EXHIBIT 10.2
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PURCHASE AND SALE AGREEMENT
Dated: April 30, 2000
By and Among
ENERGY CAPITAL INVESTMENT COMPANY PLC
and
ECIC CORPORATION
AS SELLER
and
AROC INC.
AS BUYER
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TABLE OF CONTENTS
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Page
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ARTICLE I
Definitions and References............................................................................... 1
Section 1.1. Certain Defined Terms................................................................ 1
Section 1.2. Certain Additional Defined Terms..................................................... 9
Section 1.3. References, Titles and Construction.................................................. 9
ARTICLE II
Interests to be Sold and Purchased....................................................................... 10
ARTICLE III
Purchase Price........................................................................................... 11
ARTICLE IV
Representations and Warranties of Seller................................................................. 11
Section 4.1. Organization and Existence........................................................... 11
Section 4.2. Authority Relative to This Agreement................................................. 11
Section 4.3. Valid and Binding Agreement.......................................................... 11
Section 4.4. Non-Contravention.................................................................... 11
Section 4.5. Approvals............................................................................ 12
Section 4.6. Pending Litigation................................................................... 12
Section 4.7. Basic Documents...................................................................... 12
Section 4.8. Commitments, Abandonments or Proposals.............................................. 13
Section 4.9. Production Sales Contracts........................................................... 13
Section 4.10. Plugging and Abandonment............................................................. 14
Section 4.11. Licenses and Permits................................................................. 14
Section 4.12. Area of Mutual Interest and Other Agreements; Tax Partnerships....................... 14
Section 4.13. Payment of Expenses.................................................................. 14
Section 4.14. Compliance with Laws................................................................. 14
Section 4.15. Partnerships; Title to Interests; Partnership Agreements............................. 14
Section 4.16. Physical Condition of Facilities..................................................... 15
Section 4.17. Environmental Matters................................................................ 15
Section 4.18. Production Data...................................................................... 16
Section 4.19. Ordinary Course Operations........................................................... 16
Section 4.20. Sale of Production................................................................... 16
Section 4.21. Brokerage Fees....................................................................... 16
Section 4.22. Bankruptcy........................................................................... 16
Section 4.23. Full Disclosure...................................................................... 16
Section 4.24. Disclaimer of Warranties............................................................. 17
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ARTICLE V
Representations and Warranties of Buyer.................................................................. 17
Section 5.1. Organization and Existence........................................................... 17
Section 5.2. Qualification........................................................................ 17
Section 5.3. Charter and Bylaws................................................................... 17
Section 5.4. Capitalization of Buyer.............................................................. 17
Section 5.5. Authority Relative to This Agreement................................................. 18
Section 5.6. No Conflict.......................................................................... 18
Section 5.7. Consents and Approvals, Licenses, Etc................................................ 19
Section 5.8. Subsidiaries......................................................................... 19
Section 5.9. Preferred Shares; Conversion Shares.................................................. 20
Section 5.10. Financial Statements................................................................. 20
Section 5.11. Securities Filings................................................................... 21
Section 5.12. Absence of Undisclosed Liabilities................................................... 21
Section 5.13. Absence of Certain Changes........................................................... 21
Section 5.14. Tax Matters.......................................................................... 22
Section 5.15. Environmental and Other Laws......................................................... 23
Section 5.16. Legal Proceedings.................................................................... 24
Section 5.17. Title to Properties; Permits; Licenses; Condition of Assets.......................... 24
Section 5.18. ERISA................................................................................ 25
Section 5.19. Agreements........................................................................... 26
Section 5.20. Labor Disputes and Acts of God....................................................... 28
Section 5.21. Insurance............................................................................ 28
Section 5.22. Offering of Securities............................................................... 28
Section 5.23. Government Regulation................................................................ 28
Section 5.24. Brokerage Fees....................................................................... 29
Section 5.25. Bankruptcy........................................................................... 29
Section 5.26. Nature of Company Assets............................................................. 29
Section 5.27. Full Disclosure...................................................................... 29
ARTICLE VI
Certain Covenants of Seller and Buyer Pending Closing................................................... 30
Section 6.1. Pre-Closing Covenants of Seller...................................................... 30
Section 6.2. Pre-Closing Covenants of Buyer....................................................... 31
Section 6.3. Pre-Closing Covenants of Seller and Buyer............................................ 33
ARTICLE VII
Due Diligence Examination With Respect to the Properties................................................. 33
Section 7.1. Inspection and Assertion of Defects.................................................. 33
Section 7.2. Certain Price Adjustments............................................................ 34
Section 7.3. Waiver............................................................................... 35
Section 7.4. Casualty Loss........................................................................ 35
Section 7.5. Disputes............................................................................. 35
ARTICLE VIII
Conditions Precedent to the Obligations of the Parties................................................... 37
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Section 8.1. Conditions Precedent to the Obligations of Buyer..................................... 37
Section 8.2. Conditions Precedent to the Obligations of Seller.................................... 38
ARTICLE IX
Closing of Transaction................................................................................... 39
Section 9.1. The Closing.......................................................................... 39
Section 9.2. Seller's Closing Obligations......................................................... 39
Section 9.3. Buyer's Closing Obligations.......................................................... 39
Section 9.4. Delivery of Files.................................................................... 40
ARTICLE X
Pre-Closing Termination.................................................................................. 40
Section 10.1. Termination.......................................................................... 40
Section 10.2. Effect of Termination................................................................ 40
ARTICLE XI
Rights to Distributions, Assumption of Liabilities and Indemnification................................... 40
ARTICLE XII
Affirmative Post Closing Covenants of Buyer.............................................................. 41
Section 12.1. Inspection Rights.................................................................... 41
Section 12.2. Books, Financial Statements and Reports.............................................. 41
Section 12.3. Notice of Material Events and Change of Address...................................... 43
Section 12.4. Maintenance of Properties............................................................ 43
Section 12.5. Maintenance of Existence and Qualifications.......................................... 43
Section 12.6. Payment of Trade Liabilities, Taxes, etc............................................. 43
Section 12.7. Insurance............................................................................ 44
Section 12.8. Compliance with Agreements and Law................................................... 44
Section 12.9. Charter Amendment Approval........................................................... 44
ARTICLE XIII
Post Closing Negative Covenants of Buyer................................................................. 44
Section 13.1. Indebtedness......................................................................... 44
Section 13.2. Limitation on Liens.................................................................. 45
Section 13.3. Limitation on Mergers................................................................ 45
Section 13.4. Limitation on Sales of Property...................................................... 45
Section 13.5. Limitation on Investments and New Businesses......................................... 46
Section 13.6. Transactions with Affiliates......................................................... 46
Section 13.7. Restricted Payments.................................................................. 46
ARTICLE XIV
Events of Default and Remedies........................................................................... 46
Section 14.1. Events of Default.................................................................... 46
Section 14.2. Annulment of Defaults................................................................ 48
Section 14.3. Expiration........................................................................... 48
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ARTICLE XV
Notices.................................................................................................. 49
ARTICLE XVI
Miscellaneous Matters.................................................................................... 50
Section 16.1. Survival of Provisions.............................................................. 50
Section 16.2. Public Announcements................................................................ 50
Section 16.3. Fees and Expenses................................................................... 50
Section 16.4. Costs of Enforcement................................................................ 51
Section 16.5. Indemnification..................................................................... 51
Section 16.6. Waiver and Amendment................................................................ 52
Section 16.7. Entire Agreement.................................................................... 52
Section 16.8. Binding Effect; Assignment; No Third Party Benefit.................................. 52
Section 16.9. Severability........................................................................ 53
Section 16.10. Governing Law....................................................................... 53
Section 16.11. Remedies Not Exclusive.............................................................. 53
Section 16.12. Further Assurances.................................................................. 53
Section 16.13. Counterparts........................................................................ 53
Section 16.14. Injunctive Relief................................................................... 54
Section 16.15. Consent to Jurisdiction............................................................. 54
Section 16.16. Payments............................................................................ 54
Section 16.17. Right to Purchase New Equity Securities............................................. 54
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT dated April 30, 2000, is made by and among
ENERGY CAPITAL INVESTMENT COMPANY PLC, an English investment company, ECIC
CORPORATION, a Texas corporation (collectively, "Seller"), and AROC INC., a
Delaware corporation ("Buyer");
W I T N E S S E T H:
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WHEREAS, Seller desires to sell, assign and convey to Buyer, and Buyer
desires to purchase and accept certain limited partnership interests; and
WHEREAS, Seller and Buyer deem it in their mutual best interests to execute
and deliver this Agreement;
NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual
covenants and agreements contained herein, Seller and Buyer do hereby agree as
follows:
ARTICLE I
Definitions and References
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Section 1.1. Certain Defined Terms. When used in this Agreement, the
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following terms shall have the respective meanings assigned to them in this
Section 1.1 or in the section, subsections or other subdivisions referred to
below:
"Affiliate" means, with respect to any Person, any other Person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with, such Person. For the purposes of
this definition, "control" when used with respect to any Person means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract, or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agreement" means this Agreement, as hereafter changed, amended or modified
in accordance with the terms hereof.
