referenced above under
"ii".
(4) If the Vermilion 215 Field Curative is not obtained
within six (6) months of the Closing Date, then
Purchaser shall have the option to elect between: (a)
the return of the allocated Sales Price, or (b)
receiving an assignment of any contractual rights
Seller may have to demand said curative. If there has
been a prior return payment, then upon electing "(a)"
Purchaser will retain the return payment, or upon
electing "(b)" Purchaser shall repay the allocated
Sales Price within five (5) days of such election and
Seller shall simultaneously redeliver to Purchaser
assignments "(3)" and "(4)" referenced above under
"ii". If there has been no prior return payment and
Purchaser elects "(a)", then within five (5) days after
the expiration of the aforesaid six (6) month period
Seller shall return the allocated Sales Price for the
affected portion of the Interests and Purchaser shall
simultaneously return to Seller assignments "(3)" and
"(4)" referenced above under "ii".
(5) An accounting will be made between the Seller and Buyer
for revenue and expenses for the applicable periods in
the event of any return payment or repayment. By way of
illustration: (a) if there is a return payment after
the end of thirty (30) days, then the return payment
shall be adjusted according to the revenue and expenses
between the Effective Date and the end of the thirty
(30) day period; and (b) if there is a repayment then
the repayment shall be adjusted according to the
revenue and expenses between the end of the thirty (30)
day period and the date of the repayment.
b. Eugene Island 45 Field Curative:
i. Walter, et al Reassignment: Reference is made to
Paragraph "9" (including Requirement No. "9"
thereunder) of the Notice of Title Defects. The
reassignment of operating rights from Walter Oil & Gas
Corporation and/or its successors and assigns (the
"Walter, et al Reassignment") has not been obtained as
of the Closing Date. Seller shall execute and deliver
at Closing to Purchaser: (1) an Assignment of Record
Title Interest and Bill of Sale for the Eugene Island
45 Field Property; (2) an Assignment of Overriding
Royalty
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Interest; and (3 )an Assignment of Operating Rights.
Purchaser shall pay at Closing the allocated Sales
Price for the Eugene Island 45 Field Property. Seller
shall use its best efforts to obtain the execution of
the Walter, et al Reassignment and deliver same to
Purchaser within thirty (30) days of the Closing Date.
If the Walter, et al., Reassignment is not obtained
within said thirty (30) day period, there shall be no
return of the allocated Sales Price for such Property,
but Seller shall continue to use its best efforts to
obtain said reassignment.
ii. Newfield Abandonment: Pursuant to a Farmout Agreement
dated April 1, 1993, between Seller, as Farmor, and
Newfield Exploration Company ("Newfield"), as Farmee,
as amended by Letter Agreement dated August 10, 1994,
Mobil became obligated, upon the drilling of the
contract well in compliance with the terms of the
Farmout, to assign Newfield certain operating rights.
The contract well, the Eugene Island Block 51 #8 Well,
was drilled and Seller elected to retain an overriding
royalty interest. No assignment has been made from
Seller to Newfield, subject to the retained overriding
royalty interest. Newfield has notified Seller of its
intention to plug and abandon or to turn over said well
to Seller, and to return any interest that would have
been assigned. Seller shall use its best efforts to
obtain a reassignment from Newfield of the operating
rights and/or obtain an agreement, satisfactory to
Purchaser, turning over said well and recognizing that
the assignment and reassignment are no longer necessary
and that Newfield relinquishes its interest in any
operating rights, within thirty (30) days of the
Closing Date. If the reassignment or agreement is not
obtained within said thirty (30) day period, there
shall be no return of the allocated Sales Price for
such Property, but Seller shall continue to use its
best efforts to obtain said reassignment or agreement.
8. Estimated Revenue and Expenses: Seller and Purchaser hereby agree to an
adjustment to the Sales Price to be paid at closing to deduct the sum
of $4,500,000.00, being the estimated revenues net of expenses for the
months of August and September, 1996. Seller and Purchaser recognize
that this is an estimate and is subject to adjustment at Final
Accounting.
9. Ratification of Purchase and Sale Agreement: Except as amended hereby,
the Purchase and Sale Agreement is ratified and confirmed in all res-
pects and shall continuein full force and effect as originally written.
10. Successors and Assigns: The provisions of this Amendment shall be
binding upon and inure to the benefit of the parties hereto and their
respective permitted successors and assigns.
