EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
Among
Carneros Energy, Inc.,
the Stockholders of Carneros Energy, Inc.
and
Carneros Acquisition Corp.,
as Buyer
TABLE OF CONTENTS
Page
ARTICLE I
PURCHASE AND SALE
1.1 Agreement to Sell and to Purchase..................................... 1
1.2 Purchase Price........................................................ 1
ARTICLE II
ACCESS, CERTAIN ACKNOWLEDGEMENTS AND DISCLAIMERS
2.1 Access. .............................................................. 3
2.2 Produced Materials and Wastes......................................... 4
2.3 Acknowledgment of Responsibility ..................................... 4
2.4 Disclaimers........................................................... 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES AS TO SELLERS
3.1 Organization.......................................................... 5
3.2 Authorization; Enforceability ........................................ 5
3.3 Conflicts............................................................. 6
3.4 Bankruptcy; Litigation................................................ 6
3.5 Title to Shares....................................................... 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
AS TO THE PURCHASED COMPANIES AND ITS ASSETS
4.1 Organizational Matters................................................ 7
4.2 Capitalization........................................................ 7
4.3 Authority; Conflicts.................................................. 8
4.4 Bankruptcy............................................................ 8
4.5 Subsidiaries of Company............................................... 8
4.6 Violations of Laws.................................................... 8
4.7 Litigation............................................................ 8
4.8 Taxes................................................................. 8
4.9 Financial Statements.................................................. 10
4.10 Contracts. ........................................................... 10
4.11 Payables ............................................................. 11
4.12 No Suspense........................................................... 11
4.13 Imbalances ........................................................... 11
4.14 Transfer Restrictions................................................. 12
4.15 AFEs.................................................................. 12
4.16 Absence of Certain Changes and Events................................. 12
4.17 Environmental......................................................... 13
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4.18 Licenses............................................................. 13
4.19 Brokers' Fees ....................................................... 13
4.20 Bank Accounts........................................................ 13
4.21 Title to Assets...................................................... 14
4.22 Employment Matters................................................... 14
4.23 Benefit Matters...................................................... 14
4.24 Natural Gas Act and Investment Company Act........................... 15
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
5.1 Organization......................................................... 15
5.2 Authorization; Enforceability ....................................... 15
5.3 Conflicts............................................................ 15
5.4 Bankruptcy........................................................... 15
5.5 Brokers' Fees ....................................................... 15
5.6 Investment Intent ................................................... 16
5.7 Independent Investigation............................................ 16
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Confidentiality ..................................................... 16
6.2 Conduct of Business ................................................. 16
6.3 Third Party Consents................................................. 18
6.4 No Public Announcement............................................... 18
6.5 COBRA................................................................ 18
ARTICLE VII
BUYER'S CONDITIONS
7.1 Representations, Warranties and Covenants............................ 18
7.2 Closing Delivery by Sellers ......................................... 19
7.3 Consents............................................................. 19
7.4 No Litigation........................................................ 19
ARTICLE VIII
SELLERS' CONDITIONS
8.1 Representations, Warranties and Covenants............................ 20
8.2 Closing Delivery by Buyer............................................ 20
8.3 No Litigation........................................................ 20
ARTICLE IX
NATURE OF STATEMENTS AND SURVIVAL OF COVENANTS,
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
9.1 Survival............................................................. 20
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9.2 Indemnification. ................................................. 21
9.3 Procedures........................................................ 22
9.4 No Consequential Damages.......................................... 23
9.5 Exclusive Remedy.................................................. 24
9.6 Mitigation of Damages/Minimization of Claim....................... 24
ARTICLE X
TERMINATION
10.1 Termination....................................................... 25
10.2 Liability Upon Termination........................................ 25
ARTICLE XI
DEFINITIONS OF CERTAIN TERMS
ARTICLE XII
MISCELLANEOUS
12.1 Notices .......................................................... 33
12.2 Assignment and Successors......................................... 34
12.3 Entire Agreement; Amendment....................................... 34
12.4 Governing Law..................................................... 34
12.5 Waiver............................................................ 34
12.6 Severability ..................................................... 34
12.7 No Third Party Beneficiaries ..................................... 34
12.8 Counterparts...................................................... 35
12.9 Headings ......................................................... 35
12.10 Negotiated Transaction............................................ 35
12.11 Expenses ......................................................... 35
12.12 Termination of Certain Agreements................................. 35
12.13 Arbitration....................................................... 35
12.14 Role of Xxxxxx & Xxxxxx LLP....................................... 36
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EXHIBITS AND SCHEDULES
EXHIBITS
--------
Exhibit A Working Interests/Net Revenue Interests- Xxxxx Form of
Exhibit B Releases
Exhibit C Form of Escrow Agreement
Exhibit D Form of Demand Promissory Note
Exhibit E Form of Security Agreement
SCHEDULES
---------
Schedule 1.2 (a) Allocation among Sellers
Schedule 3.5 Title to Shares
Schedule 4.2 (a) Capitalization
Schedule 4.3 Conflicts
Schedule 4.5 Subsidiaries of Company
Schedule 4.6 Violations of Law
Schedule 4.7 Litigation
Schedule 4.8 Taxes
Schedule 4.9 Financial Statements
Schedule 4.10(a) Material Contracts
Schedule 4.10(b) Defaults Under Material Contracts
Schedule 4.11 Payables
Schedule 4.12 Suspense Revenues
Schedule 4.13 Imbalances
Schedule 4.14 Transfer Restrictions
Schedule 4.15 AFEs
Schedule 4.16 Absence of Certain Changes and Events
Schedule 4.17 Environmental
Schedule 4.18 Licenses
Schedule 4.20 Bank Accounts
Schedule 4.21 Title Defects
Schedule 4.23 Employee Plans
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of June 29, 2006, by and among Cameros Energy, Inc., a Delaware
corporation (the "COMPANY"), each of the parties identified on the signature
page hereto as a Seller (each such party a "Seller" and collectively the
"Sellers") and Cameros Acquisition Corp. ("Buyer").
RECITALS:
WHEREAS, Sellers own all of the issued and outstanding shares of common
stock, par value $0.01 per share (the "COMMON SHARES"), and of Series A
Redeemable Convertible Preferred Stock, par value $0.01 per share (the
"PREFERRED SHARES" and together with the Common Shares, the "SHARES") of the
Company; and
WHEREAS, Sellers desire to sell the Shares to Buyer, and Buyer desires
to purchase the same, all upon the terms and subject to the conditions set forth
herein; and
WHEREAS, capitalized terms used but not otherwise defined herein shall
have the meaning given such terms in ARTICLE XI;
NOW, THEREFORE, in consideration of the premises, the respective
representations, warranties, covenants and agreements contained herein, and
other good and valuable consideration, the sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 AGREEMENT TO SELL AND TO PURCHASE. On the Closing Date, upon the
terms and subject to the conditions contained herein, Sellers shall transfer,
sell, assign and convey to Buyer, and Buyer shall purchase from Sellers, the
Shares. Subject to the conditions set forth in this Agreement, the closing of
such sale and purchase ("CLOSING") shall take place at the offices of Xxxxxx &
Xxxxxx L.L.P., 0000 Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000-0000 or such other
location mutually agreed to by the Company and the Buyer on the fifth Business
Day following the date which Buyer informs the Sellers in writing that it is
prepared to effect the Closing if all the conditions set forth in Articles VII
are satisfied or waived on such fifth Business Day or such other date mutually
agreed to by the Company and the Buyer (the actual date of Closing being the
"CLOSING DATE"). At the Closing, Seller and Buyer shall deliver the items set
forth in SECTION 7.2 and SECTION 8.2, respectively.
1.2 PURCHASE PRICE.
(a) In consideration of the transfer to Buyer of the Shares,
and in accordance with this Agreement, Buyer shall pay to Sellers $25,217,452
less the Specified Amount (the "PURCHASE PRICE"). The Purchase Price shall be
decreased pursuant to SECTION 12.11. The Specified Amount shall equal the amount
of the Employee Change of Control Payments, as certified by an officer of the
Company as of Closing. To the extent that Buyer or the Company does not pay on
or prior to the first anniversary of the Closing all the Employee Change of
Control Payments to employees of the Company as of Closing, then Buyer shall pay
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to the Sellers (in the proportions set forth in Schedule 1.2(a)) within five
days after such anniversary the aggregate amount of Employee Change of Control
Payments not paid to such employees.
(b) Concurrently with the execution of this Agreement, Buyer
shall deposit $1,000,000, with U.S. Bank National Association, a national
banking association (the "ESCROW AGENT") as the "XXXXXXX MONEY" pursuant to the
terms of an escrow agreement in substantially in the form of Exhibit C. All fees
payable to the Escrow Agent under the escrow agreements shall be borne and paid
by the Company if the Company receives the Xxxxxxx Money pursuant to SECTION
1.2(c) and by Buyer in all other cases.
(c) If the transactions contemplated by this Agreement are
consummated, then the Xxxxxxx Money shall be considered as payment of a portion
of the Purchase Price, and the Purchase Price payable by Buyer at Closing shall
be reduced by the amount of the Xxxxxxx Money. In such event, the Xxxxxxx Money
and any interest thereon shall be deemed the "ESCROW AMOUNT" which shall secure
the indemnification obligations of Sellers pursuant to this Agreement. The
Escrow Amount shall be paid to Sellers or the Buyer as provided in Section 9.7.
(d) If the Closing does not occur on or before the Scheduled
Closing Date, then, unless Sellers were as of such Scheduled Closing Date in
breach of this Agreement and such breach resulted in the inability of Buyer to
effect the Closing or resulted in the failure of the conditions set forth in
Article VII to be satisfied or a material adverse change to the Company's
business, assets, operations, liabilities or results of operations (other than
effects of matters affecting the oil and gas industry generally and the effects
of political and general economic matters) occurred after the date hereof and
prior to the Scheduled Closing Date and resulted in the inability of Buyer to
effect the Closing or resulted in the failure of the conditions set forth in
Article VII to be satisfied, Sellers shall have the right to terminate this
Agreement, and receive and retain as agreed upon liquidated damages the Xxxxxxx
Money and any interest earned thereon. Sellers and Buyer shall execute and
deliver joint written instructions to the Escrow Agent to accomplish the
foregoing.
(e) "SCHEDULED CLOSING DATE" shall mean June 9, 2006;
provided, however that if the Closing shall not have occurred on or before June
9, 2006, then Buyer shall have the right to extend the Scheduled Closing Date
until June 30, 2006 if but only if it deposits with the Escrow Agent on or
before such date an additional $250,000 in cash in connection with such
extension. In such event, this additional amount will be treated as part of the
Xxxxxxx Money and paid to the Sellers or the Buyer in the same manner as the
$1,000,000 discussed in Section 1.2(c) and 1.2(f), or if the transactions
contemplated by this Agreement are consummated, then the Sellers and Buyer shall
execute and deliver joint written instructions to the Escrow Agent to have
$250,000 paid to Sellers as part of the Purchase Price.
(f) If this Agreement is terminated by the mutual written
agreement of Buyer and Sellers, or if the Closing does not occur on or before
the Scheduled Closing Date and Buyer is not entitled to the Xxxxxxx Money under
SECTION 1.2(d), then Buyer shall be entitled to the delivery of the Xxxxxxx
Money and any interest earned thereon, free of any claims by Sellers with
respect thereto. In such event, Sellers and Buyer shall execute and deliver
joint written instructions to the Escrow Agent to accomplish the foregoing.
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(g) At Closing, Buyer shall pay the Purchase Price, as
adjusted herein, less the $1,000,000 held by the Escrow Agent and, if
applicable, less the $250,000 to be paid to Sellers pursuant to Section 1.2(e),
by issuing to the Sellers a demand promissory note (the "DEMAND NOTE") in the
form of Exhibit D and executing and delivering to the Sellers a pledge and
security agreement (the "SECURITY AGREEMENT") in the form of Exhibit E. Payment
of the Demand Note upon demand will be made in immediately available funds by
wire transfer (to an account or accounts as shall be directed in writing by
Sellers prior to the Closing) in accordance with SCHEDULE 1.2(a), which Schedule
shall also indicate the percentage of the Escrow to which certain Sellers are
entitled.
(h) Each of the Sellers that owns any options, warrants or
similar rights to acquire shares of any capital stock of the Company agrees that
if the Closing occurs, then all such options, warrants or similar rights shall
be automatically terminated and cancelled without any additional consideration
to such Sellers.
