CLASS A COMMON UNIT REDEMPTION AGREEMENT AND THIRD AMENDMENT TO AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF PHAWK, LLC (F/K/A PETROHAWK ENERGY, LLC)
CLASS
A COMMON
UNIT REDEMPTION AGREEMENT
AND
THIRD
AMENDMENT TO
AMENDED
AND RESTATED
LIMITED
LIABILITY COMPANY AGREEMENT
OF
(F/K/A
PETROHAWK ENERGY, LLC)
THIS
CLASS A COMMON UNIT REDEMPTION AGREEMENT AND THIRD AMENDMENT TO AMENDED AND
RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF PHAWK, LLC (F/K/A PETROHAWK
ENERGY, LLC),
a
Delaware Limited liability company (the “Company”),
dated
as of the 8th
day of
July, 2005 (the“Redemption
Agreement and Third Amendment to LLC Agreement”),
is made
and entered into by and among FCW, LLC, a Delaware limited liability company
(“FCW”
or
“Management
Member”),
EnCap
Energy Capital Fund IV, L.P., a Texas limited partnership (“Fund
IV”),
EnCap
IV-B Acquisitions, L.P., a Texas limited partnership (“Fund
IV-B”)
,
Kellen Holdings, LLC, a Delaware limited liability Company (“Kellen”),
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ (“▇▇▇▇”),
Tejon
Energy L.P., a Texas limited partnership (“Tejon”),
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ Foundation (“DGO
Foundation”),
Dodge
▇▇▇▇▇ Foundation (“DJ
Foundation”),
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (“▇▇▇▇▇▇▇▇”),
▇▇▇▇▇▇ ▇▇▇▇▇ Canon (“▇▇▇▇▇▇”),
▇▇▇▇▇
▇. ▇▇▇▇ (“▇▇▇▇”)
and
▇▇▇▇▇ ▇. Irish III (“Irish”,
together with Fund IV, Fund IV-B, Kellen, Stai, Tejon, DGO Foundation, DJ
Foundation, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇, referred to herein collectively as
the
“Class
A Common Unitholders”
who,
together with the Management Member, are referred to collectively as the
“Members”).
RECITALS
WHEREAS,
the
Members constitute all of the Members of the Company; and
WHEREAS,
the
Company is governed by that certain Amended and Restated Limited Liability
Company Agreement of Petrohawk Energy, LLC dated as of December 12, 2003
(the
“Original
LLC Agreement”),
as
amended by that certain Assignment of Limited Liability Company Interests
and
First Amendment to the Amended and Restated Limited Liability Company Agreement
of Petrohawk Energy, LLC dated as of March 1, 2004 (the “First
Amendment to LLC Agreement”)
and as
amended by that certain Preferred Unit Redemption Agreement and Second Amendment
to Amended and Restated Limited Liability Company Agreement of PHAWK, LLC
(F/K/A
PETROHAWK ENERGY, LLC) dated as of March 11, 2005 (the “Second
Amendment to LLC Agreement”,
which,
together with the Original LLC Agreement and the First Amendment to LLC
Agreement is referred to herein as the “LLC
Agreement”);
and
WHEREAS,
Section
9.3 of the LLC Agreement provides that upon thirty (30) Business Days written
notice to the Preferred Unitholders the Company shall have the option to
redeem
any number of outstanding Preferred Units (with a minimum redemption amount
of
$1,000,000 of Preferred Units, with the Preferred Units of each Preferred
Unitholder thereof being redeemed on a pro rata basis) at any time at a cash
redemption price per Preferred Unit equal to the Liquidation Amount divided
by
the number of Preferred Units outstanding; and
WHEREAS,
the
Company has previously redeemed One Hundred Percent (100%) of the outstanding
Preferred Units in accordance with the LLC Agreement and two redemptions
not
reflected in the LLC Agreement and no Preferred Units remain outstanding
and all
accrued interest on the Preferred Units has been paid; and
WHEREAS,
the
Class A Common Unitholders desire to have all of their Class A Common Units
redeemed pursuant to the terms set forth herein; and
WHEREAS,
the
Company, in order to accomplish the redemption of all the outstanding Class
A
Common Units will make certain distributions of cash and securities; and
WHEREAS,
the
Members desire to amend Section 5.3 of the LLC Agreement to allow for a
Redemption of all of the Class A Common Units and none of the Class B Common
Units; and
WHRERAS,
the
Members desire to amend the provisions of Article XI of the LLC Agreement
in
such a way that will result in Management Member’s ownership percentage of all
outstanding Common Units to be equal to 64.24% and Investor Members’ ownership
percentage of all outstanding Common Units to be 35.76%; and
WHEREAS,
the
Members desire to amend such other provisions of the LLC Agreement as the
Members deem necessary and advisable.