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11. Defined Terms: Capitalized terms used but not defined herein shall
have the meanings ascribed to them in the Purchase and Sale Agreement.
IN WITNESS WHEREOF, the Purchaser and Seller have executed this
Amendment as of the date first written above.
SELLER:
ATTEST: MOBIL OIL EXPLORATION &
PRODUCING SOUTHEAST INC.
By: /s/ B.D. Martiny BY: /s/ H. L. Hickey
-------------------------- ----------------------
Name: B. D. Martiny Name: H. L. Hickey
Title: Assistant Secretary Title: Attorney-in-fact
BY: /s/ D. B. Litchfield
----------------------
Name: D. B. Litchfield
Title: Attorney-in-fact
PURCHASER:
FLORES & RUCKS, INC.
BY: /s/Richard G. Zepernick, Jr.
----------------------------
Name: Richard G. Zepernick, Jr.,
Title: Executive Vice President &
Chief Operating Officer
6
FIRST SUPPLEMENTAL INDENTURE
FIRST SUPPLEMENTAL INDENTURE (the "Supplemental Indenture"),
dated as of September 19, 1996, between FLORES & RUCKS, INC., a Delaware
corporation (the "Company"), the SUBSIDIARY GUARANTORS (as defined in the
Indenture described below) and FLEET NATIONAL BANK (formerly known as Shawmut
Bank Connecticut, National Association), trustee (the "Trustee"). All
capitalized terms used herein without definition herein shall have the meanings
ascribed thereto in the Indenture.
WITNESSETH:
WHEREAS, the Company and the Trustee have heretofore executed
and delivered an Indenture, dated as of December 1, 1994 (the "Indenture"),
pursuant to which the Company issued its 13 1/2% Senior Notes Due 2004 in the
aggregate principal amount of $125,000,000; and
WHEREAS, Section 9.2 of the Indenture provides that with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities, the Company, when authorized by a Board Resolution, the
Subsidiary Guarantors, when authorized by a Board Resolution, and the Trustee
may enter into an indenture or indentures supplemental to the Indenture for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of the Indenture or of modifying in any manner the rights of
the Holders under the Indenture (with certain exceptions not relevant to this
Supplemental Indenture); and
WHEREAS, the Company desires and has requested the Trustee to
join with it in entering into this Supplemental Indenture for the purpose of
amending the Indenture in certain respects as permitted by said Section 9.2; and
WHEREAS, the Company has been soliciting consents to the
substance of this Supplemental Indenture upon the terms and subject to the
conditions set forth in its Consent Solicitation Statement dated August 20, 1996
and in the related Letter of Transmittal and Consent (which together constitute
the "Solicitation"); and
WHEREAS, the Company has (1) filed with the Trustee consents
to the substance of this Supplemental Indenture executed and delivered by the
Holders of not less than a majority in principal amount of the Outstanding
Securities of record as of August 20, 1996, (2) delivered to the Trustee an
Opinion of Counsel relating to this First Supplemental Indenture as contemplated
by Section 9.3 of the Indenture and (3) satisfied all other conditions required
under Article IX of the Indenture to enable the Company and the Trustee to enter
into this Supplemental Indenture.
NOW, THEREFORE, for and in consideration of the foregoing, the
Company, the Subsidiary Guarantor and the Trustee agree for the benefit of the
other and for the equal and ratable benefit of the Holders of the Securities as
follows:
<PAGE>
SECTION 1 Amendments of Section 1.1 of the Indenture.