ARTICLE II
ACCESS, CERTAIN ACKNOWLEDGEMENTS AND DISCLAIMERS
2.1 ACCESS.
(a) From and after the date hereof and up to and including the
Closing Date (or earlier termination of this Agreement) but subject to the
provisions of SECTIONS 2.1(a) and 2.1(b) below and obtaining any required
consents of Third-Parties, including Third-Party operators of the Assets (with
respect to which consents the Company shall use commercially reasonable efforts
to obtain), the Company shall afford to Buyer and its officers, employees,
agents, accountants, attorneys, investment bankers and other authorized
representatives ("BUYER'S REPRESENTATIVES") reasonable access, during normal
business hours, to the Assets and ALL Records and other documents in the
Purchased Companies' possession. The Company shall also make available to Buyer
and Buyer's Representatives, upon reasonable notice during normal business
hours, the Purchased Company's personnel knowledgeable with respect to the
Assets in order that Buyer may make such diligence investigation as Buyer
considers necessary or appropriate. All investigations and due diligence
conducted by Buyer or any Buyer's Representative shall be conducted at Buyer's
sole cost and expense and any conclusions made from any examination done by
Buyer or any Buyer's Representative shall result from Buyer's own independent
review and judgment.
(b) No Invasive Activity shall be conducted by Buyer or any
Buyer's Representative upon the Assets.
(c) Buyer shall abide by the Purchased Companies' and any
Third Party operator's safety rules, regulations, and operating policies while
conducting its due diligence evaluation of the Assets including any
environmental or other inspection or assessment of the Assets. Buyer hereby
defends, indemnifies and holds each of the operators of the Assets, the Company
and the Sellers harmless from and against any and all Losses arising out of,
resulting from or relating to any field visit, environmental assessment, or
other due diligence activity conducted by Buyer or any Buyer's Representative
with respect to the Assets.
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2.2 PRODUCED MATERIALS AND WASTES. Buyer acknowledges that the Assets
have been utilized for the purposes of exploration, development and production
of oil and gas and associated hydrocarbons. Waste materials therefrom,
including, without limitation, crude oil, and gases with associate wastes and
chemicals, produced water and injected waters with associated chemicals,
compounds and by products and drilling fluids and associated chemicals,
compounds and drill cuttings, may have been spilled or disposed of on-site or
off-site through methods such as, but not limited to, pit closures, burial, line
or well failures, land farming, land spreading, surface pits and underground
injection. Buyer acknowledges that such activities may have produced conditions
regarded as environmentally adverse. In addition, some production equipment may
contain asbestos or naturally occurring radioactive material (hereinafter
referred to as "NORM"). In this regard, Buyer expressly understands and agrees
that NORM may affix or attach itself to the inside of xxxxx, materials and
equipment as scale or in other forms, and that said xxxxx, materials and
equipment located on the properties may contain NORM and that NORM-containing
material may be buried or otherwise disposed of on the properties. Further,
Buyer acknowledges that as a result of the historic operations of these Assets,
NORM may be present in air, water or soil on or near the sites and that Sellers
and/or the Purchased Companies may be unaware of the presence of some or all of
such NORM. Buyer hereby releases each Seller from any liability with respect to
any such adverse environmental condition. Buyer agrees to dispose of or
discharge, or cause the Purchased Companies to dispose of or discharge, all
waste (including but not limited to produced water, crude oil, drilling fluids
and other waste) generated in connection with the ownership or operation of the
Assets in accordance with all applicable Laws.
2.3 ACKNOWLEDGMENT OF RESPONSIBILITY.
(a) Buyer acknowledges its responsibility following Closing,
and hereby agrees following Closing, to, or to cause the Company to, plug and
abandon each and every well included in the Assets and to reclaim the Assets in
accordance with applicable Laws and as may be required under any Lease, contract
or other agreement affecting the Assets (whether or not the plugging or
reclamation obligation arose or relates to periods of time prior to or after the
Closing Date).
(b) Buyer expressly acknowledges that the Purchased Companies
are responsible, and none of the Purchased Companies, Buyer or their respective
Affiliates shall have recourse against any Seller, for the debts, liabilities,
commitments, duties and obligations of the Purchased Companies, including those
arising under, related to, or in connection with the ownership, operation or use
of the Assets or the business of the Purchased Companies, whether or not such
debts, liabilities commitments, duties or obligation arise or relate to periods
of time prior to or after the Closing Date and Buyer, effective as of the
Closing, on its own behalf and on behalf of the Purchased Companies and their
Affiliates, hereby releases each Seller for any such debt, liability,
commitment, duty or obligation.
2.4 DISCLAIMERS. Buyer acknowledges and agrees that, except as
otherwise expressly set forth in Article III, IV or IX of this Agreement (and
except as expressly set forth in Article III, IV or IX, the representations and
warranties therein shall not survive the Closing), none of Sellers or any
Affiliate of a Seller makes any representation or warranty, express, statutory,
implied or otherwise with respect to the Assets, the Purchased Companies or the
Shares. Except as otherwise expressly set forth in Article III or IV or IX of
this Agreement, Sellers, for themselves and their Affiliates, hereby expressly
disclaims any and all representations and warranties associated with the Assets,
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the Purchased Companies and the Shares, express, statutory, implied or
otherwise, including any representation or warranty regarding: (a) title, (b)
any costs, expenses, revenues, receipts, accounts receivable, or accounts
payable, (c) any contractual, economic or financial information and data
associated with the Assets, the Purchased Companies or the Shares, (d) the
continued financial viability or productivity of the Assets or transportability
of product, (e) the environmental or physical condition of the Assets, (f) any
federal, state, local or tribal income or other Tax consequences associated with
the Assets, the Purchased Companies or the Shares, (g) the absence of patent or
latent defects, (h) the state of repair of the Assets, (i) merchantability or
conformity to models, (j) fitness for a particular purpose, and (k) production
rates, recompletion opportunities, decline rates or the quality, quantity or
volume of the reserves of hydrocarbons, if any, attributable to the Assets.
Sellers, for themselves and their Affiliates, expressly disclaim any and all
representations and warranties, except as otherwise expressly set forth in
Articles III or IV or IX associated with the quality, accuracy, completeness or
materiality of the information, data and materials furnished (whether
electronically, orally, by video, in writing or any other medium, by compact
disk, in any data room, or otherwise) at any time to Buyer associated with
transactions contemplated by this Agreement, including, information, data or
materials regarding: (a) title to the Assets, (b) costs, expenses, revenues,
receipts, accounts receivable or accounts payable associated with the Assets,
(c) contractual, economic or financial information associated with the Assets,
the Purchased Companies or the Shares, (d) the continued financial viability or
productivity of the Assets, or transportability of product, (e) the
environmental or physical condition of the Assets, (f) federal, state, local or
tribal income or other Tax consequences associated with the Assets, the
Purchased Companies or the Shares, (g) the absence of patent or latent defects,
(h) the state of repair of the Assets, (i) any warranty regarding
merchantability or conformity to models, (j) any rights of Buyer under
appropriate Laws to claim diminution of consideration or return of the purchase
price, (k) any warranty of freedom from patent, copyright or trademark
infringement, (1) warranties existing under applicable Law now or hereafter in
effect, and (m) any warranty regarding fitness for a particular purpose and (n)
production rates, recompletion opportunities, decline rates, gas balancing
information or the quality, quantity or volume of the reserves of hydrocarbons,
if any, attributable to the Assets.
ARTICLE III
REPRESENTATIONS AND WARRANTIES AS TO SELLERS
Each Seller as to itself or himself, as the case may be, solely hereby
represents and warrants to Buyer as follows:
3.1 ORGANIZATION. If Seller is an entity, Seller is duly organized or
formed, validly existing and in good standing under the Laws of the State of its
formation, with full power to carry on its business as it is conducted and to
own, lease and operate its assets.
3.2 AUTHORIZATION; ENFORCEABILITY. Seller has the requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
performance of Seller's obligations hereunder have been duly and validly
authorized by Seller. This Agreement and all other agreements and instruments to
be executed by Seller in connection herewith have been duly executed and
delivered by Seller, and constitute legal, valid and binding obligations of
Seller, enforceable against Seller, in accordance with their terms.
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3.3 CONFLICTS. Subject to the receipt of the consents, permissions,
novations, and approvals by Third Parties set forth on Schedule 3.3
(collectively, the "THIRD PARTY CONSENTS"), Seller's execution, delivery, and
performance of this Agreement and the transactions contemplated hereby will not:
(a) violate or conflict with any provision of Seller'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 such Seller is a party or by which it is bound; or (c) violate or conflict
with any applicable Law, except in the case of clauses (b) and (c) above, where
such breaches, violations, or conflicts would not reasonably be expected to have
a Material Adverse Effect.
3.4 BANKRUPTCY; LITIGATION. There are no bankruptcy, reorganization, or
arrangement proceedings pending, being contemplated by, or threatened against
Seller. There is no suit, action, investigation or other proceeding pending, or
to the Seller's actual knowledge, threatened, by or before any Governmental
Entity that would reasonably be expected to interfere materially with the
Seller's ability to perform its obligations under this Agreement.
3.5 TITLE TO SHARES.
(a) Seller owns beneficially and of record, all of the Shares
attributed to such Seller as set forth on SCHEDULE 3.5 and such Shares will be
transferred to Buyer free and clear of all Encumbrances other than those arising
under applicable securities laws. Each of Warburg, Xxxxxx Equity Partners, L.P.
and WP EEX LLC represent and warrant to Buyer that (i) each has authorized the
stock certificates representing the Shares attributed to it on Schedule 3.5 to
be issued in the name of "Warburg Pincus & Co., as nominee", that Warburg Pincus
& Co. is authorized to hold such Shares in its name as nominee for such Seller,
that Warburg Pincus & Co. is authorized to transfer such Shares to Buyer and
that upon Warburg Pincus & Co.'s delivery of such certificates to Buyer together
with stock powers executed by Warburg Pincus & Co., such Shares will be
transferred to Buyer free and clear of all Encumbrances other than those arising
under applicable securities laws and (ii) that the pledge agreements and other
security agreements referenced in UCC filings in the State of New York, #s
9954961, 41386616, 22618019, 22624678, 41593336, 41593492 and 53053247, do not
create any Encumbrances on the Shares.
(b) Subject to the effectiveness of SECTION 12.12, there are
no outstanding or authorized options, warrants, subscriptions, calls, puts,
conversion or other rights, contracts, agreements, commitments or understandings
of any kind respecting the Shares owned by such Seller or obligating such Seller
to sell, purchase or return any shares of capital stock of the Company or any
other securities convertible into, exchangeable for or evidencing the right to
subscribe fnr any shares of capital stock of or other ownership interest in the
Company.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
AS TO THE PURCHASED COMPANIES AND ITS ASSETS
The Company hereby represents and warrants to Buyer as follows:
4.1 ORGANIZATIONAL MATTERS. The Company is a corporation, duly
organized, validly existing and in good standing under the Laws of the State of
Delaware, with full power to carry on its business as it is conducted, and to
own, lease or operate its assets. Gotland Oil, Inc. ("Gotland") is a
corporation, duly organized, validly existing and in good standing under the
Laws of the State of Texas, with full power to carry on its business as it is
conducted, and to own, lease or operate its assets. Each of the Purchased
Companies is duly authorized to do business and is in good standing in such
other jurisdictions in which such Purchased Company is required to be so
authorized, except where the failure to be so authorized would not reasonably be
expected to have a Material Adverse Effect. The certificate of incorporation and
the bylaws and all amendments thereto, and the minute books, stock ledgers and
stock transfer records of the Purchased Companies made available to Buyer for
review are accurate and complete.
4.2 CAPITALIZATION. As of the date of this Agreement, the authorized
capital stock of the Company consists of 88,883 shares of common stock of the
Company (the "Common Stock") and 684,450 shares of Series A Redeemable
Convertible Preferred Stock (the "Preferred Stock"). As of the date of this
Agreement, (i) 33,637.716 shares of Common Stock are issued and outstanding; and
(ii) 299,563.813 shares of Preferred Stock are issued and outstanding. All
outstanding Shares are duly authorized, validly issued, fully paid and
nonassessable and were not issued in violation of any preemptive or other
similar rights. Except as set forth in the preceding two sentences and as set
forth on SCHEDULE 4.2, as of the date of this Agreement, there are issued,
reserved for issuance or outstanding (A) no shares of capital stock or other
voting securities of the Company; (B) no securities of the Company convertible
into, or exchangeable or exercisable for, shares of capital stock or other
voting securities of the Company; and (C) other than options to purchase an
aggregate of 2061.989 shares of Common Stock with each such option having the
per share exercise price of $100 and an additional 2777.396 shares available for
grant under the Company's 2001 Stock Incentive Plan (with the holders of
outstanding options and the number of options held by such holders identified on
SCHEDULE 4.2 and it being acknowledged that all options are held by the Sellers
and that pursuant to SECTION 1.2(h) all outstanding options shall be cancelled
in connection with the Closing for no additional consideration), no options,
warrants, stock appreciation rights, phantom stock plans, stock equivalents,
calls, rights, commitments, arrangements or agreements to which the Company is a
party or by which it is bound, in any case relating to the issued or unissued
capital stock of the Company or obligating the Company to issue, deliver, sell,
purchase, redeem, repurchase or acquire, or cause to be issued, delivered, sold,
purchased, redeemed, repurchased or acquired, shares of capital stock or other
voting securities of the Company, or obligating the Company to grant, extend or
enter into any such option, warrant, call, right, commitment, arrangement or
agreement. As of the date hereof, all of the issued and outstanding capital
stock of the Company is held of record by the Persons set forth on SCHEDULE 3.5.
