AMENDED PLAN SPONSORSHIP AGREEMENT
Exhibit
2.2
AMENDED
PLAN SPONSORSHIP AGREEMENT
This
Amended Plan Sponsorship Agreement (the “Agreement”) is made and
executed between CAERUS OIL AND GAS LLC, a Delaware limited liability company
(“Caerus” or “Purchaser”), and TETON ENERGY
CORPORATION, a Delaware corporation (“TEC”), TETON NORTH AMERICA
LLC, a Colorado limited liability company (“TNA”), TETON PICEANCE LLC, a
Colorado limited liability company (“TP”), TETON DJ LLC, a Colorado
limited liability company (“TDJ”), TETON WILLISTON LLC, a
Colorado limited liability company (“TW”), TETON BIG HORN LLC, a
Colorado limited liability company (“TBH”), TETON ORRI LLC, a
Colorado limited liability company (“TORRI”), and TETON DJCO LLC, a
Colorado limited liability company (“Teton DJ” and collectively
with TEC, TNA, TP, TDJ, TW, TBH, TORRI and Teton DJ, the “Debtors”) to be effective on
the 15th day of December 2009. Caerus and Debtors agree as
follows:
2. Bankruptcy
Filings. The Debtors commenced their bankruptcy cases by
filing chapter 11 petitions in the United States Bankruptcy Court for the
District of Delaware (the “Court”) on November 8, 2009
(the “Petition
Date”). On the Petition Date, the Debtors filed, inter alia, their Proposed
Plan of Reorganization (the “Initial Plan”) and supporting
Disclosure Statement and Bidding Procedures Motion, including a request for
approval of a breakup termination fee in an amount not to exceed $750,000
(“Breakup Fee”) to Rise
Energy Partners II, LLC, a Delaware limited liability company (“Rise”), and the reimbursement
of Rise’s actual out-of-pocket and reasonable third party expenses in an amount
not to exceed $200,000 (the “Expense Reimbursement”) in the
event that Rise is not selected as the Successful Bidder (as defined in the
Bidding Procedures Motion) at the conclusion of the Auction (as hereinafter
defined). The Breakup Fee and Expense Reimbursement to Rise will be
paid as an administrative expense following the confirmation hearing and
consummation of the transactions contemplated by this Agreement (the “Transaction”).
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(a) On
the Transaction Date (or in the case of any Post-Closing Reconciliation
adjustment, on or before the date specified in Section 7 below), Purchaser will
tender the following consideration (collectively, the “Purchase Price”):
(i)
$20,050,000 in cash (of which
$750,000 from the application of the Deposit will remain in the escrow account
until determination of the Post-Closing Reconciliation adjustment as described
in Section 10), plus or minus any Post-Closing Reconciliation adjustment as
described in Section 7 below;
(ii)
a contractual participation
right to 50% of the profits (net of the costs for acquisition, exploration,
development, operation and maintenance, as further described in Exhibit A)
of Teton DJ, as reorganized, or a newly formed entity (the “WashCo Entity”), owned
directly or indirectly by Caerus, holding the assets listed on Schedule
4(a)(ii) annexed hereto (the “WashCo Assets);
and
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(iii)
a contractual participation right to 50% of the
profits (net of the costs for acquisition, exploration, development, operation
and maintenance, as further described in Exhibit A)
of TBH, as reorganized, or a newly formed entity (the “Big Horn Entity”), owned
directly or indirectly by Caerus, holding the assets listed on Schedule 4(a)(iii)
annexed hereto (the “Big Horn
Assets”); and.
(b) The
rights to 50% of the net profits of the WashCo Entity and the Big Horn Entity
shall be governed by separate agreements, substantially in the form annexed
hereto as Exhibit
A.