(a) Paragraph (i) of the definition of "Permitted Indebtedness," in
Section 1.1 of the Indenture, is amended to read in its entirety as follows:
"(i) Indebtedness of the Company under one or more bank credit
or revolving credit facilities in an aggregate principal amount at any
one time outstanding not to exceed the greater of (A) $50 million or
(B) an amount equal to the sum of (x) $20 million and (y) 20% of
Adjusted Consolidated Net Tangible Assets determined as of the date of
the incurrence of such Indebtedness (such greater amount being referred
to as the "Adjusted Maximum Credit Amount") (plus interest and fees
payable under such facilities), less any amounts derived from Asset
Sales of any Original Properties and applied to the required permanent
reduction of Indebtedness (and a permanent reduction of the related
commitment to lend in the case of a revolving credit facility) under
such credit facilities as contemplated by Section 10.17(b)(i) hereof
(the "Maximum Credit Amount") (with the Maximum Credit Amount to be an
aggregate maximum amount for the Company and all Restricted
Subsidiaries, pursuant to clause (i) of the definition of "Permitted
Subsidiary Indebtedness"), and any renewals, amendments, extensions,
supplements, modifications, deferrals, refinancings or replacements
(each, for purposes of this clause, a "refinancing") thereof by the
Company, including any successive refinancings thereof by the Company,
so long as the aggregate principal amount of any such new Indebtedness,
together with the aggregate principal amount of all other Indebtedness
outstanding pursuant to this clause (i) (and clause (i) of the
definition of "Permitted Subsidiary Indebtedness") shall not at any one
time exceed the Maximum Credit Amount; provided, however, and
notwithstanding the foregoing provisions of this clause (i), the
Company may not incur Indebtedness pursuant to this clause (i) for the
purpose of (a) acquiring oil and gas Properties, (b) refinancing
Acquired Indebtedness relating to an acquisition of oil and gas
Properties or (c) making an Investment in an Unrestricted Subsidiary
for either of the foregoing purposes, if as a result of such incurrence
the aggregate principal amount of Indebtedness incurred for such
purposes pursuant to this clause (i) (and clause (i) of the definition
of "Permitted Subsidiary Indebtedness") that would then be outstanding
would exceed 50% of the Adjusted Maximum Credit Amount (plus interest
and fees), unless in each case the incurrence of such Indebtedness
which would be in excess of 50% of the Adjusted Maximum Credit Amount
would satisfy the requirements of subclauses (x), (y) and (z) of clause
(a) of Section 10.12 hereof (it being understood that in connection
with any repayments of principal under such credit facilities, the
Company may designate in its discretion the application of such
repayments to either Indebtedness incurred for the foregoing purposes
or to other Indebtedness incurred under such facilities);"
(b) Paragraph (k) of the definition of "Permitted Liens," in Section
1.1 of the Indenture, is amended to read in its entirety as follows:
<PAGE>
"(k) Liens securing Indebtedness incurred to finance the
construction, purchase or lease of, or repairs, improvements or
additions to, property of the Company or any Restricted Subsidiary,
provided, however, that such Lien shall be created (A) in the case of
any Asset Acquisition, within 180 days of the closing of such Asset
Acquisition and (B) in all other cases, within 90 days after the date
of acquisition, construction or improvement of such property or asset
by the Company or such Restricted Subsidiary; provided, further,
however, that in each case, such Lien does not extend to any other
property or asset of the Company and its Restricted Subsidiaries;"
(c) Paragraph (i) of the definition of "Permitted Subsidiary
Indebtedness," in Section 1.1 of the Indenture, is amended to read in its
entirety as follows:
"(i) Indebtedness of any Restricted Subsidiary under one or
more bank credit or revolving credit facilities (and "refinancings"
thereof) in an amount at any one time outstanding not to exceed the
Maximum Credit Amount (in the aggregate for all Restricted Subsidiaries
and the Company, pursuant to clause (i) of the definition of "Permitted
Indebtedness"); provided, however, and notwithstanding the foregoing
provisions of this clause (i), the Restricted Subsidiaries may not
incur Indebtedness pursuant to this clause (i) for the purpose of (a)
acquiring oil and gas Properties, (b) refinancing Acquired Indebtedness
relating to an acquisition of oil and gas Properties or (c) making an
Investment in an Unrestricted Subsidiary for either of the foregoing
purposes, if as a result of such incurrence the aggregate principal
amount of Indebtedness incurred for such purposes pursuant to this
clause (i) (and clause (i) of the definition of "Permitted
Indebtedness") that would then be outstanding would exceed 50% of the
Adjusted Maximum Credit Amount (plus interest and fees), unless in each
case the incurrence of such Indebtedness which would be in excess of
50% of the Adjusted Maximum Credit Amount would satisfy the
requirements of subclauses (x), (y) and (z) of clause (a) of Section
10.12 hereof (it being understood that in connection with any
repayments of principal under such credit facilities, the Restricted
Subsidiaries may designate in their discretion the application of such
repayments to either Indebtedness incurred for the foregoing purposes
or to other Indebtedness incurred under such facilities);"
SECTION 2 Trustee Disclaimer. The Trustee has accepted the
amendment of the Indenture effected by this Supplemental Indenture and agrees to
execute the trust created by the Indenture as hereby amended, but only upon the
terms and conditions set forth in the Indenture, including the terms and
provisions defining and limiting the liabilities and responsibilities of the
Trustee, and without limiting the generality of the foregoing, the Trustee shall
not be responsible in any manner whatsoever for or with respect to any of the
recitals or statements contained herein, all of which recitals or statements are
made solely by the Company and the Subsidiary Guarantor, or for or with respect
to (a) the validity or sufficiency of this Supplemental Indenture or any of the
terms or provisions hereof, (b) the proper authorization hereof by the Company
and the Subsidiary Guarantor by corporate action or otherwise, (c) the due
execution hereof by the Company and the Subsidiary Guarantor, (d) the
consequences (direct or indirect and whether deliberate or inadvertent) of any
amendment herein provided for, and the Trustee makes no representation with
respect to any
HOU04:37727.2
<PAGE>
such matters and (e) the validity or sufficiency of the Solicitation or the
consent solicitation materials or procedure in connection therewith.