NOW
THEREFORE,
in
consideration of the foregoing and the mutual covenants and agreements contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Members do hereby agree as
follows:
1. Definitions.
When
used herein the following terms shall have the respective meanings assigned
to
them in this Section 1. Terms used but not defined herein shall have the
respective meanings set forth in the LLC Agreement.
“First
Redemption Schedule”shall
have the meaning assigned in Section 3 of the Second Amendment to LLC
Agreement.
“First
Redemption Shares”shall
have the meaning assigned in Section 3 of the Second Amendment to LLC
Agreement.
“Fund
IV”shall
have the meaning assigned in the preamble.
“Fund
IV-B”
shall
have the meaning assigned in the preamble.
“Helm”
shall
have the meaning assigned in the preamble.
“Irish”
shall
have the meaning assigned in the preamble.
“Kellen”
shall
have the meaning assigned in the preamble.
“Management
Member”
shall
have the meaning assigned in the preamble.
2
“Members”
shall
have the meaning assigned in the preamble.
“Original
LLC Agreement”
shall
have the meaning assigned in the recitals hereto.
“Redemption
Agreement and Third Amendment to LLC Agreement”
shall
have the meaning assigned in the preamble.
“Second
Redemption Schedule”
shall
have the meaning assigned in Section 3 of the Second Amendment to LLC
Agreement.
“Second
Redemption Shares”
shall
have the meaning assigned in Section 3 of the Second Amendment to LLC
Agreement.
“Stai”
shall
have the meaning assigned in the preamble.
“Tejon”shall
have the meaning assigned in the preamble.
“Third
Redemption Shares”shall
be
those shares set forth on Schedule II attached hereto.
2. Waiver
of Redemption Notice With
Respect to Redemption of Preferred Units.
The
Class A Common Unitholders hereby waive the condition that the Company provide
thirty (30) Business Day notice prior to redeeming the Preferred Units and
hereby consent to the redemption of all outstanding Preferred Units by the
Company which occurred on June 30, 2005. The Members agree that no Preferred
Units remain outstanding and all accrued interest on such Preferred Units
has
been paid.
3. Distribution
of First Redemption Shares, Second Redemption Shares and Third Redemption
Shares.
Within
five business days after the execution of this Redemption Agreement and Third
Amendment to LLC Agreement, the First Redemption Shares, the Second Redemption
Shares and the Third Redemption Shares shall be distributed to those Members
set
forth on the First Redemption Schedule, the Second Redemption Schedule and
Schedule II.
4. Redemption
of Class A Common Units.
(a) As
soon as practical
after the date of this Agreement, the Company shall, in complete redemption
of
the Class A Common Units, distribute to the Class A Common Unit Holders
cash and
securities totaling 64.24% of the total value of the Company’s assets. The
amount and character of the property distributed shall be as set forth
on
Schedule I attached hereto and made a part hereof (the “Redemption
Schedule”).
Notwithstanding the above, the Company shall retain and not distribute
a total
of $1,250,000 to be used to cover certain contingent liabilities and
administrative expenses of the Company. To the extent such funds are not
used
for such purposes by December 31, 2006, the Company shall distribute the
balance
of such funds, if any, 64.24% to the Class A Common Unit Holders in the
same
proportionate amounts as set forth on the Redemption Schedule.
5. Distribution
of Class B Common Units to Members of Management
Member.