(c) On
the Transaction Date and except as provided in the Plan, all assets of each of
the Debtors, including all avoidance actions under chapter 5 of the Bankruptcy
Code, excluding, however, any and all such actions against any of (i) the DIP
Lenders (as defined herein), (ii) JPMorgan Chase Bank, N.A. (sometimes also
referred to herein as the “Prepetition Agent”), as agent
for the DIP Lenders and the Lenders (as hereinafter defined), and/or (iii) the
Lenders, shall re-vest in each respective prepetition owner, as reorganized,
free and clear of all preconfirmation liens, claims, encumbrances and interests,
whether known or unknown, liquidated or unliquidated; provided, further, that
the DIP Lenders, the Lenders, and the Prepetition Agent will be released under
the Plan of any and all liability, and any and all claims against the DIP
Lenders, the Lenders, or the Prepetition Agent will not be re-vested in the
Debtors, as reorganized, and will be handled in accordance with the
Plan.
(d) At
its election, Purchaser may direct that on the Transaction Date, some or all of
TNA, TP, TDJ, TW, TBH, TORRI and Teton DJ, as reorganized, be merged into
Reorganized TEC, such that the assets of the merged Debtors, as reorganized, are
owned by Reorganized TEC, the WashCo Entity or the Big Horn Entity, in each
case, free and clear of all liens, claims, encumbrances or interests, whether
known or unknown, liquidated or unliquidated, to the fullest extent permitted by
law.
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(e) On
the Transaction Date, (i) all existing equity interests in TEC shall be
cancelled, and (ii) TEC will convert its corporate form from a Delaware
corporation to a Delaware limited liability company.
(f) Reorganized
TEC shall distribute the Purchase Price (except for the $750,000 of the Purchase
Price maintained in the Escrow Account pursuant to Section 10) in the
following manner:
(i)
on the Transaction Date, $17,400,000.00, to the Prepetition
Agent;
(ii)
on the Transaction Date the contractual participation rights
to 50% of the net profits of the WashCo Entity and the Big Horn Entity to the
Prepetition Agent;
(iii)
on the Transaction Date or as soon as reasonably practicable
thereafter, $950,000.00 pro rata to the holders of allowed general unsecured
claims (excluding Trade Claims) and to the Indenture Trustee on behalf of the
holders of allowed note holder claims, or, if there are no allowed general
unsecured claims, $900,000.00 to the Indenture Trustee on behalf of the holders
of allowed note holder claims and an additional $50,000.00 to the Prepetition
Agent;
(iv) on
the Transaction Date, $750,000.00 to Rise on account of the Breakup Fee;
and
(v)
on the Transaction Date, up to $200,000.00 to Rise on account of the Expense
Reimbursement (provided that Rise has timely submitted to TEC reasonable
supporting documentation for such expenses)1.
(g) On
the Transaction Date, the DIP Lenders, the Lenders and the Indenture Trustee
shall deliver to Purchaser executed mortgage release documents (or other
documentation reasonably requested by Purchaser) evidencing the release of the
liens and claims of the DIP Lenders, the Lenders and the Indenture Trustee
against the Debtors, the Debtors, as reorganized, and their respective
property.
(h) Reorganized
TEC shall issue 100% of its membership interests to
Purchaser. Purchaser will be the sole managing member of Reorganized
TEC.
1 In the
event the Expense Reimbursement is less than $200,000.00, the difference between
the Expense Reimbursement and $200,000.00 will be paid to the Prepetition
Agent.
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(i) Trade
Claims (as hereinafter defined) of creditors who provided goods and services to
the Debtors’ oil and gas operations (but not including amounts owed for
corporate overhead, the office lease, and any amounts owed to professional
advisers, including legal and financial or investment banking advisers) who have
pre-petition claims that remain unpaid shall be paid by Reorganized TEC in cash
in full within thirty (30) days of the Transaction Date. Obligations
to trade creditors who extend credit to the Debtors after the Petition Date will
be assumed by Reorganized TEC and paid in the ordinary course of
business. “Trade
Claims” means claims of and in the amounts listed on the attached Exhibit
B. Except as set forth in this Section 4(i) and in
Sections 4(j) and (l) below, the Purchaser does not assume any other liabilities
of the Debtors and any other liabilities are hereby expressly
rejected.