All of the Shares were issued in compliance in all material respects with all
applicable securities laws. The Shares to be acquired by Buyer pursuant to this
Agreement constitute all of the outstanding shares of capital stock of the
Company.
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4.3 AUTHORITY; CONFLICTS.
(a) The Company has the requisite power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated herein have been duly and validly authorized by all necessary
action on the part of the Company. This Agreement and all other agreement sand
instruments to be executed by the Company in connection herewith have been duly
and validly executed and delivered by the Company and constitute the valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms and conditions.
(b) Subject to the receipt of all Third Party Consents and
except as set forth in SCHEDULE 4.3, Seller's and the Company's execution,
delivery, and performance of this Agreement and the transactions contemplated
hereby will not: (i) violate or conflict with any provision of any of the
Purchased Companies' governing documents; (ii) 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 any of the Purchased
Companies is a party or by which any of its assets, including the Assets is
bound, including any Lease and Material Contract; or (iii) violate or conflict
with any Law, except in the case of clauses (ii) and (iii) above, where such
breaches, violations, or conflicts would not reasonably be expected to have a
Material Adverse Effect.
4.4 BANKRUPTCY. There are no bankruptcy, reorganization, or arrangement
proceedings pending, being contemplated by, or threatened against any of the
Purchased Companies.
4.5 SUBSIDIARIES OF COMPANY.
(a) Except for Gotland, the Company has no Subsidiaries and
has no direct or indirect equity interest in any Person.
(b) The Company owns all of the outstanding capital stock and
other equity securities of Gotland.
4.6 VIOLATIONS OF LAWS. Except as set forth in SCHEDULE 4.6, there
exists no violations by any of the Purchased Companies of any Laws, except for
those violations that would not reasonably be expected to have a Material
Adverse Effect. This SECTION 4.6 does not cover or include any matters with
respect to Environmental Laws, such matters being addressed exclusively in
SECTION 4.17.
4.7 LITIGATION. Except as set forth in SCHEDULE 4.7, there is no suit,
action, investigation or other proceeding pending, or to the Company's
Knowledge, threatened, by or before any Governmental Entity, against any of the
Purchased Companies or any of the Assets that would reasonably be expected to
have a Material Adverse Effect.
4.8 TAXES. Except as set forth on SCHEDULE 4.8 or as would not
reasonably be expected to have a Material Adverse Effect:
8
(a) (i) All Tax Returns which were required to be filed by or
with respect to any of the Purchased Companies have been duly and timely filed,
(ii) all such Tax Returns were true, correct and complete in all material
respects as of the time of such filing, (iii) all Taxes which have become due by
any of the Purchased Company have been timely paid in full, (iv) no penalty,
addition to tax, interest or other charge is or will become due with respect to
the late filing of any such Tax Return or late payment of any such Tax, and (v)
all Tax withholding and deposit requirements imposed on or with respect to the
Purchased Companies have been satisfied in full in all respects.
(b) None of the Purchased Companies has in force any waiver of
any statute of limitations in respect of Taxes or any extension of time with
respect to a Tax assessment or deficiency.
(c) There are no pending written proposed deficiencies or
other written claims for unpaid Taxes of any of the Purchased Companies and, to
the Company's Knowledge, no such claim is pending or has been threatened. No
claim has been made by any Tax authority in a jurisdiction where a Purchased
Company has not filed a Tax return that it is or may be subject to Tax by such
jurisdiction, nor to the Company's Knowledge is any such assertion threatened.
No audit, suit, action, proceeding by or with any taxing authority is ongoing
or, to the Company's Knowledge, pending with respect to any of the Purchased
Companies
(d) No Purchased Company has a been a member of an affiliated
group (within the meaning of Section 1504 of the Code) filing consolidated
federal income Tax Returns other than one of which the company was the common
parent. No Purchased Company is liable for Taxes of any company or entity that
is not a Purchased Company by reason of having filed affiliated, unitary or
combined Tax Returns or otherwise. No Purchased Company is a party to any Tax
sharing agreement.
(e) The unpaid Taxes of the Purchased Companies at December
31, 2005 did not exceed the reserve for Tax Liability (rather than any reserve
for deferred Taxes established to reflect timing differences between book and
Tax income) set forth on the face of the Audited Balance Sheet (rather than in
any notes thereto), and, since that date, the Company has not become subject to
any additional Tax liability other than in the ordinary course of its business.
(f) No Purchased Company is a party to any arrangement that
constitutes a partnership for purposes of subchapter K of chapter 1 of subtitle
A of the Code ("Tax Partnership"). The Company has provided copies to Parent of
each agreement that governs the relationship for federal income tax purposes of
the parties to each such Tax Partnership.
(g) No Purchased Company has engaged in a reportable
transaction within the meaning of Section 6111 of the Code. No Purchased Company
has distributed stock of another Person, or has had its stock distributed by
another Person, in a transaction that was purposed to be subject to Code Section
368 or Code Section 355. The Purchased Companies will not be required to include
any item of income, or exclude any item of deduction from, taxable income for
any taxable period ending after the Closing Date as a result of any change in
method of accounting for a taxable period ending on or prior to the Closing
Date, an installment sale or open transaction made on or prior to the Closing
Date, or any prepaid amount received on or prior to the Closing Date.
9
(h) The Company is not a party to any agreement, contract,
arrangement or plan that, separately or in the aggregate, has resulted, or will
result, by reason of the transactions contemplated in this Agreement, in the
payment of any excess parachute payment within the meaning of Code Section 280G.
No employee of the Company is subject to additional taxes or interest under Code
Section 409A with respect to any right to receive payments from the Company.
4.9 FINANCIAL STATEMENTS.
(a) The Company has delivered to Buyer (i) the audited
consolidated balance sheets of the Company as at December 31, 2003, 2004 and
2005 (the December 31, 2005 balance is referred to herein as the "AUDITED
BALANCE SHEET") and the related audited consolidated statements of operations,
consolidated statements of stockholders' equity, and cash flow for such fiscal
year then ended, together with the report thereon of Xxxxx Xxxxxxxxx Paulden
XxXxxx Starbuck & Xxxxxx Accountancy Corporation, independent certified public
accountants, and (ii) the unaudited balance sheet of the Company as at March 31,
2006, together with the related unaudited consolidated statements of operations,
consolidated statements of stockholder's equity, and cash flow for the period
then ended. All of the foregoing audited and unaudited financial statements are
collectively referred to herein as the "FINANCIAL STATEMENTS." Subject to the
matters set forth in SCHEDULE 4.9, the Financial Statements fairly present the
financial condition and the results of operations of the Company as at the
respective dates of and for the periods referred to therein, all in accordance
with GAAP.
(b) The Company has not since December 31, 2005 paid or
otherwise made any dividend or distribution on its stock or repurchased,
redeemed or otherwise acquired any of its stock or engaged in a comparable
transaction resulting in one or more stockholders of the Company receiving
assets of the Company.
4.10 CONTRACTS.
(a) Excluding any Leases or contracts contemplated by actions
taken as pen-nitted under SECTION 6.2 and other than the agreements providing
for the Employee Change of Control Payments, SCHEDULE 4.10(a) sets forth all
agreements, obligations, arrangements or contracts of the type described below
to which any of the Purchased Companies is a party as of the date of this
Agreement (collectively, all of such contracts, the "MATERIAL CONTRACTS"):
(i) any contract or permit that can reasonably be
expected to result in aggregate payments by any Purchased Company of more than
$50,000 during the current or any subsequent fiscal year of such Purchased
Company (based solely on the terms thereof and without regard to any expected
increase in volumes or revenues);
(ii) any contract that can reasonably be expected to
result in aggregate revenues to any Purchased Company of more than $50,000
during the current or any subsequent fiscal year of such Purchased Company
(based solely on the terms thereof and without regard to any expected increase
in volumes or revenues);
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(iii) any indenture, mortgage, loan, note, credit or
sale-leaseback or similar contract to which any Purchased Company is bound or to
which any of the Assets is subject (whether such Purchased Company is the
borrower, lender or guarantor) and all related security agreements or similar
agreements associated therewith;
(iv) any contract that constitutes a lease (other
than an oil and gas lease or similar lease), under which any Purchased Company
is the lessor or the lessee of real or personal property which lease (A) cannot
be terminated by such Purchased Company without penalty upon sixty (60) days or
less notice and (B) involves an annual base rental of more than $50,000;
(v) any contract with any Seller or any Affiliate of
a Seller that will not be terminated prior to Closing;
(vi) any contract pending for the acquisition or
disposition, directly or indirectly (by merger or otherwise), of Assets with a
value in excess of $50,000 (other than inventory or sales of hydrocarbons); and
(vii) all Xxxxxx.
(b) Except as set forth in SCHEDULE 4.10(b), no Purchased
Company and, to the Company's Knowledge, no counterparty to any Material
Contract, is in default under any Material Contract and there has not occurred
any event that (with the lapse of time or the giving of notice) would constitute
a default under any Material Contract, except in each case for any defaults that
would not reasonably be expected to have a Material Adverse Effect. As of the
date hereof, no Purchased Company has received or given notice (i) of an
intention to terminate any Material Contract or (ii) of any pending or
threatened bankruptcy, insolvency or similar proceedings with respect to any
party to any Material Contract.
(c) True and complete copies of all such Material Contracts
have been delivered to the Buyer.
4.11 PAYABLES. Except (a) as set forth in SCHEDULE 4.11, (b) for
revenues which are being suspended in accordance with applicable Law, and (c) as
would not reasonably be expected to have a Material Adverse Effect, all oil and
gas production proceeds payable by any Purchased Company to others from the
Assets, including, without limitation, all royalties, overriding royalties and
net profits interests, have been paid in material compliance with all of the
terms and conditions of the applicable Leases and other applicable instruments.
4.12 NO SUSPENSE. Except as set forth in SCHEDULE 4.12, to the
Company's Knowledge, proceeds from the sale of all oil, condensate and gas
produced from the Assets are being received by the Purchased Companies and are
not being held in suspense for any reason except for such amounts that would not
reasonably be expected to have a Material Adverse Effect.
4.13 IMBALANCES. Except as set forth in SCHEDULE 4.13 and except for
such matters that would not reasonably be expected to have a Material Adverse
Effect, there exists no imbalance regarding production taken or marketed from
any Lease, nor any unsettled pipeline imbalance, which could result in (a) a
portion of any Purchased Company's interest in production therefrom (in the case
of any Lease) to be taken or delivered after the Closing Date without such
Purchased Company receiving payment therefor and at the price it would have
11
received absent such imbalance; (b) any Purchased Company being obligated to
make payment to any Person as a result of such imbalance; or (c) production
being shut-in or curtailed after the Closing Date due to non-compliance with
allowables, production quotas, proration rules, or similar orders or regulations
of Governmental Entities; and no Purchased Company will be obligated, by virtue
of any prepayment arrangement, take-or-pay agreement, or similar arrangement, to
deliver hydrocarbons produced from the Assets at some future time without then
receiving full payment therefor.
4.14 TRANSFER RESTRICTIONS. Except as set forth in SCHEDULE 4.14 and
except for such matters that would not reasonably be expected to have a Material
Adverse Effect, there are no preferential rights of purchase or consents to
assign in favor of Third Parties with respect to any of the Assets that are
applicable to the transactions contemplated hereby.
4.15 AFES. Except as disclosed in SCHEDULE 4.15, to the Company's
Knowledge, there are no outstanding authorities for expenditures with respect to
the Assets as of the date set forth in such Schedule that are in excess of
$50,000.