"Alliance Group" means Alliance Resources Group, Inc., a Delaware
corporation.
"Alliance PLC" means Alliance Resources PLC, a public limited company
incorporated in England and Wales.
"Alliance USA" means Alliance Resources (USA), Inc., a Delaware
corporation.
"Ancillary Documents" means each agreement, certificate, document,
commitment and writing (other than this Agreement) executed or to be executed by
Buyer or Seller in connection with the transactions contemplated herein or
therein, including the Assignment.
"Applicable Law" means any statute, law, rule or regulation, or any
judgment, order, writ, injunction or decree of, any Governmental Entity to which
a specified Person or property is subject.
"AROC (Texas)" means AROC (Texas), Inc., a Texas corporation.
"Certificate of Designation" means the document attached hereto as Exhibit
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3.1.
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"Change of Control" means the occurrence of any of the following events
after giving effect to the transactions contemplated by this Agreement, the
Other Acquisition Agreements and the Preferred Stock Purchase Agreement: (a) any
Person or two or more Persons, other than Buyer or any affiliate of Buyer,
acting as a group shall acquire beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Exchange Act, and
including holding proxies to vote for the election of directors other than
proxies held by Buyer's management or their designees to be voted in favor of
persons nominated by Buyer's Board of Directors) of 33% or more of the
outstanding voting securities of Buyer, measured by voting power (including both
ordinary shares and any preferred stock or other equity securities entitling the
holders thereof to vote with the holders of common stock in elections for
directors of Buyer.), (b) Buyer shall fail beneficially to own, directly or
indirectly, 100% of the outstanding shares of voting capital stock of Alliance
PLC, Alliance Group, Source, Difco, AROC (Texas), Alliance USA, LPC or GOC, on a
fully diluted basis, (c) one-third or more of the directors of Buyer shall
consist of persons not nominated by Buyer's Board of Directors (not including as
Board nominees any directors which the Board is obligated to nominate pursuant
to shareholders agreements, voting trust arrangements or similar arrangements)
or (d) within three years of the Closing Date, the employment by Buyer of ▇▇▇▇
▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇▇ terminates for any reason.
"Charter Amendment Approval" means approval of the increase in authorized
shares of Common Stock of the Company to such level as shall permit the full and
complete conversion of the Preferred Shares into the Preferred Conversion Shares
in accordance with the Certificate of Designation, all in accordance with the
Organic Documents and Applicable Law.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means common stock, $0.001 par value per share, of Buyer and
any securities issued or issuable with respect to such shares by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
"Companies Act" means the Companies ▇▇▇ ▇▇▇▇ as amended.
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"Data" has the meaning assigned to it in Schedule 4.7 of the Seller
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Disclosure Schedule.
"Default" means an Event of Default and any default, event or condition
which would, with the giving of any requisite notices and the passage of any
requisite periods of time, constitute an Event of Default.
"Difco" means Difco Limited, a private limited company incorporated under
the laws of England and Wales.
"Environmental Laws" means any and all laws relating to the environment or
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment including ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended.
"Fiscal Quarter" means a three-month period ending on July 31, October 31,
January 31 or April 30 of any year.
"Fiscal Year" means the twelve-month period ending on April 30 of any year.
"GOC" means Germany Oil Company, a Delaware corporation.
"Governmental Entity" means any court or tribunal in any jurisdiction
(domestic or foreign) or any federal, state, municipal or other governmental
body, agency, authority, department, commission, board, bureau or
instrumentality (domestic or foreign).
"GP Approval" means, as to a given Partnership, the approval of the general
partner of such Partnership to the assignment by Seller of its respective
Interest in such Partnership to Buyer and the admission of Buyer as a
substituted limited partner of such Partnership in place of Seller.
"Hazardous Materials" means any substance regulated under Environmental
Law, whether as pollutants, contaminants, or chemicals, or as industrial, toxic
or hazardous substances or wastes, or otherwise.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended.
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"Indebtedness" of any Person means Liabilities in any of the following
categories: (a) Liabilities for borrowed money; (b) Liabilities constituting an
obligation to pay the deferred purchase price of property or services; (c)
Liabilities evidenced by a bond, debenture, note or similar instrument; (d)
Liabilities which would under U.S. GAAP be shown on such Person's balance sheet
as a liability, and is payable more than one year from the date of creation
thereof (other than reserves for taxes and reserves for contingent obligations);
(e) Liabilities arising under futures contracts, forward contracts, swap, cap or
collar contracts, option contracts, hedging contracts, other derivative
contracts, or similar agreements; (f) Liabilities constituting principal under
leases capitalized in accordance with U.S. GAAP; (g) Liabilities arising under
conditional sales or other title retention agreements; (h) Liabilities owing
under direct or indirect guaranties of Liabilities of any other Person or
constituting obligations to purchase or acquire or to otherwise protect or
insure a creditor against loss in respect of Liabilities of any other Person
(such as obligations under working capital maintenance agreements, agreements to
keep-well, or agreements to purchase Liabilities, assets, goods, securities or
services), but excluding endorsements in the ordinary course of business of
negotiable instruments in the course of collection; (i) Liabilities (for
example, repurchase agreements) consisting of an obligation to purchase
securities or other property, if such Liabilities arise out of or in connection
with the sale of the same or similar securities or property; (j) Liabilities
with respect to letters of credit or applications or reimbursement agreements
therefor; (k) Liabilities with respect to payments received in consideration of
oil, gas, or other minerals yet to be acquired or produced at the time of
payment (including obligations under "take-or-pay" contracts to deliver gas in
return for payments already received and the undischarged balance of any
production payment created by such Person or for the creation of which such
Person directly or indirectly received payment); or (l) Liabilities with respect
to other obligations to deliver goods or services in consideration of advance
payments therefor; provided, however, that the "Indebtedness" of any Person
shall not include Liabilities that were incurred by such Person on ordinary
trade terms to vendors, suppliers, or other Persons providing goods and services
for use by such Person in the ordinary course of its business, unless and until
such Liabilities are outstanding more than 90 days past the original invoice or
billing date therefor.
"IRS" means the Internal Revenue Service.
"Key Employment Agreements" means (i) that certain Executive Employment
Agreement dated as of December 8, 1999 between Buyer and ▇▇▇▇ ▇. ▇▇▇▇▇▇, and
(ii) that certain Service Agreement dated September 20, 1996 between Alliance
PLC and ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, as amended by Supplemental Agreement dated
September 20, 1996, Second Supplemental Agreement dated December 1, 1998, and
letter agreement dated as of December 8, 1999.
"Liabilities" means, as to any Person, all indebtedness, liabilities and
obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or absolute, fixed or contingent, and
whether or not required to be considered pursuant to U.S. GAAP.
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"Lien" means, with respect to any property or assets, any right or interest
therein of a creditor to secure Liabilities owed to such creditor or any other
arrangement with such creditor which provides for the payment of such
Liabilities out of such property or assets or which allows him to have such
Liabilities satisfied out of such property or assets prior to the general
creditors of any owner thereof, including any lien, mortgage, security interest,
pledge, deposit, production payment, rights of a vendor under any title
retention or conditional sale agreement or lease substantially equivalent
thereto, tax lien, mechanic's or materialman's lien, or any other charge or
encumbrance for security purposes, whether arising by law or agreement or
otherwise, but excluding any right of offset which arises without agreement in
the ordinary course of business. "Lien" shall also mean any filed financing
statement, any registration of a pledge (such as with an issuer of
uncertificated securities), or any other arrangement or action which would serve
to perfect a Lien described in the preceding sentence, regardless of whether
such financing statement is filed, such registration is made, or such
arrangement or action is undertaken before or after such Lien exists.