It is
acknowledged and agreed that immediately prior to the redemption of the Class
A
Common Units, Management Member will transfer to all or part of its members
all
or part of the Class B Common Units and all or part of the members of Management
Member will become Members.
6. Resignation
of Directors.
Upon the
complete redemption of the Class A Common Units and distribution pursuant
to
Section
4,
the
members of the Board of Directors of the Company designated by the EnCap
Members
and Kellen shall be deemed to have resigned with no further action on the
part
of such persons, the Company, the EnCap Members, or Kellen.
3
7. Amendments
to the LLC Agreement.
Upon
execution of this Redemption Agreement and Third Amendment to LLC Agreement
and
prior to the redemption and distribution pursuant to Section
4
and the
distribution pursuant to Section
5,
Article
XI of the LLC Agreement shall be considered amended in such a way that its
provisions result in Management Member's ownership percentage of all outstanding
Common Units to be equal to 35.76% and Investor Members’ ownership percentage of
all outstanding Common Units to be 64.24%.
8. Assignment
of Registration Rights.
The
Company and each Member agree that the EnCap Members shall have the sole
right
to exercise the demand registration rights granted to the Company and its
affiliates pursuant to Section 2 of the Registration Rights Agreement dated
as
of May 25, 2004 (the "Registration
Rights Agreement")
and
that each Member shall retain the piggyback registration rights granted to
the
Company and its affiliates pursuant to Section 3 of the Registration Rights
Agreement.
9. Counterparts.
This
Redemption Agreement and Third Amendment to LLC Agreement may be executed
in
multiple counterparts, each of which shall be deemed an original and all
of
which shall constitute but one and the same instrument.
10.
Ratification.
The LLC
Agreement, as amended and modified pursuant to the terms hereof, is hereby
ratified and affirmed.
[Remainder
of Page Intentionally Left Blank]
4
IN
WITNESS WHEREOF, the undersigned have executed this Redemption Agreement
and
Third Amendment to LLC Agreement as of the date first referenced
above.
| FCW, LLC | ||
|
By:
|
|
|
|
▇▇▇▇▇
▇. ▇▇▇▇▇▇, Manager
|
||
| EnCap Energy Capital Fund IV, L.P. | |||||
|
By:
|
EnCap Equity Fund IV GP, L.P., | ||||
| General Partner of EnCap Energy Capital Fund IV, L.P. | |||||
|
By:
|
EnCap Investments, L.P. | ||||
| General Partner of EnCap Equity Fund IV GP, L.P. | |||||
|
By:
|
EnCap Investments GP, L.L.C. | ||||
| General Partner of EnCap Investments L.P. | |||||
|
By:
|
|||||
|
▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
|||||
|
Senior
Managing Director
|
|||||
| EnCap IV-B Acquisitions, L.P. | |||||
|
By:
|
EnCap IV-B Acquisitions GP, LLC, | ||||
| General Partner of EnCap IV-B Acquisitions, L.P. | |||||
|
By:
|
EnCap Energy Capital Fund IV, L.P., | ||||
| Sole Member of EnCap IV-B Acquisitions GP, LLC | |||||
|
By:
|
EnCap Equity Fund IV GP, L.P., | ||||
| General Partner of EnCap Energy Capital Fund IV, L.P. | |||||
|
By:
|
EnCap Investments, L.P. | ||||
| General Partner of EnCap Equity Fund IV GP, L.P. | |||||
|
By:
|
EnCap Investments GP, L.L.C. | ||||
| General Partner of EnCap Investments L.P. | |||||
|
By:
|
|||||
|
▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
|||||
|
Senior
Managing Director
|
|||||
|
Kellen
Holdings, LLC
|
|||
|
By:
|
|
||
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇, Vice President
|
|||
|
|
|
|
▇▇▇▇
▇▇▇▇▇▇ Stai
|
|
|
|
|
Tucker
▇. ▇▇▇▇▇▇▇▇
|
|
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ Foundation
|
|||
|
By:
|
|
||
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇, President
|
|||
|
|
|
|
▇▇▇▇▇▇
▇▇▇▇▇ Canon
|
|
Dodge
▇▇▇▇▇ Foundation
|
|||
|
By:
|
|
||
|
▇▇▇▇▇▇
▇▇▇▇▇ Canon, Executive Director
|
|||
|
Tejon
Energy LP
|
|||||
|
By:
|
JIMAKA,
LLC
|
||||
|
General
Partner
|
|||||
|
By:
|
|
||||
|
▇▇▇▇▇▇
▇▇▇▇▇ Canon, Manager
|
|||||
|
By:
|
|
||||
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇, Manager
|
|||||
|
|
|
|
▇▇▇▇▇
▇. ▇▇▇▇
|
|
|
|
|
▇▇▇▇▇
▇. Irish, III
|
SCHEDULE
I
|
|
%
of Investor Group
|
Petrohawk
Warrants
|
Petrohawk
Common Shares
|
Cash
|
Total
Value
|
|||||||||||
|
EnCap
Energy Capital Fund IV, L.P.