(j) On
the Transaction Date, Reorganized TEC will pay up to $286,500 under existing
employee retention agreements from funds in the JPM Account (as hereinafter
defined), pursuant to Schedule
4(j). Reorganized TEC will assume and honor or pay all those
unpaid employee wages and salaries and accrued vacation, health insurance and
similar benefits to and through the Transaction Date in the amounts as are set
forth on Exhibit
C. Reorganized TEC may, but is not required to, offer
continued employment with it to one or more of the Debtors’
employees. For the avoidance of doubt, Reorganized TEC will not pay
severance to any employee whose employment is terminated post petition except
pursuant to a new or amended agreement that Reorganized TEC may in its sole
discretion enter into with such employee.
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(k) Subject
to the approval of the Debtors, which shall not be unreasonably withheld or
delayed, Caerus reserves the right to modify the form of its acquisition of the
assets of the Debtors so that Caerus (or a subsidiary controlled by Caerus) and
the Debtors will at closing enter into an asset purchase agreement whereby
Caerus (or a subsidiary controlled by Caerus) purchases from the Debtors all of
the assets of such entities free and clear of any liens, claims, encumbrances or
interests, whether known or unknown, liquidated or unliquidated (the
“Asset
Acquisition”). It is the intent of Caerus that such Asset
Acquisition shall provide the same economic benefit to the DIP Lenders, the
Lenders, the Note Holders, the general unsecured creditors, the creditors with
trade payables, and all other parties in interests as would the acquisition of
the membership interests of Reorganized TEC and the other Debtors, as
reorganized (the “Equity
Acquisition”). By no later than January 10, 2010, Debtors
shall provide to Purchasers a draft Confirmation Order and all documents and
information reasonably requested by Purchaser under this
Agreement. On or before 5:00 p.m. Eastern on January 12, 2010,
Purchaser shall provide TEC with its written notification of election to
consummate the Plan pursuant to an Asset Acquisition, failing which the Plan
shall be consummated as an Equity Acquisition. An election by
Purchaser to consummate the Plan as an Asset Acquisition shall be accompanied by
a proposed form of asset purchase agreement to be used to consummate the
transaction pursuant to the confirmed Plan. In addition, if Caerus
elects to consummate the Plan as an Asset Acquisition, Caerus will fund up to an
additional $25,000 for Wind Down Expenses (defined below) subject to its receipt
of reasonable documentation supporting such expenses.
(l) The
Plan shall provide that the Purchaser shall acquire the rights reserved by the
Debtors to amend the schedule of Assumed Contracts, including without
limitation, to withdraw or add any contract or lease from the list of Assumed
Contracts, at any time prior to the Confirmation Date, and Debtors shall revise
the list of Assumed Contracts in accordance with any direction received from the
Purchaser.
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(m) Debtors
shall reasonably and expeditiously cooperate with Purchaser to prepare and file
with the Court an amendment to the Plan to include modifications to the Plan in
accordance with the terms and conditions in this Agreement, and shall solicit
and endeavor to secure any required creditor approvals of the Plan.
(a) Prior
to the Transaction Date, JPMorgan Chase Bank, N.A. and JPMorgan Ventures Energy
Corporation shall not have terminated the existing hedge agreements of
TEC.
(b) Total
claims entitled to priority pursuant to section 507 of the Bankruptcy Code
(other than post petition trade debt) shall not exceed $1
million. After the Confirmation Date but before the Transaction Date,
Debtors shall deliver to Purchaser a true and correct itemization of all unpaid
priority claims to demonstrate to Purchaser’s reasonable satisfaction that the
foregoing condition has been satisfied.
(c) Prior
to the Transaction Date, JPMorgan Chase Bank, N.A., Royal Bank of Canada,
Guaranty Bank and Trust Company, and US Bank National Association (collectively,
the “Lenders”) shall not
have terminated the Plan Support Agreement in which they have agreed to vote to
accept the Plan.
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(d) Prior
to the Transaction Date, individual holders under that certain Secured
Subordinated Convertible Debenture Indenture (collectively, the “Note Holders”), holding at
least two thirds in dollar amount and 51 percent in number of such Note Holders,
shall have executed and not have terminated a Plan Support Agreement in which
they shall have agreed to vote to accept the Plan so long as the Plan’s
treatment of the Note Holders’ claims have not been modified.
