EXHIBIT 10.26
EQUITY CONTRIBUTION AGREEMENT
THIS EQUITY CONTRIBUTION AGREEMENT (this "AGREEMENT") is entered into
on June 29, 2006, among PACIFIC ENERGY RESOURCES LTD., a Delaware corporation
("COMPANY"), WARBURG, XXXXXX EQUITY PARTNERS, L.P., a Delaware limited
partnership ("WARBURG"), and WP EEX LLC, a Delaware limited liability company
("WP EEX").
R E C I T A L S
A. The Company's wholly-owned subsidiary, Cameras Acquisition Corp., a
Delaware corporation ("ACQUISITION"), Carneros Energy, Inc., a Delaware
corporation ("CARNEROS"), Warburg, WP EEX and certain other shareholders of
Carneros are parties to a Stock Purchase Agreement dated the date hereof whereby
Acquisition is purchasing all of the issued and outstanding shares of capital
stock of Carneros (the "SHARES").
B. A significant portion of the purchase price for the Shares is being
funded with proceeds of a loan from Laurus Master Fund, Ltd. ("LAURUS") that is
being secured by all of the assets of Carneros and its wholly-owned subsidiary,
Gotland Oil, Inc. ("GOTLAND").
C. The parties desire to provide for a means to ensure that each of
Carneros, Acquisition and Gotland will at all times remain solvent and
adequately capitalized and able to pay its debts as they become due.
D. The Company believes that Carneros, Acquisition, and Gotland are
each well capitalized and not engaged or about to engage in a business for which
its remaining assets are unreasonably small or beyond the ability or each of
them to pay, but nonetheless has agreed to contribute additional capital to
Carneros, Acquisition or Gotland, as the case may be, on the terms and subject
to the conditions set forth below.
X. Xxxxxxx and WP EEX would not have been willing to enter into the
Stock Purchase Agreement but for the Company entering into this Agreement.
A G R E E M E N T
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In consideration of the foregoing and of the mutual promises contained
in this Agreement, the parties agree that:
1. TERM. This Agreement shall be effective until the earlier of (the
"TERMINATION DATE") (i) thirty (30) days after the fourth anniversary of the
date hereof or (ii) the Early Termination Date. For purposes hereof, "EARLY
TERMINATION DATE" means the first date after the date hereof that all of the
following conditions are then satisfied: (i) Carneros and Gotland have
collectively produced in excess of 1,000 barrels of oil, net to Carneros and
Gotland, each day for more than 180 consecutive days preceding such date, (ii)
the average of the forward prices for West Texas Intermediate oil (as quoted on
the New York Mercantile Exchange) relating to the five years following such date
exceeds $54.59 per barrel, (iii) the then aggregate consolidated indebtedness of
Acquisition, Carneros and Gotland is less than $21,200,000, (iv) none of the
conditions set forth in SECTION 2 shall have occurred on and after the date
hereof and prior to such date, and (v)
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a Qualified Refinancing has occurred prior to such date. For purposes hereof, a
"QUALIFIED REFINANCING" means that all the indebtedness associated with the
Securities Purchase Agreement referenced below of approximately $21,200,000
shall have been refinanced with one or more commercial lenders unaffiliated with
the Company under arrangements pursuant to which there arc no principal payments
required prior to the fourth anniversary of the Closing and all other terms
thereof are no less favorable to Acquisition, Carneros and Gotland as the other
terms of the Securities Purchase Agreement and related agreements.
2. CONDITIONS FOR EQUITY CONTRIBUTION. The Company shall be obligated to
contribute cash (either directly or through Acquisition) as additional equity
capital to Carneros, Acquisition or Gotland, as the case may be, if any of the
following occurs at any time prior to the Termination Date (which if any such
event occurs such capital contribution shall he made within two business days of
such event):
(a) There is an event of default under the Securities Purchase
Agreement dated May 31, 2006, as amended by a Joinder and Amendment
Agreement the date hereof, among Carneros, Gotland, Acquisition and
Laurus or any other loan document referenced therein and, if a cure
period is provided, it continues without cure within such cure period,
or an event of default occurs, and, if a cure period is provided, such
event of default continues without cure within such cure period, under
any loan agreement or other indebtedness of $1,000,000 or more of
Carneros, Acquisition or Gotland;
(b) Carneros, Acquisition or Gotland admits in writing its
inability, or is generally unable, to pay its debts as they become due;
or
(c) Carneros, Acquisition or Gotland (i) applies for, consents
to or allows to exist the appointment of, or the taking of possession
by, a receiver, custodian, trustee or liquidator of itself or of all or
a substantial part of its property, (ii) makes a general assignment for
the benefit of creditors, (iii) commences a voluntary case under the
federal bankruptcy laws (as now or hereafter in effect), (iv) is
adjudicated a bankrupt or insolvent, (v) files a petition seeking to
take advantage of any other law providing for the relief of debtors,
(vi) acquiesces to, without challenge within ten (10) days of the
filing thereof, or fails to have dismissed, within forty-five (45)
days, any petition filed against it in any involuntary case under such
bankruptcy laws, or (vii) takes any action for the purpose of effecting
any of the foregoing.