SECTION 3 Governing Law. This Supplemental Indenture shall be
governed by the laws of the State of New York.
SECTION 4 Counterparts. This Supplemental Indenture may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed as of the date first above written.
ISSUER:
FLORES & RUCKS, INC.,
a Delaware corporation
By: /s/ ROBERT K. REEVES
Name: Robert K. Reeves
Title: Senior Vice President and
General Counsel
SUBSIDIARY GUARANTOR:
FLORES & RUCKS, INC.,
a Louisiana corporation
By: /s/ ROBERT K. REEVES
Name: Robert K. Reeves
Title: Senior Vice President and
General Counsel
TRUSTEE:
FLEET NATIONAL BANK
(formerly known as Shawmut Bank
Connecticut, National Association)
By: /s/ ELIZABETH C. HAMMER
Name: Elizabeth C. Hammer
Title: Vice President
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Current Report (Form 8-K)
of Flores & Rucks, Inc. our report dated August 8, 1996, with respect to the
statements of combined oil and gas revenues and direct operating expenses of
certain oil and gas producing properties to be acquired from Mobil Oil
Exploration & Producing Southeast Inc. which is included in the Registration
Statement on Form S-3 (Registration No. 333-10365) of Flores & Rucks, Inc. filed
with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Fort Worth, Texas
October 10, 1996
EXHIBIT 99.1
OPTION AGREEMENT
This Agreement is entered into this the 11th day of August, 1996 by and
among James C. Flores ("Flores"), Cherie Hair Flores, residents of Baton Rouge,
Louisiana, William W. Rucks, IV., individually ("Rucks"), Catherine May Rucks,
residents of Lafayette, Louisiana, and William W. Rucks, IV. and Catherine May
Rucks as sole general partners of the Rucks Family Limited Partnership
("Partnership"), a Texas limited partnership.
RECITALS
A. Flores is Chairman of the Board of Directors and Chief Executive
Officer of Flores & Rucks, Inc., a Delaware corporation ("Company"). Rucks is
Vice-Chairman of the Board of Directors and President of the Company. Flores,
members of his immediate family and his family limited partnership are record
owners collectively of not fewer than 3,000,000 shares of the Company's common
stock, par value 0.01 per share ("Company's Stock"). Rucks and the Partnership
are currently the record owners of not fewer than 3,450,000 shares in the
aggregate of the Company's Stock. B. Rucks wishes to sell 1,650,000 shares of
the Company's Stock in a public sale ("Public Sale") on/or before December 31,
1996, and the Company has agreed, subject to certain conditions, to prepare and
file a registration statement covering the sale of the
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aforesaid 1,650,000 shares. Rucks, Flores and the Company believe that if Rucks
completes the Public Sale, it will be in the best interest of the Company and
its stockholders for Flores to have the right to acquire from Rucks and the
Partnership 1,600,000 shares of the Company's Stock in order to facilitate the
Public Sale, prevent the occurrence of a change in control event under the
Company's existing debt instruments and to assure continuity of management and
the balanced, timely and appropriate redistribution of the Company's Stock.
Accordingly, Rucks and the Partnership have agreed to grant Flores an option
(the "Option") to acquire 1,600,000 shares ("Option Shares") of the Company's
Stock of which Rucks and the Partnership are currently the record owners under
terms and conditions hereinafter specified.