4.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
SCHEDULE 4.16, since the date of the Audited Balance Sheet none of the Purchased
Companies has:
(a) amended its Organizational Documents;
(b) paid or increased any bonuses, salaries, or other
compensation to any stockholder, director, officer, or (except for salary,
bonuses and other compensation at levels no higher than those in effect at
December 31, 2005) employee or entered into any employment, severance, or
similar contract with any director, officer, or employee;
(c) adopted, amended, modified or terminated any bonus,
profit-sharing, incentive, severance or other plan, contract or commitment for
the benefit of any of the directors, officers and employees of any Purchased
Company, or taken any such action with respect to any other Employee Benefit
Plan;
(d) made any change in the accounting methods or principles
used by any Purchased Company;
(e) borrowed or agreed to borrow any funds or issued any note,
bond or other debt security, or guaranteed any indebtedness for borrowed money
or capitalized lease obligation, except liabilities incurred for working capital
purposes, the aggregate amount of which does not exceed $100,000;
(f) merged or consolidated with any other Person;
(g) made any loan to, or entered into any other transaction
with, any of the directors, officers or employees of any Purchased Company
except for transactions in the ordinary course of business and not in an
aggregate amount in excess of $50,000;
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(h) made any material change in employment terms for any of
the directors, officers or employees of the Company;
(i) paid any dividends or made any distributions in respect of
the Shares or redeemed, repurchased or otherwise acquired any Shares;
(j) transferred, sold, mortgaged, pledged or disposed of any
material Asset other than the sale of hydrocarbons in the ordinary course of
business; or
(k) entered into any agreement, whether oral or written, to do
any of the foregoing.
4.17 ENVIRONMENTAL.
(a) Except as set forth in SCHEDULE 4.17 to the Company's
Knowledge, the Assets are free of any Environmental Defect, except where any
such Environmental Defect, individually or in the aggregate with other
Environmental Defects, would not reasonably be expected to have a Material
Adverse Effect.
(b) With respect to the Assets, no Purchased Company has
entered into, or is subject to, any agreements, consents, orders, decrees,
judgments, license or permit conditions, or other directives of Governmental
Entities in existence at this time based on any Environmental Laws that relate
to the future use of any of the property and that require any change in the
present conditions of any of the property owned by such Purchased Company,
except for any matters that would not reasonably be expected to have a Material
Adverse Effect.
(c) Except as set forth in SCHEDULE 4.17, none of the
Purchased Companies has received written notice from any Person of any release,
disposal, event, condition, circumstance, activity, practice or incident
concerning any land, facility, asset or property that: (i) interferes with or
prevents compliance by any Purchased Company with any Environmental Law or the
terms of any license or permit issued pursuant thereto; or (ii) gives rise to or
results in any common law or other liability of such Purchased Company to any
Person which, in the case of either clause (i) or (ii) hereof, would have a
Material Adverse Effect.
4.18 LICENSES. Except as set forth in SCHEDULE 4.18, to the Company's
Knowledge, a Purchased Company or the operators of the Assets, holds all
licenses, permits, or other authorizations necessary to carry on operations
connected with the Assets as currently conducted, except where the failure to
obtain such licenses, permits, or other authorizations would not reasonably be
expected to have a Material Adverse Effect.
4.19 BROKERS' FEES. None of the Purchased Companies has incurred or
will incur any liability, contingent or otherwise, for brokers' or finders' fees
in respect of the transactions contemplated hereby. No Seller or any Affiliate
of Seller has incurred or will incur any liability, contingent or otherwise, for
brokers' or finders' fees in respect of the transactions contemplated hereby for
which the Purchased Companies, Buyer or any Affiliate of Buyer will be
responsible.
4.20 BANK ACCOUNTS. SCHEDULE 4.20 sets forth as of the date of this
Agreement (a) the name of each financial institution in which any Purchased
Company has deposit or checking accounts or safe deposit boxes and (b) the types
of those arrangements and accounts, including, as applicable, names in which
13
accounts or boxes are held, the account or box numbers and the name of each
Person authorized to draw thereon or have access thereto.
4.21 TITLE TO ASSETS. Except as set forth in SCHEDULE 4.21, the Company
has Defensible Title to the Assets free of any Title Defects other than
Permitted Encumbrances and the Assets other than the Leases and Xxxxx are in
good working condition subject to ordinary wear and tear, except where such
failure to have such Defensible Title or to be in such condition, individually
or in the aggregate, would not have a Material Adverse Effect.
4.22 EMPLOYMENT MATTERS. Each Purchased Company is in compliance with
all Laws relating to the employment of labor, including all such Laws, relating
to wages, hours, collective bargaining, discrimination, civil rights, safety and
health, workers' compensation and the collection and payment of withholding or
Social Security taxes and similar taxes except for such noncompliance that would
not reasonably be expected to have a Material Adverse Effect. No Purchased
Company is a party to any labor or collective bargaining agreement respecting
its employees. No labor organization or group of employees has made a pending
demand for recognition, there are no representation proceedings pending with a
labor relations tribunal and there is no threatened organizing activity
respecting the employees of any Purchased Company. To the Company's Knowledge,
there are no strikes, work stoppages, slow-downs, lockouts or other labor
disputes respecting the employees of any Purchased Company and there are no
complaints, charges, claims or grievances, pending or threatened, arising out of
the employment relationships respecting the employees of any Purchased Company.
Seller have heretofore provided to Buyer a complete and accurate list of the
following information for each employee of any Purchased Company (including each
such employee on leave of absence or layoff status): name; job title; current
compensation; accrued vacation; and service credited for benefit purposes.
Except for the Employee Change of Control Payments, no bonuses or other amounts
shall be payable to employees of the Company in connection with the Closing.
4.23 BENEFIT MATTERS. (a) SCHEDULE 4.23 sets forth a list of each
Employee Plan sponsored by, participated in or contributed to by any Purchased
Company. None of the Purchased Companies has any material unfunded obligation
under any such Employee Plan. None of the Purchased Companies sponsors nor
participates in any other Employee Plans. Only employees of the Purchased
Companies participate in the Employee Plans listed in SCHEDULE 4.23. True and
complete copies of each Employee Plan set forth in SCHEDULE 4.23, including
related trusts, amendments and summary plan descriptions, have been made
available to Buyer. The Purchased Companies have substantially complied with all
of their obligations, contribution requirements and administrative
responsibilities respecting its employees and relating to such Employee Plans
There are no material actions, suits, claims, fiduciary breaches, violations or
matters pending before any governmental agency respecting such Employee Plans.
None of the Purchased Companies contributes to, nor had an obligation to
contribute to within the six years preceding the Closing, a multiemployer plan
within the meaning of Section 3(37) of ERISA.
(b) Except for the Employee Change of Control Payments, the
consummation of the transactions contemplated by this Agreement will not trigger
additional payments, contributions, benefits or vesting rights respecting or
under any Employee Plan as to any employee of the Company.
14
4.24 NATURAL GAS ACT AND INVESTMENT COMPANY ACT. None of the Purchased
Companies is (a) a "NATURAL GAS COMPANY" under the Natural Gas Act, as amended,
or (b) a public utility or public service company (or similar designation) whose
rates are established through cost of service rate regulation under the laws of
any state in the United States or by any foreign country. None of the Purchased
Companies is an "INVESTMENT COMPANY" or a company "CONTROLLED" by an "INVESTMENT
COMPANY" within the meaning of the Investment Company Act of 1940, as amended.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers and the Company as
follows:
5.1 ORGANIZATION. Buyer is a corporation, duly organized, validly
existing and in good standing under the Laws of the State of Delaware, with full
power to carry on its business as it is conducted and to own, lease, and operate
its assets.
5.2 AUTHORIZATION; ENFORCEABILITY. Buyer has the legal capacity to
enter into this Agreement, the Demand Note and the Security Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement, the Demand Note and the Security Agreement and the
performance of Buyer's obligations hereunder and thereunder have been duly and
validly authorized by Buyer. This Agreement, the Demand Note and the Security
Agreement and all other agreements and instruments to be executed by Buyer in
connection herewith have been duly executed and delivered by Buyer, and
constitute legal, valid and binding obligations of Buyer, enforceable against
Buyer, in accordance with their terms.
5.3 CONFLICTS. Buyer's execution, delivery, and performance of this
Agreement, the Demand Note and the Security Agreement and the transactions
contemplated hereby will not: (a) violate or conflict with any provision of such
Buyer'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 Buyer is a party or by which it is bound;
or (c) violate or conflict with any Law, except in the case of clause (b) and
(c) above, where such breaches, violations, or conflicts would materially
interfere with the ability of the Buyer to perform its obligations hereunder or
result in an adverse effect on any of the Sellers.
5.4 BANKRUPTCY; SOLVENCY. There are no bankruptcy, reorganization, or
arrangement proceedings pending, being contemplated by, or threatened against
Buyer. Buyer is Solvent, and immediately following the Closing and the payment
of the Demand Note, each of the Buyer, the Company and Gotland will be Solvent.
5.5 BROKERS' FEES. Neither Buyer nor any Affiliate of Buyer has
incurred or will incur any liability, contingent or otherwise, for brokers' or
finders' fees in respect of the transactions contemplated hereby for which any
Seller or any Affiliate of a Seller will be responsible.
15
5.6 INVESTMENT INTENT, Buyer is acquiring the Shares for its own
account and with the intention of holding the Shares solely for investment.
Buyer acknowledges that the Shares have not been, and will not be, registered
under the Securities Act of 1933, or any state securities Laws. Buyer is able to
bear the risk of an investment in the Shares, including risks associated with
holding the Shares for an extended period of time. Buyer has no intention as of
the date hereof of selling the Shares in a public distribution in violation of
federal securities Laws or any applicable state securities Laws.
5.7 INDEPENDENT INVESTIGATION. Buyer is sophisticated in the
evaluation, purchase, ownership and operation of oil and gas properties and
related facilities. In making its decision to enter into this Agreement and to
consummate the transactions contemplated herein, subject to the express
representations set forth in ARTICLES III AND IV, Buyer (a) has relied or shall
rely solely on its own independent investigation and evaluation of the Assets
and the Purchased Companies and (b) has satisfied or shall satisfy itself as to
the environmental and physical condition of and contractual arrangements
affecting the Purchased Companies and the Assets.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 CONFIDENTIALITY. Notwithstanding the termination of this Agreement
or any other provision of this Agreement to the contrary but subject to the next
sentence of this SECTION 6.1, the terms of any confidentiality obligation
between the parties hereto shall remain in full force and effect in accordance
with its terms. If Closing of the transaction contemplated under the terms of
this Agreement occurs, all such confidentiality obligations shall terminate
(which termination shall be effective as of Closing).
6.2 CONDUCT OF BUSINESS. The Company agrees that from and after the
date hereof until Closing, except as expressly contemplated by this Agreement or
as expressly consented to in writing by Buyer, to, and to cause each of its
Subsidiaries to, operate its business in the usual, regular and ordinary manner
consistent with past practice and shall not, nor shall it permit its
Subsidiaries to:
(a) amend its Organizational Documents;
(b) pay or increase any bonuses, salaries, or other
compensation to any stockholder, director, officer, or (except for salary,
bonuses and other compensation at levels no higher than those in effect at
December 31, 2005) employee or into any employment, severance, or similar
contract with any director, officer, or employee;
(c) adopt, amend, modify or terminate any bonus,
profit-sharing, incentive, severance or other plan, contract or commitment for
the benefit of any of its directors, officers and employees, or take any such
action with respect to any other Employee Benefit Plan;
(d) make any change in its accounting methods or principles
except as required by Law;
(e) borrow or agree to borrow any funds or issue any note,
bond or other debt security, or guarantee any indebtedness for borrowed money or
capitalized lease obligation, except for liabilities incurred in the ordinary
course of business or for working capital purposes in an aggregate amount not in
excess of $100,000;
16
(f) merge or consolidate with any other Person;
(g) make any loan to, or enter into any other transaction
with, any of its directors, officers or employees except for transactions in the
ordinary course of business and not in an aggregate amount in excess of $50,000;
(h) make any material change in employment terms for any of
its directors, officers or employees outside the ordinary course of business;
(i) fail to promptly notify Buyer of any emergency or other
change which would reasonably be expected to have a Material Adverse Effect;
(j) declare, pay or set aside any dividends or distributions
or similar payment with respect to the Shares, or repurchase, redeem or
otherwise acquire any of the Shares;
(k) transfer, sell, mortgage, pledge or dispose of any of its
material Assets other than the sale of hydrocarbons in the ordinary course of
business;
(1) fail to use commercially reasonable efforts to maintain
and preserve intact their respective business organizations, to keep available
the services of their officers and employees or to maintain their business
relationships and goodwill with suppliers, contractors, distributors, customers,
licensors, licensees and other having business relationships with them;
(m) (i) amend or modify, or terminate, any Material Contract
or material Lease, (ii) enter into or assume any Material Contract, (iii) enter
into or assume any material Lease, or any new contracts to sell hydrocarbons
other than in the ordinary course of business at market pricing, but in no event
having a duration longer than three months, or (iv) enter into, assume,
terminate or modify any agreement with respect to Xxxxxx;
(n) acquire any business or Person, by merger or
consolidation, purchase of substantial assets or equity interests, or in any
other manner, in a single transaction or series of related transactions;
(o) make any capital expenditure or commitment except for
expenditures in the ordinary course of business in an aggregate amount not in
excess of $50,000;
(p) (i) authorize for issuance, issue, sell or deliver, or
adjust, split, combine (A) any Shares or other equity or voting interests in the
Company or any of its Subsidiaries or any securities convertible into,
exchangeable for, or evidencing the right to subscribe for or acquire any Shares
or other equity or voting interest in the Company or any of its Subsidiaries, or
(ii) make any other change in the capital structure of the Company or any of its
Subsidiaries;
(q) form or acquire any new Subsidiary;
17
(r) fail to act in compliance in all material respects with
all applicable Environmental Laws or otherwise take any commercially reasonable
action that will give rise to liability under any Environmental Law;
(s) knowingly take any action or omit to take any commercially
reasonable action that would cause any of its representations and warranties
herein to become untrue in any material respect; or
(t) authorize, or commit or agree to take, any of the
foregoing actions.