"Listing Rules" means the listing rules of the London Stock Exchange.
"London Stock Exchange" means the London Stock Exchange Limited.
"LPC" means LaTex Petroleum Corporation, an Oklahoma corporation.
"LRI" means LaTex Resources, Inc., a Delaware corporation.
"LRI Merger" means the merger of Alliance Resources (Delaware) Inc. with
and into LRI whereby Alliance PLC became the sole shareholder of LRI.
"Material Adverse Effect" means (a) when used with respect to Buyer, a
material adverse change in, or a material adverse effect upon (i) the business,
assets, results of operations, condition (financial or otherwise) or prospects
of Buyer and its Subsidiaries on a consolidated basis, (ii) Buyer's ability to
timely pay the Obligations or to perform on a timely basis any material
obligation of Buyer under this Agreement or any agreement, instrument, or
document entered into or delivered in connection herewith or (iii) the
enforceability of the material terms of this Agreement or any Ancillary
Document; and (b) when used with respect to Seller, a material adverse change
in, or a material adverse effect upon (i) the Interests or the Properties or
(ii) the enforceability of the material terms of this Agreement or any Ancillary
Document.
"Oil and Gas Properties" has the meaning assigned to it in Schedule 4.7 of
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the Seller Disclosure Schedule.
"Old LaTex Payables" means those current accounts payable to Buyer or its
consolidated Subsidiaries that meet one or more of the following tests and have
been certified to Seller by Buyer and applicable Subsidiary as being an Old
LaTex Payable:
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(a) accounts payable the collection of which is barred by the
applicable statute of limitations;
(b) accounts payable the collection of which has been compromised or
forgiven in part, in either case to the extent of the amount that has been
compromised or forgiven; or
(c) accounts payable in respect of which the indebtedness was
incurred prior to the LRI Merger and where each of the following is true: (i) no
payment has been made on an individual amount of indebtedness payable since the
LRI Merger, (ii) no contact has been received by Buyer or applicable Subsidiary
from the applicable creditor since the LRI Merger pertaining to such account or
if contact has been received, such account is being diligently contested in good
faith, (iii) no promise to pay such account has been made by Buyer or applicable
Subsidiary since the LRI Merger and (iv) no judgment has been obtained by, or
settlement agreement entered into with, such creditor with respect to such
indebtedness.
"Other Acquisition Agreements" means other agreements or proposed
agreements to which Buyer is a party and disclosed in writing to Seller, whereby
Buyer will issue shares of Series A Preferred, in exchange for limited
partnership interests and interests in oil, gas and mineral properties and
related assets.
"Outstanding Common Stock" means, at any time, the aggregate of all Common
Stock then outstanding, including all shares of Common Stock which could be
acquired from the Company upon exercise or conversion of any outstanding
warrants, options or other securities then exercisable or convertible into
Common Stock.
"Partnership Agreements" means the Agreement of Limited Partnership of each
of the Partnerships, as amended, modified or changed to the date hereof.
"Permits" means licenses, permits, franchises, consents, approvals,
variances, exemptions and other authorizations of or from Governmental Entities.
"Permitted Investment" means any investment, loan, advance, guaranty or
capital contribution by Buyer or any Subsidiary in any of the following: (a)
properties or assets to be used in the ordinary course of business of Buyer and
its Subsidiaries; (b) current assets arising from the sale of goods and services
in the ordinary course of business of Buyer and its Subsidiaries; (c)
investments in one or more of Buyer's Subsidiaries or in any Person that
concurrently with such investment becomes a Subsidiary; (d) any marketable
obligation maturing not later than one year after the date of acquisition
therefor, issued or guaranteed by the United States of America or by any agency
of the United States of America which has the full faith and credit of the
United States of America; (e) commercial paper which is given the highest rating
by a credit rating agency of recognized national standing and maturing not more
than 270 days from the date of creation thereof; and (f) any demand deposit or
time deposit (including certificates of deposit and money market or sweep
accounts) with a commercial bank or trust company
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organized and doing business under the laws of the United States of America or
any state thereof which has capital, surplus and undivided profits of at least
$250,000,000, provided that such deposit must be either payable on demand or
mature not more than twelve months from the date of investment therein.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, enterprise, unincorporated organization
or Governmental Entity.
"Preferred Conversion Shares" means the shares of Common Stock issuable
upon conversion of the Preferred Shares.
"Preferred Stock Purchase Agreement" means that certain Preferred Stock
Purchase Agreement dated as of May 1, 2000, by and among Buyer, Bank of America,
N.A., EnCap Equity 1996 Limited Partnership, Energy Capital Investment Company
PLC, El Paso Capital Investments, L.L.C., EF-II Holdings, LLC, Picosa Creek
Limited Partnership and EnCap Investments L.L.C.
"Proceedings" means all proceedings, actions, claims, suits, investigations
and inquiries by or before any arbitrator or Governmental Entity.
"Properties" has the meaning assigned to it in Schedule 4.7 of the Seller
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Disclosure Schedule.
"Reasonable best efforts" means a party's reasonable best efforts in
accordance with reasonable commercial practice and without the incurrence of
unreasonable expense.
"Restricted Payment" shall mean any Distribution (as defined below) in
respect of Buyer or any Subsidiary thereof (other than on account of capital
stock or other equity interests of a Subsidiary owned legally or beneficially by
the Seller or another Subsidiary), including any Distribution resulting in the
acquisition by Buyer of securities that would constitute treasury stock. As
used in this definition, "Distribution" shall mean, in respect of any
corporation, partnership or other business entity (a) dividends or other
distributions or payments on capital stock or other equity interest of such
corporation, partnership or other business entity (except distributions in such
stock or other equity interest) and (b) the redemption or acquisition of such
stock or other equity interests or of warrants, rights or other options to
purchase such stock or other equity interests (except when solely in exchange
for such stock or other equity interests); provided, that "Distribution" shall
not mean any dividend or other distribution made, or redemption effected, in
accordance with the terms of the Certificate of Designation.
"Securities Act" means the U.S. Securities Act of 1933, as amended.
"Securities and Exchange Commission" means the U.S. Securities and Exchange
Commission.
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"Seller Disclosure Schedule" mean a schedule delivered by Seller to Buyer
which sets forth additional information regarding the representations and
warranties of Seller contained herein and information called for hereby.
"Senior Credit Facility" means that certain Credit Agreement dated as of
May 1, 2000, by and among Buyer, Toronto Dominion (Texas), Inc. as Agent, and
the lenders signatory thereto.
"Series A Preferred" means shares of Buyer's Series A Preferred Stock,
$0.001 par value per share.
"Source" means Source Petroleum, Inc., a Louisiana corporation.
"Subordinated Debt" means that certain Indebtedness of Buyer evidenced by
the Subordinated Debt Agreement.
"Subordinated Debt Agreement" means that certain Purchase Agreement dated
as of May 1, 2000, by and among Buyer, EnCap Equity 1996 Limited Partnership,
Energy Capital Investment Company PLC and El Paso Capital Investments, L.L.C.
"Subsidiary" means any corporation more than 50% of whose outstanding
voting securities, or any general partnership, joint venture or similar entity
more than 50% of whose total equity interests, is owned, directly or indirectly,
by the Buyer, or any limited partnership of which Buyer or any Subsidiary is a
general partner.
"Taxes" means any income taxes or similar assessments or any sales, excise,
occupation, use, ad valorem, property, production, severance, transportation,
employment, payroll, franchise, transfer, stamp, withholding or other tax
imposed by any United States federal, state or local (or any foreign or
provincial) taxing authority, including any interest, penalties or additions
attributable thereto.
"Tax Return" means any return or report (including but not limited to any
related or supporting information, any amended return or report or any
information return or report) with respect to Taxes.
"Treasury Regulations" means one or more treasury regulations promulgated
under the Code by the Treasury Department of the United States.
"U.S. GAAP" means generally accepted accounting principles in the United
States of America from time to time.