Now, therefore, in consideration of the recitals, the mutual promises
of the parties hereto and other good and valid consideration the receipt and
sufficiency of which is acknowledged, the parties hereby agree as follows:
1. DEFINITIONS.
As used herein the following terms shall have the following
meanings (such definitions to be equally applicable to the singular and plural
and to the masculine and feminine forms of the defined terms):
2
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1.1 CLOSING means the meeting(s) to be held at the Company's
principal offices in Baton Rouge, Louisiana for the purpose of completing the
purchase(s) and sale(s) of Option Shares purchased by Flores pursuant to the
exercise(s) of the Option.
1.2 COMPANY means Flores & Rucks, Inc., a Delaware
Corporation, with principal offices located at 8440 Jefferson Highway, Suite
420, Baton Rouge, Louisiana.
1.3 COMPANY'S STOCK means the common stock, par value 0.01
cent per share, of Flores & Rucks, Inc.
1.4 DEMAND Registration Rights means the contractual right of
Rucks and the Partnership to demand that the Company cause the Option Shares to
be registered following the Option Expiration Date in the event that Flores does
not exercise the Option to acquire the Option Shares as evidenced by a separate
agreement contemporaneously entered into between Rucks, the Partnership and the
Company.
1.5 EFFECTIVE DATE means the date on which the funding occurs
of the sales proceeds to Rucks from the public sale of 1,650,000 shares of the
Company's Stock; if the aforesaid funding does not occur prior to January 1,
1997 there shall be no Effective Date.
3
<PAGE>
1.6 EXERCISE NOTICE means a written notice from Flores to
Rucks notifying Rucks and the Partnership of Flores' exercise of the Option; the
Exercise Notice may be given from time to time during the Option Exercise Period
and shall specify the number of Option Shares which Flores elects to purchase
pursuant to this Option Agreement; the Exercise Notice shall be delivered in
accordance with the provisions of Section 7.4 below.
1.7 EXTENDED PERIOD means the one-year period which will
commence on the first day following the second annual anniversary of the
Effective Date and, shall terminate on the Option Expiration Date.
1.8 IRREVOCABLE PROXY means Flores' right to vote the Option
Shares throughout the Option Exercise Period as evidenced by that certain
document entitled "Irrevocable Proxy Coupled With An Interest" substantially in
the form of Annex A to this Option Agreement and which shall be delivered by
Rucks and the Partnership to Flores on the Effective Date.
1.9 MINIMUM SHARE PURCHASES means not fewer than 300,000
Option Shares with respect to each purchase which occurs on/or before the second
annual anniversary of the Effective Date and means all of the remaining Option
Shares with respect to purchases which occur during the Extended Period.
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1.10 OPTION means the right of Flores under this Option
Agreement to purchase the Option Shares.
1.11 OPTION AGREEMENT means this Agreement.
1.12 OPTION EXERCISE PERIOD means the period which commences
on the Effective Date and ends on the Option Expiration Date.
1.13 OPTION EXPIRATION DATE means that date which is the
earliest to occur of:
(a) the third annual anniversary date of the Effective
Date except that if the Option Expiration Period is not
extended for an additional year by Flores' payment to Rucks
and the Partnership of the Option Extension Payment, the
Option Expiration Date shall occur on the second annual
anniversary date of the Effective Date, or
(b) the date upon which any of the following events
occur:
(i) January 1, 1997 unless the Effective Date shall
have occurred on/or before December 31, 1996; (ii)
The date that Flores ceases to be a beneficial owner
of at least 2,250,000 shares of the Company's Stock
as adjusted for stock splits, stock dividends
5
<PAGE>
or similar corporate reorganizational events which
occur after the date of the Option Agreement; (iii)
The date that Flores ceases to be either an officer
or director of the Company.
1.14 OPTION EXTENSION PAYMENT means the nonrefundable payment
of One Million Dollars ($1,000,000) which at Flores' option may be made to Rucks
and the Partnership on or before the second annual anniversary of the Effective
Date and which, if made, shall subject to the provisions of Section 1.13 extend
the Option Exercise Period until the third annual anniversary of the Effective
Date. Sixty-two and one half percent (62.5%) of the Option Extension Payment
shall be allocated to the Partnership and the remaining thirty-seven and one
half percent(37.5%) shall be allocated to Rucks. The Option Extension Payment
shall be applied toward the Purchase Price of the Option Shares if the Option is
exercised during the Extended Period.