3. AMOUNT OF EQUITY CONTRIBUTION. At any time prior to the Termination Date
(including on multiple occasions if necessary) that there is an occurrence
described in SECTION 2, the Company shall contribute cash (either directly or
through Acquisition) to Carneros, Acquisition or Gotland, as the case may be,
without receiving additional shares of stock or any other consideration, as
equity capital in an amount necessary to cure such default, make Carneros,
Acquisition or Gotland solvent, or permit Carneros, Acquisition or Gotland to
pay all of its debts that are then due, as the case may be. As used in this
Agreement, the term "solvent" means that the sum of an entity's assets at a fair
valuation exceeds the sum of such entity's debts and other obligations.
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4. LIMITATION ON CONTRIBUTION. The maximum aggregate amount that the Company
shall be required to contribute pursuant to SECTIONS 2 AND 3 shall be
$8,000,000.
5. THIRD PARTY BENEFICIARY. The parties hereto acknowledge that Carneros,
Acquisition and Gotland are third party beneficiaries hereof. Notwithstanding
that Carneros, Acquisition and Gotland are third party beneficiaries, this
Agreement can be amended or terminated at any time by a writing executed by the
Company, Warburg and WP EEX, without need for consent of Carneros, Acquisition
or Gotland.
6. MISCELLANEOUS,
6.1 GOVERNING LAW AND JURISDICTION. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of California. Each of
the parties hereto consents to such jurisdiction for the enforcement of this
Agreement and matters pertaining to the transaction and activities contemplated
hereby.
6.2 NOTICES. All notices and other communications provided for or
permitted hereunder shall be made by hand delivery, first-class mail, or
telecopier, addressed as follows;
PARTY ADDRESS
----- -------
Pacific Energy Resources Ltd. 0000 Xxxx Xxxx X Xxxxxx
Xxxx Xxxxx, XX 00000
Attn: Xxxxxx Xxxxx
Fax: (000) 000-0000
Warburg Pincus Equity Partners, LP 000 Xxxxxxxxx Xxxxxx, 00xx Floor
WP EEX LLC Xxx Xxxx, Xxx Xxxx 00000
Attn: General Counsel
Fax: (000) 000-0000
All notices and communications shall be deemed to have been duly given: when
delivered by hand, if personally delivered; three (3) business days after
deposit in any United States Post Office in the Continental United States,
postage prepaid, if mailed; and when receipt is acknowledged, if telecopied.
6.3 ATTORNEYS' FEES. If a dispute arises with respect to this
Agreement, the party prevailing in the dispute shall be entitled to recover all
fees and expenses, including, without limitation, reasonable attorneys' fees and
expenses, incurred in ascertaining that party's rights, or in preparing to
enforce or in enforcing that party's rights under this Agreement, whether or not
it was necessary for that party to institute suit.
6.4 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
several counterparts and when so executed shall constitute one agreement binding
on all the parties, notwithstanding that all the parties are not signatory to
the original and same counterpart.
6.5 COMPANY REPRESENTATIONS. The Company represents and warrants to
Warburg and WP EEX as follows: The Company has the requisite power and authority
to enter into this
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Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the performance of the Company's obligations
hereunder have been duly and validly authorized by the Company. This Agreement
has been duly executed and delivered by the Company, and constitutes legal,
valid and binding obligations of the Company, enforceable against the Company,
in accordance with their terms. The Company's execution, delivery, and
performance of this Agreement and the transactions contemplated hereby will not:
(a) violate or conflict with any provision of the Company's governing documents;
(b) result in the breach of any term or condition of, or constitute a default or
cause the acceleration of any obligation under any agreement or instrument to
which the Company is a party or by which it is bound; or (c) violate or conflict
with any applicable law.
6.6 FURTHER ASSURANCE. From time to time each party will execute and
deliver such further instruments and will take such other action as the other
party may reasonably request in order to discharge and perform their obligations
and agreements hereunder and to give effect to the intentions expressed in this
Agreement. If for any reason the obligation of the Company hereunder would be
unenforceable, the Company agrees to the fullest extent permitted by law to take
such other action requested by Warburg to accomplish the effect contemplated by
Section 3 hereof as long as such action would not adversely affect the Company
in any material respect in contrast to the position that the Company would have
been in had such obligation been enforceable.
[SIGNATURES CONTAINED ON FOLLOWING PAGE]
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The parties have executed this Agreement as of the day and year first
above written.
PACIFIC ENERGY RESOURCES LTD.,
a Delaware corporation
By: /S/ XXXXXX XXXXX
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Xxxxxx Xxxxx, President
WARBURG, XXXXXX EQUITY PARTNERS, L.P.
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
By: WARBURG PINCUS PARTNERS LLC, its
general partner
By: WARBURG PINCUS & CO.,
its managing member
By: /S/ XXXXXXX X. XXXX
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Name:
Title: Partner
WP EEX LLC
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
By: /S/ XXXXXXX X. XXXX
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Name:
Title: Partner of Managing Members
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