Section 1.2. Certain Additional Defined Terms. In addition to such terms
--------------------------------
as are defined in the opening paragraph and in Section 1.1 of this Agreement,
the following terms are used in this Agreement as defined in the Sections set
forth opposite such terms:
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Defined Term Section Reference
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Asserted Defects............................ 7.1(a)
Assignment.................................. 9.2(a)
Audited Financial Statements................ 5.10
Base Purchase Price......................... Article III
Basic Documents............................. 4.7
Closing..................................... 9.1
Closing Date................................ 9.1
Effective Date.............................. 9.2(a)
Event of Default............................ 14.1
Financial Statements........................ 5.10
Interests................................... Article II
Latest Balance Sheet........................ 5.10
Net Title Adjustments....................... 7.2(c)
Organic Documents........................... 5.3
Partnerships................................ Article II
Permitted Liens............................. 13.2
Preferred Shares............................ Article III
Purchase Price.............................. Article III
Scheduled Production Sales Contracts........ 4.9
Unaudited Financial Statements.............. 5.10
Section 1.3. References, Titles and Construction.
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(a) All references in this Agreement to articles, sections,
subsections and other subdivisions refer to corresponding articles, sections,
subsections and other subdivisions of this Agreement unless expressly provided
otherwise.
(b) Titles appearing at the beginning of any of such subdivisions are
for convenience only and shall not constitute part of such subdivisions and
shall be disregarded in construing the language contained in such subdivisions.
(c) The words "this Agreement", "this instrument", "herein",
"hereof", "hereby", "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless expressly so
limited.
(d) Words in the singular form shall be construed to include the
plural and vice versa, unless the context otherwise requires. Pronouns in
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masculine, feminine and neuter genders shall be construed to include any other
gender.
(e) Unless the context otherwise requires or unless otherwise
provided herein, the terms defined in this Agreement which refer to a particular
agreement, instrument or document also refer to and include all renewals,
extensions, modifications, amendments or restatements of such agreement,
instrument or document, provided that nothing contained in this
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subsection shall be construed to authorize such renewal, extension,
modification, amendment or restatement.
(f) Examples shall not be construed to limit, expressly or by
implication, the matter they illustrate.
(g) The word "or" is not intended to be exclusive and the word
"includes" and its derivatives means "includes, but is not limited to" and
corresponding derivative expressions.
(h) No consideration shall be given to the fact or presumption that
one party had a greater or lesser hand in drafting this Agreement.
(i) All references herein to "$" or "dollars" shall refer to U.S.
Dollars.
ARTICLE II
Interests to be Sold and Purchased
----------------------------------
Seller agrees to sell, assign and transfer and Buyer agrees to purchase and
accept, for the consideration hereinafter set forth, and subject to the terms
and provisions herein contained, all of Seller's interests as a limited partner
(the "Interests") in the following limited partnerships: Famcor Oil W.T., L.P.;
▇▇▇▇▇▇▇ Partners, Ltd.; RM Acquisition-I Limited Partnership; SE Share, L.P.;
St. ▇▇▇▇▇▇▇▇▇▇▇ Partners, Ltd.; Tanqueray Limited Partnership; Wheel-▇▇▇▇▇, Ltd.
(the "Partnerships").
ARTICLE III
Purchase Price
--------------
In consideration of the sale of the Interests by Seller to Buyer, Buyer
shall pay to Seller at Closing an aggregate purchase price (the "Base Purchase
Price") consisting of 227,962 shares of Series A Preferred (the "Preferred
Shares"). The rights, designations, preferences and other terms and conditions
relating to the Preferred Shares shall be as set forth in the Certificate of
Designation attached hereto as Exhibit 3.1. The Base Purchase Price may be
-----------
adjusted as provided in Article VII (the Base Purchase Price, as so adjusted,
and as the same may be otherwise adjusted by the mutual agreement of the
parties, being called the "Purchase Price").
10
ARTICLE IV
Representations and Warranties of Seller
----------------------------------------
Subject to the Seller Disclosure Schedule, Seller represents and warrants
to Buyer as follows:
Section 4.1. Organization and Existence. Energy Capital Investment
--------------------------
Company PLC is a duly formed and validly existing English investment company.
ECIC Corporation is duly formed and validly existing under the laws of the State
of Texas and is a wholly-owned subsidiary of Energy Capital Investment Company
PLC.
Section 4.2. Authority Relative to This Agreement. Seller has full power
------------------------------------
and authority to execute, deliver, and perform this Agreement and the Ancillary
Documents and to consummate the transactions contemplated hereby and thereby.
The execution, delivery, and performance by Seller of this Agreement and the
Ancillary Documents and the consummation by it of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary action of Seller.
Section 4.3. Valid and Binding Agreement. This Agreement has been duly
---------------------------
executed and delivered by Seller and constitutes, and each Ancillary Document
has been, or when executed will be, duly executed and delivered by Seller and
constitutes, or when executed and delivered will constitute, a valid and legally
binding obligation of Seller, enforceable against it in accordance with their
respective terms, except that such enforceability may be limited by (a)
applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws
affecting creditors' rights generally and (b) equitable principles which may
limit the availability of certain equitable remedies (such as specific
performance) in certain instances.
Section 4.4. Non-Contravention. Subject to receipt of GP Approval,
-----------------
neither the execution, delivery, and performance by Seller of this Agreement and
each other agreement, instrument, or document executed or to be executed by
Seller in connection with the transactions contemplated hereby nor the
consummation by it of the transactions contemplated hereby and thereby do and
will (a) conflict with or result in a violation of any provision of the
partnership agreement or other governing instruments of Seller, (b) conflict
with or result in a violation of any provision of, or constitute (with or
without the giving of notice or the passage of time or both) a default under, or
give rise (with or without the giving of notice or the passage of time or both)
to any right of termination, cancellation, or acceleration under, any bond,
debenture, note, mortgage, indenture, lease, contract, agreement, or other
instrument or obligation to which Seller is a party or by which Seller, any of
its properties or the Interests may be bound, (c) result in the creation or
imposition of any lien or other encumbrance upon the properties of Seller or the
Interests, or (d) violate any Applicable Law binding upon Seller.
Section 4.5. Approvals. Other than GP Approval, no consent, approval,
---------
authorization. license, order or permit of, or declaration, filing, or
registration with, any
11
Governmental Entity or any other Person or entity is required to be obtained or
made by Seller in connection with the execution, delivery, or performance by
Seller of this Agreement or any Ancillary Document and the consummation of the
transactions contemplated hereby and thereby.
Section 4.6. Pending Litigation. There are no Proceedings pending, or to
------------------
the best knowledge of Seller, threatened, which affect the Interests or the
Properties (including any actions challenging or pertaining to Seller's title to
the Interests or the Partnership's title to any of their respective Properties),
or affecting the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby. None of Seller or any of the Interests
or, to the best knowledge of Seller, the Properties is subject to any judgment,
order, writ, injunction, or decree of any Governmental Entity.
Section 4.7. Basic Documents. To Seller's knowledge, the oil, gas and/or
---------------
mineral leases, interests in which comprise parts of the Oil and Gas Properties,
and all other material contracts and agreements, licenses, permits and
easements, rights-of-way and other rights-of-surface use comprising any part of
or otherwise relating to the Properties (such leases and such material
contracts, agreements, licenses, permits, easements, rights-of-way and other
rights-of-surface use, including any amendments or modifications, being herein
called the "Basic Documents"), are in full force and effect and constitute valid
and binding obligations of the parties thereto and are enforceable in accordance
with their respective terms. To the best of Seller's knowledge, all Basic
Documents are disclosed on Schedule 4.7 of the Seller Disclosure Schedule in
------------
connection with the descriptions of the Oil and Gas Properties to which they
relate or otherwise in the Seller Disclosure Schedule. To the best of Seller's
knowledge, no Partnership is in breach or default (and no situation exists which
with the passing of time or giving of notice would create a breach or default)
of its obligations under the Basic Documents to which it is a party or any
regulations incorporated in or governing same, and (to the best of Seller's
knowledge) no breach or default by any third party (or situation which with the
passage of time or giving of notice would create a breach or default) exists, to
the extent such breach or default (whether by a Partnership or such a third
party) could materially adversely affect the ownership, operation, value or use
of any Oil and Gas Property of a Partnership after the Effective Date. To the
best of Seller's knowledge, all payments (including all delay rentals,
royalties, shut-in royalties and valid calls for payment or prepayment under
operating agreements) owing under Basic Documents have been and are being made
(timely, and before the same became delinquent) by the Partnerships in all
material respects (and, where the non-payment of same by a third party could
materially adversely affect the ownership, operation, value or use of an Oil and
Gas Property after the Effective Date, have been and are being made, to the best
knowledge of Seller, by such third parties). For the purposes of the
representations contained in this Section (and without limitation of such
representations), the non-payment of an amount, or non-performance of an
obligation, where such non-payment, or non-performance, could result in the
forfeiture or termination of rights of a Partnership under a Basic Document,
shall be considered material. To the best of Seller's knowledge, Seller has
rights in the Data.