Buyer acknowledges that the Purchased Companies own undivided interests in
certain of the properties comprising the Assets that they are not the operator
thereof, and Buyer agrees that the acts or omissions of the other working
interests owners (including the operators) who are not Sellers or any Affiliates
of any Seller shall not constitute a breach of the provisions of this SECTION
6.2, nor shall any action required by a vote of working interest owners
constitute such a breach so long as a Purchased Company has voted its interest
in a manner that complies with the provisions of this SECTION 6.2.
6.3 THIRD PARTY CONSENTS. The Company and the Sellers shall use their
commercially reasonable efforts to obtain all Third Party Consents prior to
Closing.
6.4 NO PUBLIC ANNOUNCEMENT. None of Buyer, the Company, Sellers or any
of their respective Affiliates shall, without the written approval of the other
parties, make any press release or other public announcement concerning the
transactions contemplated by this Agreement, except as and to the extent that
any such Person shall be so obligated by Law, in which case the other parties to
this Agreement shall be advised and the parties shall use their reasonable best
efforts to cause a mutually agreeable release or announcement to be issued;
provided, however, that the foregoing shall not preclude communications or
disclosures necessary to implement the provisions of this Agreement (including
communications or disclosures to lenders or rating agencies or in connection
with the receipt of any consents or contractual notices) or to comply with
applicable accounting, tax and disclosure obligations of any Governmental
Entity.
6.5 COBRA. Buyer shall assume, or cause the Company to retain, the
obligations to satisfy the health benefit continuation requirements of Section
6.01, ET SEQ. of ERISA or Section 4980B of the Code with respect to the Company
and all of its employees, whether terminated prior to or after the Closing.
ARTICLE VII
BUYER'S CONDITIONS
The obligation of Buyer to purchase the Shares as contemplated hereby
is, at the option of Buyer, subject to the satisfaction on or before the Closing
Date of the conditions set forth below, any of which may be waived by Buyer in
writing.
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and
warranties of Sellers contained in ARTICLE III and of the Company in ARTICLE IV
of this Agreement shall be true and correct in all material respects on and as
of the Closing Date, in each case with the same force and effect as though such
18
representations and warranties had been made or given on and as of the Closing
Date (other than those representations and warranties that address matters only
as of a particular date which shall remain true and correct in all material
respects as of such date); and each and all of the agreements and covenants of
Seller to be performed or complied with by Seller on or before the Closing Date
pursuant to this Agreement shall have been performed or complied with in all
material respects.
7.2 CLOSING DELIVERY BY SELLERS. Sellers shall have delivered, or be
standing ready to deliver to Buyer at Closing:
(a) the certificates representing the Shares and stock powers
executed and dated the Closing Date;
(b) copies of the certificate of incorporation of each of the
Purchased Companies, certified by the secretary of state of its jurisdiction of
incorporation, and copies of bylaws of each of the Purchased Companies,
certified by an officer of each of the Purchased Companies;
(c) reasonably current good standing certificate (or
equivalent document) for each of the Purchased Companies issued by the secretary
of state of its jurisdiction of incorporation and in each state in which any of
the Purchased Companies is qualified to do business as a foreign corporation;
(d) the certificate of an officer of the Company as
contemplated by Section 1.2(a) setting forth in sufficient detail reasonably
acceptable to the Buyer the Employee Change of Control Payments;
(e) resignations from all directors of the Purchased
Companies;
(f) releases in the form of EXHIBIT B between each Seller and
each officer and director of each Purchased Company, on the one hand, and such
Purchased Company, on the other hand, releasing each other from all claims by
the other; and
(g) a duly executed copy of the Escrow Agreement.
7.3 CONSENTS. Each of the Third Party Consents and the other consents
identified in Schedule 4.4 must have been obtained and must be in full force and
effect.
7.4 NO LITIGATION. No preliminary or permanent injunction or other
order of any Governmental Entity shall be in effect or threatened that prevents
the consummation of the transactions contemplated by this Agreement. No suit,
action, claim, proceeding or investigation before any Governmental Entity shall
have been commenced or threatened by any Person (other than Buyer or its
Affiliates) (i) seeking to prevent the sale of the Shares or asserting that the
sale of all or a portion of the Shares would be unlawful, or (ii) that may have
the effect of preventing, delaying, making illegal or otherwise interfering with
the sale of the Shares.
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ARTICLE VIII
SELLERS' CONDITIONS
The obligation of Sellers to transfer the Shares as contemplated hereby
is, at the option of Sellers, subject to the satisfaction on or before the
Closing Date of the conditions set forth below, any of which may be waived by
Sellers in writing.
8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and
warranties of Buyer contained in ARTICLE V of this Agreement shall be true and
correct in all material respects on and as of the Closing Date (other than those
representations and warranties that address matters only as of a particular date
which shall remain true and correct in all material respects as of such date)
and each and all of the agreements and covenants of Buyer to be performed or
complied with by it on or before the Closing Date pursuant to this Agreement
shall have been performed or complied with in all material respects.
8.2 CLOSING DELIVERY BY BUYER. Buyer shall have delivered, or be
standing by ready to deliver to Seller at Closing:
(a) the Demand Note as contemplated by ARTICLE I;
(b) a duly executed copy of the Security Agreement;
(c) a certificate of the Secretary of the Buyer certifying as
to the certificate of incorporation and bylaws of the Buyer and resolutions of
the Board of Directors of Buyer relating to this transaction; and
(d) a duly executed copy of the Escrow Agreement, together
with evidence that the Escrow Agreement has been deposited with the Escrow
Agent.
8.3 NO LITIGATION. No preliminary or permanent injunction or other
order of any Governmental Entity shall be in effect or threatened that prevents
the consummation of the transactions contemplated by this Agreement. No suit,
action, claim, proceeding or investigation before any Governmental Entity shall
have been commenced or threatened by any Person (other than Seller or any of its
Affiliates) asserting that the sale of all or a portion of the Shares would be
unlawful.
ARTICLE IX
NATURE OF STATEMENTS AND SURVIVAL OF COVENANTS,
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
9.1 SURVIVAL. The representations and warranties of the parties
contained in this Agreement or in any certificate or other writing delivered
pursuant hereto or in connection herewith will survive the Closing; provided,
however, that none of the representations or warranties of the Sellers or the
Company contained in this Agreement or in any certificate or other writing
delivered pursuant hereto or in connection herewith shall survive the Closing
except that (i) the representations and warranties contained in Sections 3.1,
3.2, 4.1, 4.9(b), 4.21 (but only to the extent of a Third-Party Claim relating
to the Semitropic Field or the McDonald Anticline Field) and 4.23(b) shall
terminate on the first anniversary of Closing, (ii) the representations and
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warranties contained in Section 4.8 shall terminate on the second anniversary of
Closing and (iii) the representations and warranties contained in Sections 3.5,
4.2 and 4.5(b) shall survive the Closing indefinitely. Notwithstanding the
immediately preceding sentence, any representation or warranty in respect of
which indemnity may be sought under this Agreement will survive the time at
which it would otherwise terminate pursuant to the immediately preceding
sentence to the extent, but only to the extent, that written notice with
reasonable specificity identifying the inaccuracy or breach thereof giving rise
to such right of indemnity shall have been given to the party against whom such
indemnity may be sought prior to such time; provided, however, that the
applicable representation or warranty will survive only with respect to the
particular inaccuracy or breach specified in such written notice. All
pre-closing covenants and any liability therefor shall terminate as of the
Closing. The post-closing covenants and agreements of Buyer and Sellers
contained in this Agreement that are to be perfonned following the Closing shall
survive Closing for (a) the time period(s) set forth in the respective Sections
contained in this Agreement, or (b) if no time period is specified, without any
contractual limitation on the period of survival.
9.2 INDEMNIFICATION.
(a) Sellers will indemnify, defend and hold harmless Buyer
against Damages incurred or suffered as a result of or arising out of the
failure of any representation or warranty made in Sections 3.1, 3.2, 3.5, 4.1,
4.2, 4.5(b), 4.8, 4.9(b), 4.21 (but only to the extent of a Third Party Claim
relating to the Semitropic Field or the McDonald Anticline Field) and 4.23(b) to
be true and correct as of the Closing Date; PROVIDED, HOWEVER, that Sellers will
not be liable under this SECTION 9.2 unless the aggregate amount of Damages
exceeds $100,000 and then only to the extent of such Damages exceeding such
amount and; PROVIDED FURTHER, HOWEVER, that such obligation of Sellers shall
only apply to the extent that a claim is made in accordance with SECTION 9.3
within the time period, if any, provided in SECTION 9.1.
(b) Notwithstanding anything to the contrary, Sellers'
aggregate liability under this Agreement including and under this SECTION 9.2
shall not exceed, in the aggregate, an amount equal to $1,000,000 for any and
all claims made hereunder and Buyer's sole recourse to such amount shall be
pursuant to the funds held under the Escrow Agreement; PROVIDED, HOWEVER, that
Sellers' aggregate liability under this Agreement including and under this
SECTION 9.2 with respect to indemnity claims made with respect to SECTIONS 3.5,
4.2, and 4.5(b) shall not exceed, in the aggregate, an amount equal to the
Purchase Price (and, with respect to all Sellers, other than Warburg, Xxxxxx
Equity Partners, L.P. and WP EEX LLC, shall not exceed the proceeds received by
such Seller hereunder); and PROVIDED FURTHER, HOWEVER, that Buyer's recourse
shall not be limited solely to funds held under the Escrow Agreement with
respect to indemnity claims made with respect to SECTIONS 3.5, 4.2, and 4.5(b)
and, to the extent a claim is made after the first anniversary of the Closing
and prior to the second anniversary of the Closing, SECTION 4.8;
(c) Buyer will indemnify and hold harmless each Seller, its
partners, members, directors and officers and each person, if any, who controls
such Seller, against any losses, claims, damages or liabilities, joint or
several, to which such Seller may become subject, under any securities laws or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon or relate in any manner to
Buyer's financing of the transactions contemplated herein, including without
21
limitation an untrue statement or alleged untrue statement of a material fact
contained in any document utilized in such financing or any omission or alleged
omission of a material fact in any such document, and will reimburse each Seller
for any legal or other expenses reasonably incurred by such Seller in connection
with defending any such action or claim as such expenses are incurred.
Furthermore, Buyer acknowledges and agrees that none of the Sellers are making
any representation or warranty regarding any information included or omitted
from any such document.
(d) Payments of all amounts owing by an Indemnifying Party
under this Article IX shall take into account and be appropriately reduced by
amounts received or receivable by the Indemnified Party under insurance (but
excluding any amounts applied to Purchaser's self-insured retention),
indemnification, contribution, reimbursement or similar contracts, and by any
cash tax benefit realized or to be realized by the Indemnified Party.
(e) Buyer may only look to the Escrow Amount for payment or
otherwise under this Agreement including under this Article IX. Buyer hereby
acknowledges none of the Sellers shall have any personal liability or obligation
under this Article IX or otherwise under or in connection with this Agreement
above and beyond their interest in the Escrow Amount.
9.3 PROCEDURES.
(a) If any Person who or which is entitled to seek
indemnification under SECTION 9.2 (an "INDEMNIFIED PARTY") receives notice of
the assertion or commencement of any Third-Party Claim against such Indemnified
Party with respect to which the Person against whom or which such
indemnification is being sought (an "INDEMNIFYING PARTY") is obligated to
provide indemnification under this Agreement, the Indemnified Party will give
such Indemnifying Party reasonably prompt written notice thereof, but in any
event not later than 30 days after receipt of such written notice of such
Third-Party Claim. Such notice by the Indemnified Party will describe the
Third-Party Claim in reasonable detail, will include copies of all available
material written evidence thereof and will indicate the estimated amount, if
reasonably estimable, of the Damages that have been or may be sustained by the
Indemnified Party. The Indemnifying Party will have the right to participate in,
or, by giving written notice to the Indemnified Party, to assume, the defense of
any Third-Party Claim at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel (which will be reasonably satisfactory to the
Indemnified Party), and the Indemnified Party will cooperate in good faith in
such defense.