(e) The
Plan shall be approved and consummated and the Transaction Date occur on or
before January 31, 2010.
(f) Prior
to the Transaction Date, the Debtors will conduct their business in the ordinary
course with no out of the ordinary course undertakings or expenditures, unless
expressly approved by Purchaser.
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(q) Uncured Title Defects,
Environmental Conditions, and Casualty Losses. TEC did not
receive written notification of any Uncured Title Defects, Environmental
Conditions, or Casualty Losses (as such terms are defined in the Plan
Sponsorship Agreement, dated November 8, 2009, by and between the Debtors and
Rise (the “Rise Plan
Sponsorship Agreement”) from Rise. To the knowledge of TEC and
each Debtors, no Uncured Title Defects, Environmental Conditions, or Casualty
Losses (as such terms are defined in the Rise Plan Sponsorship Agreement) were
identified by Rise.
(r) Rise Plan Sponsorship
Agreement. Prior to the Auction, the Rise Plan Sponsorship
Agreement had not been terminated or amended. But for Purchaser being
the Successful Bidder, Rise was, to the knowledge of the Debtors, ready, willing
and able to consummate the Plan.
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7. Purchase Price
Adjustment. The Net Working Capital shall be calculated as the
difference between (a) Teton Current Assets (as defined herein), and (b) Teton
Current Liabilities (as defined herein), as of December 31, 2009, and the
Transaction Date. The Debtors have provided Purchaser and the
Prepetition Agent with an estimate of Net Working Capital as of December 31,
2009, and January 15, 2010, prepared in accordance with generally accepted
accounting principles and the terms of this Agreement. The Debtors
will provide to Caerus and the Prepetition Agent by January 22, 2010, an
estimated balance sheet and a preliminary determination of the Net Working
Capital, as of December 31, 2009, together with an estimated income
statement for the month, quarter, and year ended December 31, 2009, and, in
each case, confirmed in writing by the chief financial officer of TEC to be
prepared in accordance with generally accepted accounting principles and the
terms of this Agreement (collectively, the “Preliminary Net Working
Calculation”). Reorganized TEC will provide a post closing
reconciliation (the “Post
Closing Reconciliation”) of Net Working Capital as of the Transaction
Date, within thirty (30) days of the Transaction Date (the “Post Closing Reconciliation
Date”). Such calculation shall be made consistent with the
Preliminary Net Working Calculation. If the Post Closing
Reconciliation results in a positive amount of Net Working Capital as of the
Transaction Date, that amount shall be paid by Reorganized TEC to the
Prepetition Agent for the Lenders by wire transfer within ten (10) days of such
Post Closing Reconciliation Date. If the Post Closing Reconciliation
results in a negative amount of Net Working Capital as of the Transaction Date,
that amount shall be paid by the Prepetition Agent on behalf of the Lenders to
Reorganized TEC by wire transfer within ten (10) days of such Post Closing
Reconciliation Date. Notwithstanding the foregoing, if after the
Transaction Date but before December 31, 2010, Reorganized TEC receives a
reduction from any of the tax revenue authorities of Xxxxxx, Ellis, Graham,
and/or Xxxxxxxx Counties, Kansas, for ad valorem taxes payable for the year
ended December 31, 2009, (1) half of such reduction amount shall reduce the
Teton Current Liabilities for purposes of performing the Post Closing
Reconciliation, or (2) if the reduction is made after the Post Closing
Reconciliation adjustment has been determined, Caerus will pay half of such
reduction amount directly to the Prepetition Agent within three (3) Business
Days.
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(a) “Teton Current Assets” shall
mean, on December 31, 2009, or the Transaction Date, as applicable, the sum of
(i) cash and cash equivalents of the Debtors, including cash attributable to
operations during the bankruptcy case, but excluding any sums held in Account
Number #000000816242705 at JPMorgan Chase Bank, N.A., in the name of JPM for the
Benefit of TEC for payments under prepetition retention agreements (the “JPM Account”), and excluding
any sums on account of Purchaser’s Deposit of $750,000 (as provided for herein)
and the deposit(s) of any other bidder(s) pursuant to the Bidding Procedures,
and (ii) the net realizable value of all receivables of the Debtors on December
31, 2009, or the Transaction Date, as applicable, after adjustment for all
setoffs and doubtful claims.