Section 4.8. Commitments, Abandonments or Proposals.
--------------------------------------
12
(a) Seller has made no commitments to make capital contributions to any of
the Partnerships after the Effective Date.
(b) To the best knowledge of Seller: (i) no Partnership has incurred any
expenses, and has made any commitments to make expenditures, in connection with
(and no other obligations or liabilities have been incurred which would
adversely affect) the ownership or operation of such Partnership's Oil and Gas
Properties after the Effective Date, other than routine expenses incurred in the
normal operation of existing ▇▇▇▇▇; (b) no Partnership has abandoned, nor
entered into any agreements or arrangements to abandon, any ▇▇▇▇▇ (or removed
any material items of equipment, except those replaced by items of equal
suitability and value) on such Partnership's Oil and Gas Properties since the
Effective Date; and (c) no proposals are currently outstanding (whether made by
a Partnership or by any other party) to drill additional ▇▇▇▇▇, or to deepen,
plug back, or rework existing ▇▇▇▇▇, or to conduct other operations for which
consent is required under the applicable operating agreement, or to conduct any
other operations other than normal operation of existing ▇▇▇▇▇ on the
Properties, or to abandon any ▇▇▇▇▇, on the Oil and Gas Properties. To the best
knowledge of Seller, there are no operations involving any of the Oil and Gas
Properties with respect to which a Partnership has become a non-consenting
party.
Section 4.9. Production Sales Contracts. To the best knowledge of
--------------------------
Seller, there exist no agreements or arrangements for the sale of production
from the Oil and Gas Properties (including without limitation, calls on, or
other rights to purchase, production, whether or not the same are currently
being exercised) other than (a) production sales contracts (in this Section, the
"Scheduled Production Sales Contracts") disclosed in Section 4.9 of the Seller
Disclosure Schedule or (b) agreements or arrangements which are cancelable on 60
days notice or less without penalty or detriment. To the best knowledge of
Seller, each Partnership is presently receiving a price for all production from
(or attributable to) such Partnership's Oil and Gas Properties covered by a
Scheduled Production Sales Contract as computed in accordance with the terms of
such contract, and is not having deliveries of gas from any Property subject to
a Scheduled Production Sale Contract curtailed substantially below such
Property's delivery capacity. To the best knowledge of Seller, there are no
prepayments, advance payments, take-or-pay payments or similar payments
affecting the Oil and Gas Properties.
Section 4.10. Plugging and Abandonment. To the best knowledge of Seller,
------------------------
there are no dry holes, or shut in or otherwise inactive ▇▇▇▇▇, located on the
Oil and Gas Properties or on lands pooled or unitized therewith (including any
▇▇▇▇▇ which would, if located in Texas, require compliance with Railroad
Commission Rule 14(b)(2)), except for ▇▇▇▇▇ that have been properly plugged and
abandoned, and except for ▇▇▇▇▇ drilled to depths not included within the Oil
and Gas Properties or within units in which the Oil and Gas Properties
participate which have never been completed in such depths.
Section 4.11. Licenses and Permits. To the best knowledge of Seller, (i)
--------------------
each Partnership has all Permits necessary or appropriate to own and operate the
Oil and Gas Properties as presently being owned and operated by such
Partnership, (ii) such Permits are in full
13
force and effect, and (iii) the Partnerships have not received written notice of
any violations in respect of any such Permits.
Section 4.12. Area of Mutual Interest and Other Agreements; Tax
-------------------------------------------------
Partnerships. To the best knowledge of Seller: (i) no Oil and Gas Property is
------------
subject to (or has related to it) any area of mutual interest agreements; (ii)
no Oil and Gas Property is subject to (or has related to it) any farm-out or
farm-in agreement under which any party thereto is entitled to receive
assignments not yet made, or could earn additional assignments after the
Effective Date; and (iii) no Oil and Gas Property is subject to (or has related
to it) any tax partnership.
Section 4.13. Payment of Expenses. To the best knowledge of Seller, all
-------------------
expenses (including all bills for labor, materials and supplies used or
furnished for use in connection with the Properties, and all severance,
production, ad valorem, windfall profit and other similar taxes) and liabilities
relating to the ownership or operation of the Properties, have been, and are
being, paid (timely, and before the same become delinquent) by the Partnership
that owns such Properties.
Section 4.14. Compliance with Laws. To the best knowledge of Seller, the
--------------------
ownership and operation of Properties, to the extent that non-conformance could
adversely affect the ownership, operation, value or use thereof after the
Effective Date (or otherwise affect Buyer), has been in conformity, in all
material respects, with all Applicable Laws, except for such non-compliance
which would not have a Material Adverse Effect.
Section 4.15. Partnerships; Title to Interests; Partnership Agreements.
--------------------------------------------------------
(a) Each Partnership has been duly formed and is validly existing under
the laws of the State of Texas.
(b) Seller has good and marketable title to the Interests, free and clear
of all Liens and other encumbrances, save and except for the Partnership
Agreements.
(c) Each Partnership Agreement is in full force and effect and constitutes
the valid and binding obligation of the parties thereto and is enforceable in
accordance with its respective terms, except that such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium,
and similar laws affecting creditors' rights generally and (ii) equitable
principles which may limit the availability of certain equitable remedies (such
as specific performance) in certain instances. Seller is not in breach or
default (and no situation exists which with the passing of time or giving of
notice would create a breach or default) of its obligations under any
Partnership Agreement and (to the best of Seller's knowledge) no breach or
default by any other party to any Partnership Agreement (or situation which with
the passage of time or giving of notice would create a breach or default)
exists, to the extent such breach or default (whether by Seller or such other
party) could materially adversely affect the ownership or value of any Interest
after the Effective Date.
14
Section 4.16. Physical Condition of Facilities. To the best of Seller's
--------------------------------
knowledge, the surface physical facilities on the Oil and Gas Properties have
been maintained in accordance with normal industry maintenance practices and are
in a state of repair (normal wear and tear excepted) that Seller believes to be
adequate for the normal use of such facilities in the ordinary conduct of the
business of Seller. Without limiting the foregoing, but subject to ordinary
wear and tear, to the best of Seller's knowledge, such facilities are not in
need of maintenance or improvements except for maintenance and improvements in
the ordinary course in accordance with normal industry practice.
Section 4.17. Environmental Matters. To the best knowledge of Seller:
---------------------
(i) each Partnership is in material compliance with all applicable federal,
state, local and foreign laws, regulations, rules, orders, decrees, treaties,
judicial decisions, judgments, injunctions, permits and governmental
restrictions relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata) (collectively "Environmental Laws"), except for such non-
compliance as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, and there are no circumstances that
are reasonably likely to materially prevent or interfere with such compliance in
the next three years, and (ii) no Partnership has received written notice of or
is the subject of, any actions, causes of action, claims, investigations,
demands, notices, requests for information, complaints, suits or proceedings by
any Person alleging liability under or non-compliance with any Environmental Law
that are reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect. Buyer acknowledges that this Section 4.17 is the exclusive
representation and warranty made by Seller in this Agreement with respect to
applicable Environmental Laws and no other representation and warranty in this
Agreement shall be deemed to cover such matters.
Section 4.18. Production Data. Seller has provided to representatives of
---------------
Buyer aggregate production data on the Properties and data on lease operating
expenses incurred on the Properties. To the best knowledge of Seller, all of
such data is accurate and complete in all material respects as of the date
provided.
Section 4.19. Ordinary Course Operations. To the best of Seller's
--------------------------
knowledge, since January 1, 2000, (i) no Partnership has operated or in any
manner dealt with, incurred obligations with respect to, or undertaken any
transactions relating to, the Properties of such Partnership other than in the
ordinary course of business consistent with past practice and (ii) none of the
Properties has suffered any material destruction, damage, or loss (except
depreciation of equipment through ordinary wear and tear) or been subjected by
any Partnership to any mortgage, lien, encumbrance, claim, or security interest
that has not previously been disclosed to representatives of Buyer or that would
constitute a Material Adverse Effect.