(b) If, within 30 days after giving notice of a Third-Party
Claim to an Indemnifying Party pursuant to SECTION 9.3(a), an Indemnified Party
receives written notice from the Indemnifying Party that the Indemnifying Party
has elected to assume the defense of such Third-Party Claim as provided in the
last sentence of SECTION 9.3(a), the Indemnifying Party will not be liable for
any legal expenses subsequently incurred by the Indemnified Party in connection
with the defense thereof; PROVIDED, HOWEVER, that if the Indemnifying Party
fails to take reasonable steps necessary to defend diligently such Third-Party
Claim within twenty days after receiving written notice from the Indemnified
Party, the Indemnified Party may assume its own defense, and the Indemnifying
Party will be liable for all reasonable costs and expenses paid or incurred in
connection therewith (if the Indemnifying Party is obligated to provide
indemnification under this Agreement with respect to the underlying Third-Party
22
Claim); PROVIDED, HOWEVER, that the Indemnifying Party shall not be liable for
the costs and expenses of more than one counsel for all Indemnified Parties in
any one jurisdiction. Without the prior written consent of the Indemnified
Party, the Indemnifying Party will not enter into any settlement of any
Third-Party Claim which would lead to liability or create any financial or other
obligation on the part of the Indemnified Party for which the Indemnified Party
is not entitled to indemnification hereunder, or which provides for injunctive
or other non-monetary relief applicable to the Indemnified Party, or does not
include an unconditional release of all Indemnified Parties. If a firm offer is
made to settle a Third-Party Claim without leading to liability or the creation
of a financial or other obligation on the part of the Indemnified Party for
which the Indemnified Party is not entitled to indemnification hereunder and the
Indemnifying Party desires to accept and agree to such offer, the Indemnifying
Party will give written notice to the Indemnified Party to that effect. If the
Indemnified Party fails to consent to such firm offer within ten days after its
receipt of such notice, the Indemnified Party may continue to contest or defend
such Third-Party Claim and, in such event, the maximum liability of the
Indemnifying Party as to such Third-Party Claim will not exceed the amount of
such settlement offer. The Indemnified Party will provide the Indemnifying Party
with reasonable access during normal business hours to books, records and
employees of the Indemnified Party necessary or desirable in connection with the
Indemnifying Party's defense of any Third-Party Claim which is the subject of a
claim for indemnification by an Indemnified Party hereunder. If the Sellers
elect to assume the defense as Indemnifying Parties of a Third-Party Claim, then
the Sellers shall be entitle to pay the applicable defense costs out of the
Escrow Amount, or if they pay such costs then to be reimbursed for such costs,
and the Buyer shall execute with Sellers such direction to the Escrow Agent to
effect such result.
(c) Any claim by an Indemnified Party on account of Damages
which does not result from a Third-Party Claim (a "DIRECT CLAIM") will be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof. Such notice by the Indemnified Party will describe the Direct Claim in
reasonable detail, will include copies of all available material written
evidence thereof and will indicate the estimated amount, if reasonably
practicable, of Damages that has been or may be sustained by the Indemnified
Party. The Indemnifying Party will have a period of 30 days within which to
respond in writing to such Direct Claim. If the Indemnifying Party does not so
respond within such 30 day period, the Indemnifying Party will be deemed to have
rejected such claim, in which event the Indemnified Party will be free to pursue
such remedies as may be available to the Indemnified Party on the terms and
subject to the provisions of this Agreement.
(d) A failure to give timely notice or to include any
specified information in any notice as provided in SECTION 9.3(a), 9.3(b) or
9.3(c) (in contrast to the notice deadlines in SECTION 9.1 and SECTION 9.2) will
not affect the rights or obligations of any party hereunder, except and only to
the extent that, as a result of such failure, any party which was entitled to
receive such notice was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise materially prejudiced as a result
of such failure.
9.4 NO CONSEQUENTIAL DAMAGES. Notwithstanding any other provision of
this Agreement, no Indemnified Party shall be entitled to any consequential
damages including exemplary, punitive, incidental, indirect or special damages
(collectively "EXCLUDED DAMAGES") suffered by an Indemnified Party except to the
extent such Excluded Damages are the subject of a Third-Party Claim.
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9.5 EXCLUSIVE REMEDY. The indemnities provided for in this Article IX
shall be the sole and exclusive remedy of the Buyer after the Closing with
respect to, arising out of, or resulting from this Agreement (including for any
inaccuracy or breach of any representation or warranty); Sellers have no
personal liability with respect to the indemnities and Buyer's sole recourse
with respect to such indemnities shall be limited to funds held under the Escrow
Agreement other than with respect to indemnity claims made with respect to
SECTIONS 3.5, 4.2, 4.5(b) and 448; provided, however, that the foregoing shall
not limit the right of a party to seek any available remedy for actual fraud
involving a knowing and intentional material misrepresentation. Buyer covenants
and agrees that following the Closing it shall not seek or assert any other
remedy hereunder. Each party specifically waives and releases the other parties
from any liability and any rights it might otherwise have pursuant to law other
than pursuant to the terms of this Agreement and other than any liability
arising from actual fraud involving a knowing and intentional material
misrepresentation.
9.6 MITIGATION OF DAMAGES/MINIMIZATION OF CLAIM. Buyer and Sellers
agree to use reasonable commercial efforts to (a) resolve all Third Party Claims
and Direct Claims for which indemnification is sought under this Article IX on
the lowest cost basis that complies with the requirements of applicable Laws and
(b) mitigate the costs and expenses as well as any Damages arising out of any
Third Party Claim or Direct Claim.
9.7 DISTRIBUTION OF ESCROW AMOUNT (a) If a Seller does not timely
dispute as provided herein a Direct Claim or a Third Party Claim for which
Sellers are alleged by Buyer to be responsible (a "Claim"), the Sellers and the
Buyer shall promptly jointly instruct the Escrow Agent to disburse to Buyer the
amount requested by Buyer in the notice of Claim with respect to liquidated
claims, or with respect to a Claim that is not yet liquidated or resolved, the
amount reasonably estimated by Buyer to be necessary to reimburse Buyer for such
Claim shall be deemed set aside within the Escrow Amount and shall not be
disbursed until such Claim is liquidated or resolved. If the Sellers timely
dispute the Claim, the Escrow Agent shall not disburse any of the Escrow Amount
with respect to the Claim unless and until it receives, and in accordance with,
joint instructions from Buyer and the Sellers or a final and binding award from
a court of competent jurisdiction If a Third Party Claim is asserted by Buyer
and if the Sellers elect to assume the defense thereof, Buyer and Sellers shall
execute joint instructions instructing the Escrow Agent to pay out of Escrow
Amounts the legal fees incurred in connection with such defense.
(b) Upon the expiration of fifteen (15) days from and after
the first anniversary of Closing, the Buyer and the Sellers shall promptly
jointly instruct the Escrow Agent to make a disbursement of the Escrow Amount to
the Sellers in the percentage set forth on Schedule 1.2(a) and in an aggregate
amount equal to all of the Escrow Amount remaining on such date less the amount
of any properly asserted Claims pending on such date. As such pending Claims are
resolved, any Escrow Amounts not reasonably expected to be required to reimburse
Buyer for amounts hereunder resulting from or arising out of the remaining
pending Claims shall be disbursed to the Sellers. The Buyer and the Sellers
shall promptly jointly instruct the Escrow Agent to distribute such funds to the
24
Sellers in accordance with the terms hereof. If a pending Claim is liquidated or
resolved such that Buyer becomes entitled to reimbursement, then the Sellers and
Buyer shall promptly jointly instruct the Escrow Agent to distribute Escrow
Amounts to Buyer in such amount as necessary to reimburse Buyer.
(c) The Buyer and Sellers agree to provide joint instructions
as contemplated herein and in a prompt manner. If either Buyer or the Sellers
fail to promptly give written instructions to the Escrow Agent as contemplated
herein, the party entitled to Escrow Amounts under this SECTION 9.7 shall be
entitled to seek a court order of a court of competent jurisdiction instructing
the Escrow Agent to make the distribution contemplated herein. Any court
granting such an order shall also be entitled to assess costs against the party
that failed to give such instructions promptly and to award interest on the
subject funds if the court determines that an award of interest would be
appropriate.
(d) Notwithstanding anything to the contrary herein, if any
action is required or permitted to be taken by the Sellers after the Closing
with respect to or that relates to the Escrow Agreement or Escrow Amount,
Warburg Pincus Equity Partners, L.P. may, but shall not be required to, act on
behalf of all Sellers, and all the Sellers acknowledge and agree that Warburg
Pincus Equity Partners, L.P. is authorized on their behalf to take any such
action.
ARTICLE X
TERMINATION
10.1 TERMINATION. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned prior to the Closing by:
(a) mutual consent of Sellers and Buyer;
(b) Buyer, if the conditions set forth in ARTICLE VII have not
been satisfied or waived by Buyer on or before the Scheduled Closing Date;
(c) Sellers, if the conditions precedent set forth in ARTICLE
VIII have not been satisfied or waived by Sellers on or before the Scheduled
Closing Date;
(d) Sellers or Buyer if the Closing shall not have occurred on
or before the Scheduled Closing Date;
provided, however, that no party shall have the right to terminate this
Agreement pursuant to clause (b), (c) or (d) above if such party is at such time
in material breach of any provision of this Agreement; provided, further, that
Sellers shall not be deemed in breach of any representations or warranties under
this Agreement for the purposes of the foregoing if the condition set forth in
SECTION 7.1 is capable of being satisfied.
10.2 LIABILITY UPON TERMINATION. If the obligation to close the
transactions contemplated by this Agreement is terminated pursuant to any
provision of SECTION 10.1 hereof, then, except as provided in SECTION 1.2, and
except for the provisions of SECTION 6.1, SECTION 10.2 and SECTION 12.11, this
Agreement shall forthwith become void and the parties shall have no liability or
obligation hereunder except and to the extent such termination results from the
knowing and willful breach by a party of any of its covenants or agreements
hereunder.
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ARTICLE XI
DEFINITIONS OF CERTAIN TERMS
In addition to terms defined elsewhere in this Agreement, the following
terms shall have the meanings assigned to them herein, unless the context
otherwise indicates, both for purposes of this Agreement and all Exhibits hereto
and any Schedule:
"AFFILIATE" shall mean, with respect to any specified Person, any
Person that directly or indirectly controls, is controlled by or is under common
control with such specified Person. For the purpose of the immediately preceding
sentence, the term "CONTROL" means the power to direct or cause the direction of
the management of such Person, whether through the ownership of voting
securities or by contract or agency or otherwise. For purposes of this Agreement
and notwithstanding anything herein to the contrary, prior to Closing, the
Company shall be considered Affiliates of Sellers, and from and after Closing,
the Company shall be considered Affiliates of Buyer and not Sellers.
"AGREEMENT" shall have the meaning given such term in the introduction
to the Agreement.
"ASSETS" shall mean all assets owned by the Purchased Companies,
including, but not limited to, all of the Purchased Companies' rights, titles
and interests in, to and under lands, leases and xxxxx, including all of the
Purchased Companies' working interests, operating rights, mineral interests,
overriding royalty interests, reversionary interests, net profits interests, net
revenue interests, and any other similar or dissimilar interests, the undivided
interests therein and the underlying oil, gas and mineral leasehold estates
associated therewith, together with rights in any pooled or unitized acreage by
virtue of any lands covered by the Leases being a part thereof, including, but
not limited to, all of the Purchased Companies' rights, titles and interests in,
to, under and derived from:
(a) their respective oil, gas and mineral leases and other
mineral leases and the leasehold estates created thereby (collectively, the
"LEASES"), together with corresponding interests in and to all the property and
rights incident thereto, including all rights in any pooled or unitized acreage
by virtue of the Leases being a part thereof, all production from the pool or
unit allocated to any such Leases, and all interests in any xxxxx within the
pool or unit associated with the Leases;
(b) the equipment and other personal and mixed property
(including liquid hydrocarbon inventory in tanks), improvements, easements,
rights-of-way, permits, licenses, servitudes and any other estates situated in
or upon, or used or useful, or held for future use in connection with the
exploration, development and production of oil, gas and other minerals, sulfur,
associated gas from any of the Leases or the treatment, storage or
transportation of such substances therefrom, including xxxxx, casing, tubing,
derricks, tanks, batteries, boilers, separators, rods, dehydrators, compressors,
pumps, flow lines, water lines, gas lines, buildings, field offices, fixtures,
machinery, gas production, gathering or processing equipment, systems or
pipelines, gas marketing systems or pipelines, power lines, telephone and
26
telegraph lines, and all other fixtures and improvements, currently located on
the Leases or lands pooled therewith or located thereon as of the Closing Date;
(c) all Basic Documents;
(d) all easements, rights-of-way, licenses, authorizations,
permits, and similar rights and interests applicable to, or used or useful in
connection with, any or all of the above-described interests;
(e) all Records;
(f) all oil, gas and associated liquid and gaseous
hydrocarbons stored upon or produced from the Leases from and after the Closing
Date;
(g) all warehouse stock and other material and equipment held
for or related to operations on the Assets or acreage pooled thereunder;
(h) salt water disposal systems associated with the Assets and
the operations thereon or on acreage pooled therewith; and
(i) all seismic, geological and geophysical data relating to
the Assets, if any.