1.15 OPTION SHARES means in the aggregate 1,600,000 shares of
the Company's Stock, 1,000,000 shares of which are currently owned of record by
the Partnership and 600,000 shares of which are currently owned of record by
Rucks; the Option Shares are represented by the Certificates identified on Annex
B to this Agreement.
6
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1.16 PURCHASE PRICE means the price per share which Flores
shall pay Rucks and Partnership for the Option Shares at the Closing(s) of
Purchase(s)of Option Shares following the Exercise(s) of the Option.
2. THE OPTION-EXERCISE.
2.1 OPTION. Rucks and the Partnership hereby grant to Flores a
right to purchase the Option Shares for the Purchase Price specified in Section
3.1 hereof subject to the terms and conditions specified in this Option
Agreement. The Option with respect to sixty-two and one half percent(62.5%) of
the Option Shares is granted by the Partnership and the Option with respect to
thirty-seven and one half percent (37.5%) of the Option Shares is granted by
Rucks.
2.2 EXERCISE. The Option shall become exercisable by Flores on
the Effective Date and shall be exercisable by him throughout the Option
Exercise Period for one or more Minimum Share Purchases by delivering to Rucks
and the Partnership an Exercise Notice in the manner specified in Section 7.4
hereof.
3. PURCHASE PRICE-CLOSING.
3.1 PURCHASE PRICE. The purchase price for the Option
Shares shall be as follows:
7
<PAGE>
(a) The Purchase Price for Option Shares purchased
upon the exercise of the Option on/or before the first annual
anniversary date of the Effective Date, shall be $30.00 per
share; and
(b) The Purchase Price for Option Shares purchased
upon the exercise of the Option on/or before the second annual
anniversary of the Effective Date shall be $35.00 per share;
and
(c) The Purchase Price for Option Shares purchased
upon the exercise of the Option during the Extended Period
shall be $37.625 per share. The Option Extension Payment shall
be applied toward the Purchase Price for Option Shares
purchased upon the exercise of the Option during the Extended
Period.
Sixty-two and one half percent (62.5%) of the aggregate amount of the Purchase
Price of the Option Shares shall be allocated to the Partnership and
thirty-seven and one half percent (37.5%) of the Purchase Price shall be
allocated to Rucks.
3.2 CLOSING. At Closing(s) of the exercise(s) of the Option,
Flores shall by immediately available funds pay the full amount of the Purchase
Price for the Option Shares purchased pursuant to the exercise of the Option and
Rucks and the
8
<PAGE>
Partnership shall deliver to Flores against such payment certificates for the
number of Option Shares being purchased together with stock transfer powers duly
endorsed evidencing the transfer of such shares to Flores. Closing(s) shall be
held in accordance with Section 1.1 hereof on the fifth (5th) business day
following the date of the Exercise Notice or such earlier date as shall be
specified in the Exercise Notice.
4. IRREVOCABLE PROXY.
On the Effective Date, Rucks and the Partnership shall execute and
deliver to Flores an Irrevocable Proxy substantially in the form of Annex A
hereof. Promptly following the Option Expiration Date, Flores shall redeliver to
Rucks and the Partnership the Irrevocable Proxy.
5. STOCK CERTIFICATE LEGEND.
A legend shall be placed upon the certificates representing the Option
Shares in substantially the following form:
"The shares represented by this certificate are subject to an
option in favor of James C. Flores pursuant to that certain
Option Agreement dated as of August 11, 1996 by and between
James C. Flores, Cherie Hair Flores, William W. Rucks, IV.,
individually, Catherine May Rucks, individually, William W.
Rucks, IV. and Catherine May
9
<PAGE>
Rucks, as sole general partners of the Rucks Family Limited
Partnership ("Partnership"), a copy of which is on file with
the Secretary of the Corporation at its principal offices in
Baton Rouge, Louisiana and may only be transferred in
accordance with the terms of such option. In addition, in
accordance with the aforesaid Option Agreement, William W.
Rucks, IV., Catherine May Rucks and the Partnership have also
granted to James C. Flores an Irrevocable Proxy coupled with
an interest empowering Flores to vote the shares represented
by this Certificate at any Stockholders Meeting or other vote
which occurs during the term of the Option Exercise Period as
that term is defined in the Option Agreement.
Promptly following the Option Expiration Date, Flores, Rucks and the
Partnership shall jointly cause the aforesaid legend to be removed from
the Certificates which represent the Option Shares.