|
48.3431
|
%
|
1,552,453
|
3,173,458
|
$
|
500,477
|
$
|
42,646,706
|
||||||||
|
EnCap
Energy Acquisition IV-B, Inc.
|
22.5828
|
%
|
725,206
|
1,482,437
|
233,791
|
19,921,818
|
||||||||||
|
EnCap
|
70.9259
|
%
|
2,277,658
|
4,655,896
|
$
|
734,267
|
$
|
62,568,523
|
||||||||
|
|
||||||||||||||||
|
Liberty
|
21.2963
|
%
|
683,892
|
1,397,984
|
220,472
|
18,786,893
|
||||||||||
|
|
||||||||||||||||
|
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
|
1.8519
|
%
|
59,469
|
121,564
|
$
|
19,171
|
$
|
1,633,643
|
||||||||
|
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ Foundation
|
1.6667
|
%
|
53,522
|
109,407
|
17,254
|
1,470,279
|
||||||||||
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
|
0.1852
|
%
|
5,947
|
12,156
|
1,917
|
163,364
|
||||||||||
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ et. al.
|
3.7037
|
%
|
118,938
|
243,128
|
$
|
38,343
|
$
|
3,267,286
|
||||||||
|
|
||||||||||||||||
|
Tejon
Energy LP
|
1.8519
|
%
|
59,469
|
121,564
|
$
|
19,171
|
$
|
1,633,643
|
||||||||
|
Dodge
▇▇▇▇▇ Foundation
|
1.6667
|
%
|
53,522
|
109,407
|
17,254
|
1,470,279
|
||||||||||
|
▇▇▇▇▇▇
Canon
|
0.1852
|
%
|
5,947
|
12,156
|
1,917
|
163,364
|
||||||||||
|
▇▇▇▇▇▇
Canon et. al.
|
3.7037
|
%
|
118,938
|
243,128
|
$
|
38,343
|
$
|
3,267,286
|
||||||||
|
|
||||||||||||||||
|
▇▇▇▇▇
▇▇▇▇
|
0.1852
|
%
|
5,947
|
12,156
|
1,917
|
163,364
|
||||||||||
|
|
||||||||||||||||
|
▇▇▇▇▇
Irish
|
0.1852
|
%
|
5,947
|
12,156
|
1,917
|
163,364
|
||||||||||
|
|
||||||||||||||||
|
Total
|
100.0000
|
%
|
3,211,319
|
6,564,448
|
$
|
1,035,259
|
$
|
88,216,717
|
||||||||
SCHEDULE
II
|
Kellen
|
549,477.38
|
|
|
Stai
|
47,780.86
|
|
|
Tejon
|
47,780.86
|
|
|
DGO
Foundation
|
43,002.27
|
|
|
DJ
Foundation
|
43,002.27
|
|
|
▇▇▇▇▇▇▇▇
|
4,777.59
|
|
|
▇▇▇▇▇▇
|
4,777.59
|
|
|
Irish
|
4,777.59
|
|
|
Helm
|
4,777.59
|