"AUDITED BALANCE SHEET" shall have the meaning given such term in
SECTION 4.9.
"BASIC DOCUMENTS" shall mean all Leases; joint operating agreements;
oil, gas, liquids, casinghead gas and condensate purchase, sales, processing,
gathering, treatment, compression, and transportation agreements; farm-out or
farm-in agreements; joint venture, limited or general partnerships; dry hole,
bottom hole, acreage contribution, purchase and acquisition agreements; area of
mutual interest agreements; servicing contracts, easement and right-of-way
agreements; easements, rights-of-way, permits, licenses, servitudes or other
interests appertaining to the Leases; and all other executory contracts and
agreements relating to the Assets.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in New York, New York are authorized by Law
to close.
"BUYER" shall have the meaning given such term in the introduction to
this Agreement.
"BUYER SUB" shall have the meaning given such term in SECTION 12.2.
"BUYER'S REPRESENTATIVES" shall have the meaning given such term in
SECTION 2.1(a).
"CLOSING" shall have the meaning given such term in SECTION 1.1.
"CLOSING DATE" shall have the meaning given such term in SECTION 1.1.
"CODE" shall mean the Internal Revenue Code of 1986. as amended.
27
"COMMON SHARES" shall have the meaning given such term in the recitals
of this Agreement.
"COMMON STOCK" shall have the meaning given such term in SECTION 4.2.
"COMPANY" shall have the meaning given such term in the introduction to
this Agreement.
"DAMAGES" means any and all liabilities, damages and losses, and all
costs or expenses, including reasonable attorneys' and consultants' fees and
expenses incurred in respect of Third-Party Claims or claims between the parties
hereto but excluding special, incidental, indirect, consequential, punitive or
exemplary damages (unless such amount is asserted against or recovered from an
Indemnified Party pursuant to a claim by a Third Party).
"DEBT" means all obligations of the Company and its Subsidiaries, on a
consolidated basis, (a) to repay money borrowed, including all principal and
unpaid interest with respect thereto, (b) to pay money evidenced by term loans,
bonds, debentures, notes or similar instruments, (c) to pay the deferred
purchase price for property or services, (d) as lessee under capital leases, and
(e) all obligations of another individual or entity of the type listed in (a)
through (d), payment of which is guaranteed by the Company or its Subsidiaries
or secured by liens on the property of the Company or its Subsidiaries (with
respect to liens, to the extent of the value of the property pledged pursuant to
such liens if less than the amount of such obligations), provided, that "DEBT"
shall not include trade accounts payable incurred in the ordinary course of
business.
"DEFENSIBLE TITLE" shall mean (a) as to any Leases or Xxxxx, such title
held by the Purchased Companies that, subject to and except for the Permitted
Encumbrances: (i) entitles the Purchased Company to receive free of any adverse
claim not less than the "NET REVENUE INTEREST" set forth in EXHIBIT A for any
Well of all oil, gas and associated liquid and gaseous hydrocarbons produced,
saved and marketed from such Well; (ii) obligates the Purchased Company to bear
costs and expenses relating to the maintenance, development and operation of a
Well in an amount not greater than the "WORKING INTEREST" set forth in EXHIBIT A
with respect to such Well (unless there is a proportionate increase in the
Purchased Company's "NET REVENUE INTEREST" for such Well); and (iii) is free and
clear of Encumbrances and (b) as to all other Assets other than the Leases and
Xxxxx such title that, subject to and except for the Permitted Encumbrances,
does not materially restrict the ability of Company to use such property as
currently intended.
"DEMAND NOTE" shall have the meaning given such term in SECTION 1.2(g).
"DIRECT CLAIM" shall have the meaning given such term in SECTION
9.3(c).
"DISPUTE" shall have the meaning given such term in SECTION 12.13.
"XXXXXXX MONEY" shall have the meaning given such term in SECTION
1.2(b).
"EMPLOYEE CHANGE OF CONTROL PAYMENTS" means the payments provided for
in the Change of Control and Severance Plan referenced in SCHEDULE 4.23 and any
bonus payments payable to employees of the Company at Closing as specified in
the officer certificate contemplated by Section 1.2(a).
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"EMPLOYEE PLANS" shall mean any bonus, deferred compensation, incentive
compensation, stock purchase, stock option, employment, consulting, severance or
termination pay, hospitalization or other medical, life or other insurance,
supplemental unemployment benefit, profit sharing, pension or retirement plan,
program, agreement or arrangement, or any other benefit plan of any kind
whatsoever that is provided to employees or former employees of the Company, or
their beneficiaries, and each other "EMPLOYEE BENEFIT PLAN" as defined in
Section 3(3) of ERISA, whether formal or informal, written or oral and whether
contributed to, or required to be contributed to, by the Company.
"ENCUMBRANCES" shall mean pledges, liens, claims, charges, mortgages,
security interests or other legal or equitable encumbrances, limitations or
restrictions of any nature whatsoever.
"ENVIRONMENTAL Claims" shall mean Losses attributable to natural
resource damages, environmental remediation and restoration costs, or fines and
penalties under Environmental Laws, including responsibilities under CERCLA for
response costs incurred as a result of hazardous substances generated from the
Assets.
"ENVIRONMENTAL DEFECT" shall mean a condition with respect to the
Assets that constitutes a violation of Environmental Law; provided that an
Environmental Defect shall not be deemed to exist for the purposes of this
Agreement unless the estimated Lowest Cost Response for remedying such
Environmental Defect exceeds $50,000.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to (a) the control of
any potential pollutant or protection of the air, water or land, (b) solid,
gaseous or liquid waste generation, handling, treatment, storage, disposal or
transportation and (c) the regulation of or exposure to hazardous, toxic or
other substances alleged to be harmful.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ESCROW AGENT" shall have the meaning set forth in SECTION 1.2 (b).
"ESCROW AGREEMENT" shall mean the Escrow Agreement entered into among
Seller, Buyer and Escrow Agent of even date herewith.
"EXCLUDED DAMAGES" shall have the meaning given such term in SECTION
9.4.
"GAAP" means United States generally accepted accounting principles.
"GOTLAND" shall have the meaning given such term in SECTION 4.1.
"GOVERNMENTAL ENTITY" shall mean any national, state or local
government or any subdivision thereof or any arbitrator, court, administrative
or regulatory agency, commission, department, board or bureau or body or other
government or authority or instrumentality or any entity or Person exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
29
"XXXXXX" shall mean hedging instruments or derivative instruments of
the Purchased Companies that relate to or are intended to reduce or eliminate
the risk of fluctuations in the price of commodities, including hydrocarbons, or
securities to which any of the Purchased Company is bound.
"INDEMNIFIED PARTY" shall have the meaning given such term in SECTION
9.3.
"INDEMNIFYING PARTY" shall have the meaning given such term in SECTION
9.3.
"INVASIVE ACTIVITY" shall mean any sampling, boring, drilling, probing,
digging or other invasive investigative activity.
"KNOWLEDGE" shall mean, with respect to the Company, the actual
knowledge (without investigation) of one or more of the following individuals:
Xxxx Xxxxxxxxx and Xxxxxx Xxxxxxxxx.
"LAW" shall mean any applicable federal, state, municipal, local or
foreign statute, law, ordinance, rule, regulation, order, judgment, writ,
injunction or decree enacted, adopted, issued or promulgated by any Governmental
Entity.
"LEASES" shall have the meaning given such term in the definition of
Assets in this ARTICLE XI.
"LOWEST COST RESPONSE" shall mean the response required or allowed
under Environmental Laws that addresses the condition present at the lowest cost
(considered as a whole taking into consideration any material negative impact
such response may have on the operations of the relevant assets and any
potential material additional costs or liabilities that may likely arise a
result of such response) as compared to any other response that is consistent
with Environmental Laws.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the
business, operations, assets, or properties of the Company and its Subsidiaries,
taken as a whole, which would have a lasting and material negative impact on the
value of the Company and its Subsidiaries, taken as a whole; provided, however,
that PROVIDED, HOWEVER, that in no event shall any of the following constitute a
Material Adverse Effect: (1) any change or effect resulting from changes in
general economic, regulatory or political conditions, conditions in the United
States or worldwide capital markets; (2) any change or effect that affects the
oil and gas exploration and development industry generally (including changes in
commodity prices, general market prices and regulatory changes affecting the oil
and gas industry generally); (3) any effect, change, event, occurrence or
circumstance relating to fluctuations in the value of currencies; (4) the
outbreak or escalation of hostilities involving the United States, the
declaration by the United States of a national emergency or war or the
occurrence of any other calamity or crisis, including acts of terrorism; (5) the
disclosure of the fact that Buyer of its Affiliates is the prospective acquirer
of the Company; (6) the announcement or pendency of the transactions
contemplated by this Agreement, including any termination of, reduction in or
similar negative impact on relationships, contractual or otherwise, with any
customers, suppliers, distributors, partners or employees of the Purchased
Companies due to the announcement or pendency of the transactions contemplated
by this Agreement; (7) any change in accounting requirements or principles
30
imposed upon the Purchased Companies or their respective businesses or any
change in law, or the interpretation thereof; (8) actions taken by Buyer or any
of its Affiliates; or (9) any effect, change, event, occurrence or circumstance
resulting from any action taken by any of the Purchased Companies or the Sellers
with Buyer's consent or from compliance by the Sellers or the Purchased
Companies with the terms of this Agreement.
"MATERIAL CONTRACTS" shall have the meaning given such tern in SECTION
4.10(a).
"NORM" shall have the meaning given such term in SECTION 2.2.
"ORGANIZATIONAL DOCUMENTS" means (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of the foregoing.
"PERMITTED ENCUMBRANCES" shall mean any or all of the following: (a)
Encumbrances that arise under operating agreements to secure payment of amounts
not yet delinquent and are of a type and nature customary in the oil and gas
industry; (b) Encumbrances that arise as a result of pooling and unitization
agreements, declarations, orders, or Laws to secure payment of amounts not yet
delinquent; (c) Encumbrances securing payments to mechanics and materialmen or
securing payment of taxes or assessments that are, in either case, not yet
delinquent; (d) lessor's royalties, overriding royalties, division orders,
reversionary interests and other similar burdens that do not operate to reduce
the "NET REVENUE INTEREST" of the Company in and to any Well to less than the
amount set forth in EXHIBIT A or such Well or increase the "WORKING INTEREST" of
the Company in and to any Well to greater than the amount set forth in EXHIBIT A
for such Well (without a corresponding increase in the "NET REVENUE INTEREST"
for such Well); (e) easements, rights-of-way, servitudes, permits, surface
leases, surface use restrictions and other surface uses and impediments on, over
or in respect of any of the Assets, provided that they do not interfere
materially with the ownership, operation, value, or use of the property
affected; (f) rights reserved to or vested in any Governmental Entity, to
control or regulate any of the Assets in any manner, and all applicable Laws, of
any Governmental Entity; (g) production sales contracts; division orders;
contracts for sale, purchase, exchange, refining or processing of hydrocarbons;
farm-out or farm-in agreements; participation agreements; unitization and
pooling designations, declarations, orders and agreements; operating agreements;
agreements of development; area of mutual interest agreements; gas balancing and
deferred production agreements; plant agreements; production handling
agreements; processing agreements; pipeline, gathering and transportation
agreements; injection, repressuring and recycling agreements; carbon dioxide
purchase or sale agreements; and salt water or other disposal agreements,
including the Material Contracts, (in each case) to the extent the same (i) are
ordinary and customary to the oil, gas and other mineral exploration,
development, processing or extraction business and (ii) do not operate to reduce
the "NET REVENUE INTEREST" of the Company in and to any Well to less than the
amount set forth in EXHIBIT A for such Well or increase the "WORKING INTEREST"
of the Purchased Companies in and to any Well to greater than the amount set
forth in EXHIBIT A for such Well (without a corresponding increase in the "NET
REVENUE INTEREST" for such Well); (h) preferential purchase rights and transfer
31
restrictions; and (i) all Basic Documents and other matters set forth in the
exhibits and schedules to this Agreement.
"PERSON" shall mean a corporation, an association, a partnership, an
organization, a business, an individual or a Governmental Entity.
"PREFERRED SHARES" shall have the meaning given such term in the
recitals to this Agreement.