Section 4.20. Sale of Production. To the best of Seller's knowledge,
------------------
except as described in Section 4.20 of the Seller Disclosure Schedule there is
no well on the Properties with respect to which any Partnership and its
predecessors in title to the Properties have collectively taken more (referred
to herein as "overproduced") or less (referred to herein as "underproduced")
production from such well than the ownership of such Partnership and such
predecessors would
15
entitle such Partnership and such predecessors (absent any gas balancing
agreement or arrangement) to receive. To the best of Seller's knowledge, the
overproduced and underproduced positions disclosed on Section 4.20 of the Seller
Disclosure Schedule are, in each case, materially accurate as of the dates shown
on such schedule.
Section 4.21. Brokerage Fees. Neither Seller nor any of its affiliates
--------------
has retained any financial advisor, broker, agent or finder or paid or agreed to
pay any financial advisor, broker, agent or finder on account of this Agreement
or any transaction contemplated hereby, which action would subject Buyer or any
of its affiliates to any liability. Seller shall indemnify and hold harmless
Buyer from and against any and all losses, claims, damages and liabilities
(including legal and other expenses reasonably incurred in connection with
investigating or defending any claims or actions) with respect to any finder's
fee, brokerage commission or similar payment in connection with any transaction
contemplated hereby asserted by any Person on the basis of any act or statement
made or alleged to have been made by Seller or any of its affiliates.
Section 4.22. Bankruptcy. There are no bankruptcy, reorganization or
----------
arrangement proceedings pending, being contemplated by, or to the knowledge of
Seller, threatened against Seller.
Section 4.23. Full Disclosure. No representation or warranty made by
---------------
Seller in this Agreement, and no statement of Seller contained in any document,
certificate or other writing furnished or to be furnished by Seller or its
representatives to Buyer pursuant hereto or in connection herewith, contains or
will contain, at the time of delivery, any untrue statement of a material fact
or omits or will omit, at the time of delivery, to state any material fact
(other than industry-wide risks normally associated with the type of business
conducted by Seller) necessary to make the statements contained therein, in
light of the circumstances in which they are made, not misleading. There is no
fact known to Seller (other than industry-wide risks normally associated with
the type of business conducted by Seller) that has not been disclosed to Buyer
in writing which Seller reasonably anticipates would result in a Material
Adverse Effect.
Section 4.24. Disclaimer of Warranties. Other than those expressly set
------------------------
out in this Article IV, Seller hereby expressly disclaims any and all
representations or warranties with respect to the Interests, the Partnerships
and the Properties or the transaction contemplated hereby, and Buyer agrees that
the Interests are being sold by Seller "where is" and "as is". Specifically as a
part of (but not in limitation of) the foregoing, Buyer acknowledges that Seller
has not made, and Seller hereby expressly disclaims, any representation or
warranty (express, implied, under common law, by statute or otherwise) as to (a)
the condition of the Properties (INCLUDING WITHOUT LIMITATION, SELLER DISCLAIMS
ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS), (b) the status of
title to the Properties or (c) as the extent of oil, gas or other mineral
reserves, the recoverability of or the cost of recovering any such reserves, the
value of such reserves, prices (or anticipated prices) at which production will
be sold and the ability to sell oil or gas production from the Properties.
16
ARTICLE V
Representations and Warranties of Buyer
----------------------------------------
Section 5.1. Organization and Existence. Buyer is a corporation duly
--------------------------
organized and validly existing under the laws of Delaware.
Section 5.2. Qualification. Each of Buyer and the Subsidiaries is duly
-------------
qualified or licensed to do business and, with respect to non-U.K. entities, in
good standing in each of the jurisdictions in which it owns, leases or operates
property or in which such qualification or licensing is required for the conduct
of its business.
Section 5.3. Charter and Bylaws. Buyer has made available to Seller
------------------
accurate and complete copies of Buyer's certificate of incorporation and bylaws
("Organic Documents") as currently in effect, and stock records of Buyer.
Neither Buyer nor any Subsidiary is in violation of its Organic Documents or its
partnership agreement or similar governing document, as the case may be.
Section 5.4. Capitalization of Buyer. Subject to Schedule 5.4, the
----------------------- ------------
authorized capital stock of Buyer, the number of shares outstanding and the
number of shares held in Buyer's treasury are set forth on Schedule 5.4 hereto.
------------
All outstanding shares of capital stock of Buyer have been validly issued and
are fully paid and nonassessable, and no shares of capital stock of Buyer are
subject to, nor have any been issued in violation of, preemptive or similar
rights. Except as set forth on Schedule 5.4 hereto, there are (and as of the
------------
Closing Date there will be) outstanding (i) no shares of capital stock or other
voting securities of Buyer, (ii) no securities of Buyer convertible into or
exchangeable for shares of capital stock or other voting securities of Buyer,
(iii) no options or other rights to acquire from Buyer, and no obligation of
Buyer to issue or sell, any shares of capital stock or other voting securities
of Buyer or any securities of Buyer convertible into or exchangeable for such
capital stock or voting securities, and (iv) no equity equivalents, interests in
the ownership or earnings or other similar rights of or with respect to Buyer.
There are (and as of the Closing Date there will be) no outstanding obligations
of Buyer or any Subsidiary to repurchase, redeem, or otherwise acquire any of
the foregoing shares, securities, options, equity equivalents, interests, or
rights. Except as set forth on Schedule 5.4, Buyer is not a party to, and is
-------------
not aware of, any voting agreement, voting trust, or similar agreement or
arrangement relating to any class or series of its capital stock.
Section 5.5. Authority Relative to This Agreement. Subject to Charter
------------------------------------
Amendment Approval as it pertains to Buyer's ability to permit the full
conversion of the Preferred Shares into the Preferred Conversion Shares, Buyer
has full power and authority to execute, deliver, and perform this Agreement and
the Ancillary Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby. The execution, delivery, and
performance by Buyer of this Agreement and the Ancillary Documents to which it
is a party, and the consummation by it of the transactions contemplated hereby
and thereby, have been duly authorized by all necessary action of Buyer. This
Agreement has been duly executed and
17
delivered by Buyer and constitutes, and each Ancillary Document executed or to
be executed by Buyer has been, or when executed will be, duly executed and
delivered by Buyer and constitutes, or when executed and delivered will
constitute, a valid and legally binding obligation of Buyer, enforceable against
Buyer in accordance with their respective terms, except that such enforceability
may be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium, and similar laws affecting creditors' rights generally and (ii)
equitable principles which may limit the availability of certain equitable
remedies (such as specific performance) in certain instances.
Section 5.6. No Conflict. Assuming all consents, approvals,
-----------
authorizations and other actions described in Section 5.7 have been obtained and
all filings and notifications listed on Schedule 5.7 have been made and except
------------
as described on Schedule 5.6, the execution, delivery and performance of this
------------
Agreement by Buyer, the execution, delivery and performance by each Subsidiary
of the Ancillary Documents to which it is a party, and the consummation by them
of the transactions contemplated hereby and thereby do not and will not (a)
violate or conflict with the Organic Documents of Buyer or any Subsidiary,
subject to Charter Amendment Approval as it pertains to Buyer's ability to
permit the full conversion of the Preferred Shares into Preferred Conversion
Shares, (b) conflict with or result in any violation of any provision of, or
constitute (with or without the giving of notice or the passage of time or both)
a default under, or give rise (with or without the giving of notice or the
passage of time or both) to any right of termination, cancellation, or
acceleration under, or require any consent, approval, authorization or waiver
of, or notice to, any party to, any bond, debenture, note, mortgage, indenture,
lease, contract, agreement, or other instrument or obligation to which Buyer or
any Subsidiary is a party or by which Buyer or any Subsidiary or any of their
respective properties may be bound or any Permit held by Buyer or any
Subsidiary, (iii) result in the creation or imposition of any Lien upon the
properties of Buyer or any Subsidiary (other than as provided in the Senior
Credit Facility) or (iv) violate any Applicable Law binding upon Buyer or any
Subsidiary.
Section 5.7. Consents and Approvals, Licenses, Etc. Except as set forth
--------------------------------------
on Schedule 5.7, no consent, approval, authorization, license, order or permit
------------
of, or declaration, filing or registration with, or notification to, any
Governmental Entity, or any other Person or entity, is required to be made or
obtained by Buyer or any Subsidiary in connection with the execution, delivery
and performance of this Agreement or any Ancillary Document and the consummation
of the transactions contemplated hereby and thereby.