(b) “Teton Current Liabilities”
shall mean, on December 31, 2009, or the Transaction Date, as applicable, the
sum of (i) all post-petition payables of the Debtors, (ii) all priority and
administrative expense claims against the Debtors, (iii) all pre-petition trade
payables, including but not limited to the items listed on Exhibit
B (Trade
Claims) and
Exhibit C (Prepetition Employee
Wage Claims), (iv) all other pre-petition claim amounts that will remain in
effect upon entry of the Confirmation Order and not be discharged pursuant to
the Plan, (v) all amounts payable as cure payments under contracts which
Purchaser, in its sole and absolute discretion, determines shall be assumed in
connection with its acquisition of the Debtors, (vi) the amount, if any,
outstanding on the debtor-in-possession working capital line of credit in the
sum of $750,000, which line of credit will mature and become due and payable to
the DIP Lenders on January 31, 2010, including but not limited to any fees
payable to counsel for the Lenders or the DIP Lenders, (vii) all amounts payable
for fees and expenses of the Debtors’ professionals incurred in connection with
the performance of post-Transaction Date, as the case may be, administrative and
wind down activities (the “Wind
Down Expenses”) in an amount not to exceed $50,000, and (viii) the
amount, if any, payable for the insurance coverage set forth in Section 5(g),
and (ix) any and all other non-discharged obligations of the
Debtors. Notwithstanding the foregoing, the parties hereto
expressly agree that all items and claims required to be paid pursuant to the
first sentence of Section 4(j) or with the Purchase Price pursuant to Section
4(f) hereof shall not constitute Teton Current Liabilities.
(c) Any
dispute regarding the Post Closing Reconciliation of Net Working Capital shall
be finally resolved by an independent certified public accounting firm of
recognized standing acceptable to the Prepetition Agent and Caerus and engaged
by Reorganized TEC (the “Accounting
Expert”). The fees and costs of the Accounting Expert shall be
paid by the non-prevailing party in the dispute or, if there is no nonprevailing
party, the fees and costs of the Accounting Expert shall be paid by the two
parties on a pro-rata basis, as determined by the Accounting
Expert. The Accounting Expert’s final determination shall be binding,
absent manifest error.
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8. Additional
Agreements. Until termination of this Agreement, the Debtors:
(i) shall provide to Caerus on a weekly basis a detailed thirteen (13) week
rolling cash flow analysis including a forecasted to actual variance analysis;
(ii) shall not make any expenditures (other than expenditures made in the
ordinary course of business of the Debtors); (iii) shall not participate or
engage in any capital transactions, including, without limitation, the sale,
financing, or refinancing of all or any portion of the Debtors’ assets or the
reworking, drilling, or completing of any xxxxx, without the prior written
consent of Caerus; and (iv) will not enter into or amend any contract, without
the prior written consent of Caerus.
9. Delays. The Debtors
covenant to use commercially reasonable efforts to cooperate fully and timely
with the reasonable requests of Purchaser in facilitating Purchaser’s
transitioning, performing, and consummating the operations and transactions
contemplated hereunder. The Debtors shall use commercially reasonable
efforts to make their knowledgeable and authorized personnel reasonably
available, and shall furthermore instruct their agents, counselors (subject to
any matters which cannot be disclosed without waiving applicable privilege) and
representatives, to answer questions, provide documents, and allow access to
Purchaser to review, inspect on the premises of the Debtors, and make copies of
original books of accounting, certificates, agreements, and all other documents
maintained by the Debtors. All such disclosures shall be subject to
Purchaser’s ongoing obligation of confidentiality under the Confidentiality and
Nondisclosure Agreement, dated November 24, 2009. At Purchaser’s
reasonable request, Debtors shall join Purchaser in filing motions with the
Court to delay or reschedule hearing dates in order to allow Purchaser
sufficient time to complete its investigations, preparation and transition
activities in contemplation of closing the
Transaction. Notwithstanding anything to the contrary otherwise
contained herein, the Debtors shall not be responsible for any delays hereunder
caused by any third parties, other than their agents, counselors and
representatives, or by circumstances that are not within the control of the
Debtors; provided that, any such delays shall not materially prejudice Caerus’
rights herein.