10
<PAGE>
6. RUCKS' AND THE PARTNERSHIP'S REPRESENTATIONS AND WARRANTIES.
Rucks, Catherine May Rucks and the Partnership represent, warrant and
covenant to Flores as follows:
(a) Rucks and the Partnership each are the sole owner
of all of the Option Shares of which such party is the owner
of record as reflected by Annex B free and clear of all liens,
claims, charges, restrictions, equities and encumbrances of
any kind subject, however, to restrictions imposed by
applicable securities laws. Now and at the time of Closing(s)
Rucks and the Partnership have and will have full power and
legal right to sell, assign, transfer and deliver to Flores
the Option Shares free and clear of all liens, claims,
charges, restrictions, equities and encumbrances of any kind
subject, however, to restrictions imposed by applicable
securities laws. Rucks and the Partnership agree during the
Option Exercise Period not to, directly or indirectly, sell,
assign, transfer or deliver, or grant any proxies (other than
the Irrevocable Proxy) or enter into any voting agreement with
respect to any of the Option Shares; and
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<PAGE>
(b) Rucks and the Partnership have all necessary
power and authority to execute, deliver and perform this
Option Agreement and the Irrevocable Proxy and to consummate
the sale of the Option Shares and the other transactions
contemplated by this Option Agreement. This Option Agreement
has been and the Irrevocable Proxy when delivered in
accordance with Section 4 will have been duly executed by
Rucks and the Partnership and when executed will constitute
the legal, valid and binding obligation of each of them
enforceable against them in accordance with their terms.
Neither the execution and delivery of this Agreement or the
Irrevocable Proxy, nor the performance of the transactions
contemplated hereby or thereby will conflict with or result in
a breach, default or violation of or require any consents
under the organization documents or partnership agreement of
the Partnership or any contract, lien, instrument or agreement
to which Rucks or the Partnership is bound or subject to.
Rucks and the Partnership have the full right, power and
authority to direct the vote of the Option Shares and have not
granted any proxies or entered into any voting agreements with
respect thereto.
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<PAGE>
7. MISCELLANEOUS.
7.1 ASSURANCE OF FURTHER ACTION. From time to time after the
Closing and without further consideration, each of the parties to this Option
Agreement shall execute and deliver, or cause to be executed and delivered, such
further instruments and agreements, and shall take such other actions, as the
other party may reasonably request in order to more effectively effectuate the
transactions contemplated by this Option Agreement.
7.2 EXPENSES. Whether or not the Closing is consummated, each
of the parties will pay all of his, her, or its own legal and accounting fees
and other expenses incurred in the preparation of this Option Agreement and the
performance of the terms and provisions of this Option Agreement.
7.3 WAIVER. The parties to this Option Agreement may by
written agreement executed by all such parties (i) extend the time for or waive
or modify the performance of any of the obligations or other acts of the parties
to this Option Agreement or (ii) waive any inaccuracies in the representations
and warranties contained in this Option Agreement or in any document delivered
pursuant to this Option Agreement.
7.4 NOTICES. All notices, requests or other communications
under this Option Agreement shall be in writing and
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<PAGE>
shall be deemed to have been duly given if delivered by hand or mailed by
overnight courier, addressed as follows:
(a) IF TO FLORES, TO JAMES C. FLORES
8440 Jefferson Highway
Suite 420
Baton Rouge, Louisiana 70809
(b) IF TO RUCKS, TO WILLIAM W. RUCKS, IV.
120 Shannon Road
Lafayette, Louisiana 70503
(c) IF TO THE PARTNERSHIP, TO WILLIAM W. RUCKS, IV.
120 Shannon Road
Lafayette, Louisiana 70503
or to such other address as may have been furnished in writing to the party
giving the notice by the party to whom notice is to be given.
7.5 ENTIRE AGREEMENT. This Option Agreement embodies the
entire Option Agreement among the parties and there have been and are no
agreements, representations or warranties, oral or written, among the parties
other than those set forth or provided for in this Option Agreement. This Option
Agreement may not be modified or changed, in whole or in part, except by a
supplemental agreement signed by each of the parties.