Section 5.8. Subsidiaries.
------------
(a) Buyer does not own, directly or indirectly, any capital stock or
equity securities of any corporation or have any direct or indirect equity or
ownership interest in any other Person, other than the Subsidiaries. Schedule
--------
5.8 lists each Subsidiary, the jurisdiction of incorporation or formation of
---
each Subsidiary and the authorized (in the case of capital stock) and
outstanding capital stock or other equity interests of each Subsidiary. Each
U.K. Subsidiary is duly formed and validly existing under the laws of the
jurisdiction of its formation, and each other Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of
18
the jurisdiction of its incorporation. Each Subsidiary has all requisite
corporate or other, as applicable, power and authority to own, lease, and
operate its properties and to carry on its business as now being conducted. No
actions or proceedings to dissolve any Subsidiary are pending.
(b) Except as otherwise indicated on Schedule 5.8, all the outstanding
------------
capital stock or other equity interests of each Subsidiary are owned directly or
indirectly by Buyer, free and clear of all Liens. All outstanding shares of
capital stock of each corporate Subsidiary have been validly issued and are
fully paid and nonassessable. All equity interests of each other Subsidiary
have been validly issued and are fully paid (to the extent required at such
time). No shares of capital stock or other equity interests of any Subsidiary
are subject to, nor have any been issued in violation of, preemptive or similar
rights.
(c) Except as set forth on Schedule 5.8, there are (and as of the
------------
Closing Date there will be) outstanding (i) no shares of capital stock or other
voting securities of any Subsidiary, (ii) no securities of Buyer or any
Subsidiary convertible into or exchangeable for shares of capital stock or other
voting securities of any Subsidiary, (iii) no options or other rights to acquire
from Buyer or any Subsidiary, and no obligation of Buyer or any Subsidiary to
issue or sell, any shares of capital stock or other voting securities of any
Subsidiary or any securities convertible into or exchangeable for such capital
stock or voting securities and (iv) no equity equivalents, interests in the
ownership or earnings, or other similar rights of or with respect to any
Subsidiary. There are (and as of the Closing Date there will be) no outstanding
obligations of Buyer or any Subsidiary to repurchase, redeem or otherwise
acquire any of the foregoing shares, securities, options, equity equivalents,
interests or rights.
Section 5.9. Preferred Shares; Conversion Shares.
-----------------------------------
(a) The Preferred Shares, when issued under the terms of this Agreement,
will be duly authorized, validly issued and fully paid and nonassessable.
Subject to Charter Amendment Approval as it pertains to Buyer's ability to
permit the full conversion of the Preferred Shares into the Preferred Conversion
Shares, the Preferred Conversion Shares, when issued against payment of the
conversion price for such shares, will be duly authorized, validly issued and
fully paid and nonassessable.
(b) Subject to Charter Amendment Approval as it pertains to Buyer's
ability to permit the full conversion of the Preferred Shares into the Preferred
Conversion Shares, sufficient shares of authorized but unissued Common Stock of
Buyer will have been reserved by appropriate action in connection with the
Preferred Conversion Shares.
(c) Neither the issuance of the Preferred Shares, nor the issuance of
shares of Common Stock upon the conversion of the Preferred Shares, is subject
to any unwaived preemptive or other similar statutory or contractual rights or
will conflict with any provision of any agreement or instrument to which the
Company or any Subsidiary is a party or by which it is bound.
19
Section 5.10. Financial Statements. Buyer has delivered to Seller
--------------------
accurate and complete copies of (i) Alliance PLC's audited consolidated balance
sheet as of April 30, 1999, and the related audited consolidated statements of
income, stockholders' equity and cash flows for the year then ended, and the
notes and schedules thereto, together with the unqualified report thereon of
KPMG Audit Plc, independent public accountants (the "Audited Financial
Statements") and (ii) Buyer's unaudited consolidated balance sheet as of
January 31, 2000 (the "Latest Balance Sheet"), and the related unaudited
consolidated statements of income, stockholders' equity, and cash flows for the
three-month period then ended (the "Unaudited Financial Statements"), certified
by Buyer's chief financial officer (collectively, the "Financial Statements").
The Financial Statements (i) represent actual bona fide transactions, (ii) have
been prepared from the books and records of Alliance PLC and Buyer and their
respective consolidated Subsidiaries in conformity with U.S. GAAP accounting
principles applied on a basis consistent with preceding years throughout the
periods involved and (iii) fairly present Alliance PLC's and Buyer's (as
applicable) consolidated financial position as of the respective dates thereof
and Alliance PLC's and Buyer's (as applicable) consolidated results of
operations and cash flows for the periods then ended. The statements of income
included in the Financial Statements do not contain any items of special or
nonrecurring income except as identified in the notes thereto, and the balance
sheets included in the Financial Statements do not reflect any write-up or
revaluation increasing the book value of any assets, nor have there been any
transactions since the date of the Latest Balance Sheet giving rise to special
or nonrecurring income or any such write-up or revaluation.
Section 5.11. Securities Filings. Buyer and its Subsidiaries has filed
------------------
with the Securities and Exchange Commission, the London Stock Exchange and the
Registrar of Companies all forms, reports, schedules, statements and other
documents required to be filed by them since May 1, 1997 under the Companies Act
and the Listing Rules and since April 30, 1997 under the Securities Act, the
Exchange Act and all other federal securities laws. All final forms, reports,
schedules, statements and other documents (including all amendments thereto)
filed by Buyer and its Subsidiaries with the Securities and Exchange Commission
and the London Stock Exchange since such date are herein collectively referred
to as the "SEC Filings". Buyer has delivered or made available to Seller
accurate and complete copies of all the SEC Filings in the form filed by Buyer
and its Subsidiaries with the Securities and Exchange Commission and the London
Stock Exchange. The SEC Filings, at the time filed, complied in all material
respects with all applicable requirements of federal securities laws. None of
the SEC Filings, including any financial statements or schedules included
therein, at the time filed, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary in
order to make the statements contained therein, in light of the circumstances
under which they were made, not misleading. All material contracts of Buyer and
the Subsidiaries have been included in the SEC Filings, except for those
contracts not required to be filed pursuant to the rules and regulations of the
Securities and Exchange Commission and the London Stock Exchange. Buyer shall
deliver to Seller as soon as they become available accurate and complete copies
of all forms, reports, and other documents furnished by it to its shareholders
generally or filed by it with the Securities and Exchange Commission and the
London Stock Exchange subsequent to the date hereof and prior to the Closing
Date.
20
Section 5.12. Absence of Undisclosed Liabilities. Neither Buyer nor any
----------------------------------
Subsidiary has any liability or obligation (whether accrued, absolute,
contingent, unliquidated, or otherwise, whether or not known to Buyer or any
Subsidiary, and whether due or to become due), except (i) liabilities reflected
on the Latest Balance Sheet, (ii) liabilities which have arisen since the date
of the Latest Balance Sheet in the ordinary course of business (none of which is
a material liability for breach of contract, breach of warranty, tort, or
infringement), (iii) liabilities arising under executory contracts entered into
in the ordinary course of business (none of which is a material liability for
breach of contract) and (iv) liabilities specifically set forth on Schedule
--------
5.12.
Section 5.13. Absence of Certain Changes. Except as disclosed on Schedule
-------------------------- --------
5.13, since the date of the Latest Balance Sheet, (i) there has not been any
----
material adverse change in, or any event or condition that might reasonably be
expected to result in a material adverse change in, the business assets, results
of operations, condition (financial or otherwise) or prospects of Buyer and the
Subsidiaries considered as a whole; (ii) the businesses of Buyer and the
Subsidiaries have been conducted only in the ordinary course consistent with
past practice; (iii) neither Buyer nor any Subsidiary has incurred any material
liability, engaged in any material transaction or entered into any material
agreement outside the ordinary course of business consistent with past practice;
(iv) neither Buyer nor any Subsidiary has suffered any material loss, damage,
destruction, or other casualty to any of its assets (whether or not covered by
insurance); and (v) neither Buyer nor any Subsidiary has taken any of the
actions set forth in Section 6.2 except as permitted thereunder.