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10. Deposit. Caerus has
deposited for the benefit of TEC by wire transfer of immediately available funds
$750,000 (the “Deposit”)
into an escrow account at XX Xxxxxx Chase Bank, N.A. (Bank Account Number Acct#
000000816242705 (the “Escrow
Account”), subject to the Escrow Agreement, dated December 14, 2009, by
and among JPMorgan Chase Bank, N.A., Caerus, and the Debtors.
(a) The
Deposit shall be credited in favor of or returned to Caerus pursuant to the
terms of the Bidding Procedures and this Agreement as follows:
(i)
On the Transaction Date, the Deposit shall be
credited against the Purchase Price but shall continue to be held in the Escrow
Account until the Post Closing Reconciliation adjustment is complete to the
satisfaction of both the Prepetition Agent and Caerus. If the final
determination of Net Working Capital pursuant to the Post Closing Reconciliation
results in a positive Net Working Capital, the escrowed Deposit will be promptly
released to the Prepetition Agent. If the final determination of Net
Working Capital pursuant to the Post Closing Reconciliation results in a
negative Net Working Capital, such negative Net Working Capital amount shall be
released from the escrowed Deposit and paid promptly to Caerus, and any
remaining escrowed Deposit (after payment of the negative amount to Caerus) will
be paid promptly to the Prepetition Agent.
(ii)
The Deposit shall be returned to Caerus within twenty four (24) hours by
wire transfer of immediately available funds to an account designated by Caerus
if the transaction contemplated herein is not consummated by January 31, 2010,
or such later date designated in a joint motion by the Debtors and Caerus for
delay of the Confirmation Date.
(b) The
Deposit shall be delivered to TEC in the event of Caerus’ continued willful
default hereunder after its receipt of written notice of default and after being
given a reasonable opportunity to cure same.
11. Wind Down
Expenses. The Debtors’, as reorganized, liability for payment
of the Wind Down Expenses shall not exceed $50,000, or $75,000 in the event the
Transaction is structured as an Asset Acquisition as allowed under Section
4(k).
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12. Governing Law. This Agreement,
the rights and obligations of the parties hereto, and any claims or disputes
relating thereto, shall be governed by and construed in accordance with the laws
of the State of Delaware (but not including the choice of law rules
thereof).
13. Legal Construction. In the
event that any one or more of the terms, provisions, or agreements that are
contained in this Agreement shall be held by a court of competent jurisdiction
to be invalid, illegal, or unenforceable in any respect for any reason, the
invalid, illegal or unenforceable term, provision, or agreement shall not affect
any other term, provision, or agreement that is contained in this Agreement and
this Agreement shall be construed in all respects as if the invalid, illegal, or
unenforceable term, provision, or agreement had never been contained
herein.
14. Counterparts. This Agreement
may be executed in counterparts (facsimile or otherwise) by the parties hereto,
and each such counterpart shall be deemed an original for all purposes, but all
such counterparts shall constitute, collectively, one agreement.
15. Telecopied Facsimiles. A
telecopied facsimile of a duly executed counterpart of this Agreement shall be
sufficient to evidence the binding agreement of each party to the terms herein.
However, the parties each agree to promptly return an original, duly executed
counterpart of this Agreement following the delivery of a telecopied facsimile
hereof.
[Remainder of Page Intentionally Left
Blank. Signature Page(s) Immediately Follow.]
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DEBTORS:
Teton
Energy Corporation
Teton
North America LLC
Teton
Piceance LLC
Teton DJ
LLC
Teton
Williston LLC
Teton Big
Horn LLC
Teton
ORRI, LLC
Teton
DJCO LLC
By:
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Name:
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Title:
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PURCHASER:
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CAERUS
OIL AND GAS LLC
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By:
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Name:
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Title:
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