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<PAGE>
7.6 RIGHTS UNDER THIS AGREEMENT. This Option Agreement shall
bind and inure to the benefit of the parties to this Option Agreement and their
respective heirs, legal representatives, successors and permitted assigns, but
shall not be otherwise assignable by any party without the prior written consent
of the other party. Nothing contained in this Option Agreement is intended to
confer upon any person, other than the parties to this Option Agreement and
their respective heirs, legal representatives, successors and permitted assigns,
any rights, remedies, obligations or liabilities under or by reason of this
Option Agreement. The Option created by this Option Agreement is nonassignable
and nontransferable; provided, however, Flores may transfer this Option to his
wife or children, or any family trust, partnership, corporation or similar
entity for the benefit of, or controlled by, any of the foregoing.
7.7 GOVERNING LAW. This Option Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware without
reference to the conflicts of laws principles of that State.
7.8 HEADINGS; REFERENCES TO SECTIONS AND ANNEXES. The
headings of the Sections, paragraphs and subparagraphs of this Option Agreement
are solely for convenience of reference and shall
15
<PAGE>
not limit or otherwise affect the meaning of any of the terms or provisions of
this Option Agreement. The references in this Option Agreement to sections and
annexes, unless otherwise indicate, are references to sections of and annexes to
this Option Agreement.
7.9 COUNTERPARTS. This Option Agreement may be executed in
counterparts, each of which shall be an original, but which together constitute
one and the same instrument.
7.10 TERM. The term of this Option Agreement commenced on the
date first set forth above and shall terminate on the Option Expiration Date.
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IN WITNESS, the parties have duly executed this Option Agreement on
August 11, 1996 as of the date first above written.
/s/ James C. Flores
---------------------------
JAMES C. FLORES
/s/ Cherie Hair Flores
---------------------------
CHERIE HAIR FLORES
/s/ William W. Rucks, IV
---------------------------
WILLIAM W. RUCKS, IV.
/s/ Catherine May Rucks
---------------------------
CATHERINE MAY RUCKS
RUCKS FAMILY LIMITED PARTNERSHIP
By:/s/ William W. Rucks, IV
---------------------------
WILLIAM W. RUCKS, IV.
General Partner
By:/s/ Catherine May Rucks
---------------------------
CATHERINE MAY RUCKS
General Partner
17
IRREVOCABLE PROXY
The undersigned (the "Stockholders"), stockholders of Flores & Rucks,
Inc., a Delaware corporation (the "Corporation"), hereby revoke all proxies
bearing a date prior to the date hereof and appoint James C. Flores (the "Proxy
Holder"), with full power of substitution, their true and lawful proxy and
attorney-in-fact to vote and otherwise represent an aggregate of 1,600,000
shares of the common stock of the Corporation, $.01 par value, which are
identified on Schedule A, held of record by the Stockholders, at any special or
annual meeting or other vote of the stockholders of the Corporation called after
the date hereof . This Irrevocable Proxy entitles the Proxy Holder to vote the
Stockholders' shares of common stock in whatever manner he chooses at the
stockholders' meetings of the Corporation.
The Stockholders acknowledge that the proxy and all other power and
authority intended to be granted hereby is coupled with an interest sufficient
in law to support an irrevocable power, shall not be revokable or terminated by
any act of the Stockholders, or any of them, by lack of appropriate power or
authority or by the occurrence of any other event or events, and is otherwise
irrevocable to the fullest extent permitted by law. This Irrevocable Proxy is
being executed in conjunction with the Option Agreement between Stockholders and
Proxy Holder dated August 11, 1996, and shall remain irrevocable so long as the
Option Agreement remains in full force and effect. In the event the Option
Agreement ceases and terminates on its own terms or by operation of law, then
this Irrevocable Proxy shall terminate; but until such time, it shall remain in
full force and effect. The Stockholders specifically agree that the Proxy Holder
may transfer this Irrevocable Proxy to any permitted transferee of the option
granted under the Option Agreement.
Dated: September 25, 1996.
STOCKHOLDERS:
/s/ WILLIAM W. RUCKS, IV
-----------------------------------
WILLIAM W. RUCKS, IV., Individually
/s/ CATHERINE MAY RUCKS
-----------------------------------
CATHERINE MAY RUCKS, Individually
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RUCKS FAMILY LIMITED PARTNERSHIP
By:/s/ WILLIAM W. RUCKS, IV
-----------------------------------
WILLIAM W. RUCKS, IV.,
General Partner
By:/s/ CATHERINE MAY RUCKS
-----------------------------------
CATHERINE MAY RUCKS,
General Partner
2