"PREFERRED STOCK" shall have the meaning given such term in SECTION
4.2.
"PURCHASED COMPANIES" shall mean, collectively, the Company and its
Subsidiaries.
"PURCHASE PRICE" shall have the meaning given such term in SECTION
1.2(a).
"RECORDS" shall include, with respect to the Purchased Companies, all
lease files, land files, well files, gas and oil sales contract files, gas
processing files, accounting records and information relating to the production
from and expenses attributable to the Assets, abstracts, title opinions, well
logs, cores, production data, and all other books, files and records,
information, and data (including engineering, geophysical and geological data),
and all rights thereto, of the Purchased Companies insofar as the same are
related to any of the Assets, to the extent the transfer thereof is not
prohibited by existing contractual obligations with Third Parties.
"RULES" shall have the meaning given such term in SECTION 12.13.
"SCHEDULED CLOSING DATE" shall have the meaning given such term in
SECTION 1.2(e).
"SECURITY AGREEMENT" shall have the meaning given such term in SECTION
1.2(g).
"SELLERS" shall have the meaning given such terms in the recitals to
this Agreement.
"SELLER TRANSACTIONAL EXPENSES" shall have the meaning set forth in
SECTION 12.11.
"SHARES" shall have the meaning given such term in the recitals to this
Agreement.
"SOLVENT" means, with respect to any Person on any date of
determination, that on such date (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including, without
limitation, contingent liabilities of such Person, (b) the present fair saleable
value of the assets of such Person is not less than the amount that will be
required to pay its debts as they become absolute and matured, taking into
account the possibility of refinancing such obligations and selling assets, (c)
such Person does not intend to, and does not believe that it will, incur debts
or liabilities beyond such Person's ability to pay such debts as they mature
taking into account the possibility of refinancing such obligations and selling
assets and (d) such Person is not engaged in business or a transaction, and does
not intend to engage in business or a transaction, for which such Person's
property remaining after such transaction would constitute unreasonably small
capital.
32
"SUBSIDIARIES" shall mean, with respect to any Person, any corporation,
partnership, limited liability company or other entity of which a majority of
the shares of capital stock or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other similar managing
body of such corporation, partnership, limited liability company or other entity
are owned directly or indirectly by such Person.
"TAXES" shall mean any federal, state, local, or foreign income, gross
receipts, income, profits, franchise, withholding, employment, sales, use,
transfer, registration, value added, alternative or add-on minimum, social
security, disability, stamp, occupation and similar taxes and assessments, and
ad valorem, property, production, excise, franchise, capital severance, windfall
profit and similar taxes and assessments based upon or measured by the ownership
or property or the production or removal of hydrocarbons or the receipt of
proceeds therefrom, or other tax of any kind whatsoever, together with any
interest, additions to tax, and penalties with respect thereto, whether or not
disputed.
"TAX RETURN" shall mean any federal, state, local, or foreign return,
declaration, report, claim for refund or information return or statement
relating to Taxes, including any schedule or attachment thereto, including any
amendment thereof.
"THIRD PARTY" shall mean any Person other than a party to this
Agreement or an Affiliate of a party to this Agreement.
"THIRD-PARTY CLAIM" means any claim, demand, action, suit or proceeding
made or brought by any Person who or which is not a party to this Agreement or
who or which is not an Affiliate of any party to this Agreement.
"THIRD PARTY CONSENTS" shall have the meaning given such term in
SECTION 3.3.
"TITLE DEFECT" shall mean any encumbrance, encroachment, irregularity,
or defect in the Purchased Companies' title to the Assets that alone or in
combination with other defects in title renders the Purchased Companies' title
to the Assets or part thereof to be less than Defensible Title; provided that a
Title Defect shall not be deemed to exist for the purposes of this Agreement
unless the estimated cost to remedy such Title Defect exceeds $50,000.
"XXXXX" shall mean the producing xxxxx included in the Assets that are
set forth in EXHIBIT A.
ARTICLE XII
MISCELLANEOUS
12.1 NOTICES. All notices, requests, consents, directions and other
instruments and communications required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered (a) in person, (b) by courier, (c) by overnight delivery service with
proof of delivery, or (d) by prepaid registered or certified first-class mail,
return receipt requested, in each such case addressed to the respective party at
the address set forth below:
33
IF TO SELLERS, TO THE ADDRESS IDENTIFIED ON THE SIGNATURE PAGE HERETO,
AND IF TO A SELLER THAT IS AN ENTITY THEN TO THE ATTENTION OF THE GENERAL
COUNSEL OF SUCH ENTITY.
IF TO BUYER, TO:
Cameros Acquisition Corp.
0000 Xxxx Xxxx X Xxxxxx
Xxxx Xxxxx, Xxxxxxxxxx 00000
Attention: President
or to such other address or facsimile number and to the attention of such other
Person as either party may designate by written notice. Any notice mailed shall
be deemed to have been given and received on the fifth Business Day following
the day of mailing.
12.2 ASSIGNMENT AND SUCCESSORS. Except as specifically contemplated by
this Agreement, no party hereto shall assign this Agreement or any part hereof
without the prior written consent of the other party. This Agreement shall inure
to the benefit of, be binding upon and be enforceable by the parties hereto and
their respective successors and permitted assigns.
12.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Exhibits hereto,
and the Schedules hereto constitute the entire agreement and understanding
between the parties relating to the subject matter hereof and thereof and
supersede all prior representations, endorsements, premises, agreements,
memoranda communications, negotiations, discussions, understandings and
arrangements, whether oral, written or inferred, between the parties relating to
the subject matter hereof. This Agreement (or any provision hereof) may not be
modified, amended, rescinded, canceled, altered or supplemented, in whole or in
part, except upon the execution and delivery of a written instrument executed by
a duly authorized representative of the Company, Buyer and Sellers.
12.4 GOVERNING LAW. This Agreement shall be governed by, construed and
interpreted in accordance with the internal laws of the State of Delaware,
without regard to choice of law rules.
12.5 WAIVER. The waiver of any breach of any term or condition of this
Agreement shall not be deemed to constitute the waiver of any other breach of
the same or any other term or condition.
12.6 SEVERABILITY. Any provision hereof that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
12.7 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement shall
entitle any Person other than Buyer and Seller to any claims, remedy or right of
any kind.
34
12.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.9 HEADINGS. The headings of the Articles and Sections of this
Agreement have been inserted for convenience of reference only and shall in no
way restrict or otherwise modify any of the terms or provisions hereof or affect
in any way the meaning or interpretation of this Agreement.
12.10 NEGOTIATED TRANSACTION. The provisions of this Agreement were
negotiated by the parties hereto, and this Agreement shall be deemed to have
been drafted by all of the parties hereto.
12.11 EXPENSES. Notwithstanding anything to the contrary herein, any
and all expenses incurred by Sellers in connection with the preparation,
negotiation and execution of this Agreement, including without limitation, all
fees and expenses of counsel employed by Sellers and any investment banker fees
(collectively, the "SELLER TRANSACTIONAL EXPENSES"), shall be borne by the
Sellers; provided. however, that prior to the Closing, the Sellers may elect to
have the Company pay such Seller Transactional Expenses on or prior to the
Closing and, in such event, the Purchase Price shall be reduced by the amount of
the Seller Transactional Expenses. Any and all expenses incurred by Buyer in
connection with the preparation, negotiation and execution of this Agreement,
including without limitation, all fees and expenses of counsel employed by Buyer
shall be borne solely and entirely by Buyer.
12.12 TERMINATION OF CERTAIN AGREEMENTS. The Company and the Sellers
agree that effective immediately prior to the Closing (assuming the Closing
occurs), each of the Stockholders Agreement dated as of May 9, 2001 among the
Company and some or all of the Sellers, as amended, and the Contribution and
Subscription Agreement dated as of May 9, 2001 among the Company and some or all
of the Sellers, as amended, shall be terminated and shall have no further force
or effect without any further action and upon such termination each of the
Company and the Sellers waive any and all rights they may have thereunder.
12.13 ARBITRATION. Any and all claims, counterclaims, demands, causes
of action, disputes, controversies, and other matters in question arising out of
or relating to this Agreement, or the alleged breach hereof, between and among
the parties to this Agreement (hereafter a "DISPUTE") shall be finally resolved
by binding arbitration administered by the American Arbitration Association
("AAA") under the AAA Commercial Arbitration Rules (the "RULES") then in force,
to the extent such Rules are not inconsistent with the provisions of this
Agreement. It shall not be a breach of this SECTION 12.13 that any party to this
Agreement may seek injunctive relief or other equitable relief to preserve the
status quo pending arbitration.
(a) Either party to this Agreement may at any time submit
written notice of a Dispute by communicating said written notice to the other
party hereto Within 30 days after receipt of such notice by such other party,
Sellers and Purchaser shall each select an arbitrator. Such arbitrators shall
then mutually select a third arbitrator; if they are unable to agree upon such
selection within such 30 days, then either party may request the AAA appoint the
third arbitrator. The arbitrators shall be impartial and unrelated, directly or
indirectly, so far as rendering of services is concerned to either of the
35
parties or any of their respective Affiliates. The arbitration shall be
conducted in Houston, Texas. Any Dispute known or ascertainable by the parties
hereto at the time an arbitration is commenced pursuant to this Section must be
asserted in that arbitration or the parties agree that it shall be waived.
(b) Ten (10) days after the appointment of the third
arbitrator, each party shall submit to the arbitrators and to each other their
last, best offers in a single monetary amount. The arbitrators shall be limited
to awarding only one or the other of the two figures submitted, as augmented by
any award of fees and costs as provided in subsection (c) below.
(c) The arbitrators shall have the power to issue procedural
orders, make interim awards and hold evidentiary hearings, at which the parties
hereto may present evidence and arguments, be represented by counsel and conduct
cross-examination. The arbitrators shall render a written decision on the
Dispute presented as soon as practicable and in any event not more than 60 days
after the close of evidence and briefing. The decision of the arbitrators shall
be final and binding on the parties hereto, and judgment upon the decision may
be entered in any court having jurisdiction thereof. In their award, the
arbitrators shall designate a prevailing party and that party shall be awarded
its reasonable attorneys' fees, expert and non-expert witness costs and expenses
incurred in connection with the arbitration, as well as the fees and costs of
the arbitrators unless the arbitrators determine otherwise. The arbitrators
shall not decide the Dispute EX AQUEO ET XXXX or as AMIABLE COMPOSITEUR or by
reliance on any other doctrine or principle that would permit the arbitrators to
avoid the application of this Agreement and/or the governing law. The
arbitrators shall not have the power to add to, modify or change any of the
provisions of this Agreement.
12.14 ROLE OF XXXXXX & XXXXXX LLP. Buyer and each of the Sellers
acknowledge and agree that in connection with the matters related to this
Agreement, Xxxxxx & Xxxxxx LLP solely represented the Sellers affiliated with
Warburg Pincus & Co. and did not represent the Company or any other Seller. In
the event of any controversy related in any manner to this Agreement, Buyer and
the Sellers agree that Xxxxxx & Xxxxxx LLP shall be entitled to represent solely
the Sellers affiliated with Warburg Pincus & Co. in such controversy and all
such other parties waive any conflicts necessary for such result.
36
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
COMPANY:
CARNEROS ENERGY, INC.
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Chief Executive Officer
SELLERS:
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, Xxxxxx & Co., its managing member
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Partner
WP EEX LLC
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx Xxx
Xxxx, Xxx Xxxx 00000
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Partner
COSCO INVESTMENTS LP 00 Xxxx Xxxxxx, Xxxxx
000 Xxx Xxxx, Xxx Xxxx 00000
By: /s/ Xxxxxxx X. Suiha
-------------------------------------------------
Name: Xxxxxxx X. Suiha
Title: Pres.
37
/s/ Xxxx X. Xxxxxxxxx
-------------------------------------------------
XXXX X. XXXXXXXXX
0 Xxxxx Xxxxx Xxx
Xxxxxxxxxxx, Xxxxxxxxxx 00000
/s/ Xxxxxx Xxxxx
-------------------------------------------------
XXXXXX XXXXX
0000 Xxxxxxxxxx Xx.
Xxxxxxxxxxx, Xxxxxxxxxx 00000
/s/ Xxxxxxxxx Xxxxxxxx
-------------------------------------------------
XXXXXXXXX XXXXXXXX
0000 Xxxxxxxxxx
Xxxxx Xxxx, Xxxxx 00000
BUYER:
CARNEROS ACQUISITON CORP.
-------------------------
0000 Xxxx Xxxx X Xxxxxx
Xxxx Xxxxx, Xxxxxxxxxx 00000
By: /s/ Xxxxxx Xxxxx
---------------------------------------------
Name: Xxxxxx Xxxxx
--------------------------------------------
Title: President
-------------------------------------------
38