Section 5.14. Tax Matters. Except as disclosed on Schedule 5.14:
----------- -------------
(a) Buyer and each Subsidiary has filed, or has had filed on its
behalf, in a timely manner (within any applicable extension periods) with the
appropriate taxing authority all Tax Returns with respect to Taxes of Buyer and
of each of the Subsidiaries, all of which Tax Returns are true, correct and
complete in all material respects;
(b) All Taxes due and payable (whether or not reflected in Tax Returns
as filed) with respect to all taxable periods of Buyer and the Subsidiaries have
been paid in full or adequate reserves have been provided for on the Financial
Statements;
(c) There are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any federal, state, local or
foreign income or other material Tax Returns required to be filed by or with
respect to Buyer or any of the Subsidiaries;
(d) None of the Tax Returns of or with respect to Buyer or any of the
Subsidiaries is currently being audited or examined by any taxing authority;
(e) No material deficiency for any Taxes has been assessed with
respect Buyer or to any of the Subsidiaries that has not either (i) been abated
or (ii) paid in full or for which adequate reserves have been provided;
21
(f) No Tax litigation is currently pending;
(g) No waiver or extension of any statute of limitations to any
federal, state, local or foreign Tax matter has been given by or requested from
Buyer or any Subsidiary; and
(h) Neither Buyer nor any Subsidiary has filed a consent under Section
341(f) of the Code.
(i) Buyer and the Subsidiaries have complied with all Applicable Laws
relating to the withholding of Taxes and the payment thereof (including
withholding of Taxes under Sections 1441 and 1442 of the Code, or similar
provisions under foreign laws), and has timely and properly withheld from the
appropriate party and paid over to the proper Governmental Entity all amounts
required to be withheld and be paid over under Applicable Law.
(j) Neither Buyer nor any Subsidiary is required to include in income
any adjustment under Section 481(a) of the Code by reason of a change in
accounting method, and neither Buyer nor any Subsidiary, nor the Internal
Revenue Service, has proposed any such adjustment or change in accounting
method. Buyer and the Subsidiaries do not have pending any private letter
ruling with the IRS.
(k) Other than as a result of this transaction, none of Buyer's or any
Subsidiary's tax attributes is subject to the limitations of Section 382, 383 or
384 of the Code or Temporary Treasury Regulation Sections 1.1502-15T or 1.1502-
21T(c).
(l) There are no liens for Taxes upon any assets of Buyer or any
Subsidiary, except liens for Taxes not yet due and payable.
(m) The tax basis of each of the assets of Buyer and the Subsidiaries
as set forth on the books, accounts and records of Buyer and the Subsidiaries is
true, correct and complete in all material respects.
Section 5.15. Environmental and Other Laws. Except as disclosed on
----------------------------
Schedule 5.15 or in the SEC Filings filed prior to the date hereof, (a) Buyer
--------------
and the Subsidiaries are conducting their businesses in compliance in all
material respects with all Applicable Laws, including all Environmental Laws,
and are in material compliance with all licenses and permits required under any
such laws; (b) to the best of Buyer's knowledge, none of the operations or
properties of Buyer or any Subsidiary is the subject of foreign, federal, state
or local investigation evaluating whether any material remedial action is needed
to respond to a release of any Hazardous Materials into the environment or to
the improper storage or disposal (including storage or disposal at offsite
locations) of any Hazardous Materials; (c) neither Buyer nor any Subsidiary has
filed any notice under any Applicable Law indicating that it is responsible for
the improper release into the environment, or the improper storage or disposal,
of any material amount of any Hazardous Materials or that any Hazardous
Materials have been improperly released, or are improperly stored or disposed
of, upon any property of Buyer or any Subsidiary; (d) neither
22
Buyer nor any Subsidiary has transported or arranged for the transportation of
any Hazardous Material to any location which is (i) listed on the National
Priorities List under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, listed for possible inclusion on such
National Priorities List by the Environmental Protection Agency in its
Comprehensive Environmental Response, Compensation and Liability Information
System List, or listed on any similar state list or foreign jurisdiction list or
(ii) the subject of foreign, federal, state or local enforcement actions or
other investigations which may lead to material claims against Buyer or any
Subsidiary for clean-up costs, remedial work, damages to natural resources or
for personal injury claims (whether under Environmental Laws or otherwise); and
(e) to the best of Buyer's knowledge, neither Buyer or any Subsidiary has any
material contingent liability under any Environmental Laws or in connection with
the release into the environment, or the storage or disposal, of any Hazardous
Materials.
Section 5.16. Legal Proceedings. Except as disclosed on Schedule 5.16,
----------------- -------------
there are no Proceedings pending or, to the best knowledge of Buyer, threatened
against or involving Buyer or any Subsidiary (or any of their respective
directors or officers in connection with the business or affairs of Buyer or any
Subsidiary) or any properties or rights of Buyer or any Subsidiary which,
individually or in the aggregate, might reasonably be expected to have a
Material Adverse Effect. Neither Buyer nor any Subsidiary is subject to any
judgment, order, writ, injunction, or decree of any Governmental Entity which
has had or is reasonably likely to have a Material Adverse Effect. There are no
Proceedings pending or, to the best knowledge of Buyer, threatened seeking to
restrain, prohibit, or obtain damages or other relief in connection with, or
questioning the legality or validity of, this Agreement or any Ancillary
Document or the transactions contemplated hereby or thereby.
Section 5.17. Title to Properties; Permits; Licenses; Condition of Assets.
-----------------------------------------------------------
(a) Each of Buyer and the Subsidiaries has good and defensible title
to all of its material properties and assets, free and clear of all Liens other
than Permitted Liens and of all material impediments to the use of such
properties and assets in the businesses of Buyer and the Subsidiaries.
(b) Each of Buyer and the Subsidiaries holds all material Permits
necessary or required for the conduct of its business. Each of such Permits is
in full force and effect, Buyer and the Subsidiaries are in compliance with all
of its material obligations with respect thereto, and, to the best knowledge of
Buyer, no event has occurred which allows, or with or without the giving of
notice or the passage of time or both would allow, the revocation or termination
of any thereof. No notice has been issued by any Governmental Entity and no
proceeding is pending or, to the best knowledge of Buyer, threatened with
respect to any alleged failure by Buyer or any Subsidiary to have any material
Permit.
(c) Buyer and the Subsidiaries possess all licenses, permits,
franchises, patents, copyrights, trademarks and trade names, and other
intellectual property (or otherwise possesses the right to use such intellectual
property without violation of the rights of any other Person)
23
which are necessary to carry out their businesses as presently conducted and as
presently proposed to be conducted hereafter, and neither Buyer nor any
Subsidiary is in violation in any material respect of the terms under which it
possesses such intellectual property or the right to use such intellectual
property.
(d) The equipment and other tangible assets of Buyer and the
Subsidiaries are in good operating condition (except for reasonable wear and
tear), and have been reasonably maintained.
Section 5.18. ERISA.
-----
(a) Set forth on Schedule 5.18 is a list identifying each "employee
-------------
benefit plan", as defined in Section 3(3) of ERISA, (i) which is subject to any
provision of ERISA, (ii) which is maintained, administered, or contributed to by
Buyer or any affiliate of Buyer, and (iii) which covers any employee or former
employee of Buyer or any affiliate of Buyer or under which Buyer or any
affiliate of Buyer has any liability. Buyer has delivered or made available to
Seller accurate and complete copies of such plans (and, if applicable, the
related trust agreements) and all amendments thereto and written interpretations
thereof, together with (i) the three most recent annual reports (Form 5500
including, if applicable, Schedule B thereto) prepared in connection with any
such plan and (ii) the most recent actuarial valuation report prepared in
connection with any such plan. Such plans are referred to in this Section as
the "Employee Plans". For purposes of this Section only, an "affiliate" of any
person means any other person which, together with such person, would be treated
as a single employer under Section 414 of the Code. The only Employee Plans
which individually or collectively would constitute an "employee pension benefit
plan" as defined in Section 3(2) of ERISA are identified as such on Schedule
--------
5.18.
----
(b) Except as otherwise identified on Schedule 5.18, (i) no Employee
-------------
Plan constitutes a "multiemployer plan", as defined in Section 3(37) of ERISA
(for purposes of this Section, a "Multiemployer Plan"), (ii) no Employee Plan is
maintained in connection with any trust described in Section 501(c)(9) of the
Code, (iii) no Employee Plan is subject to Title IV of ERISA or to the minimum
funding standards of ERISA and the Code, and (iv) during the past five years,
neither Buyer nor any of its affiliates have made or been required to make
contributions to any Multiemployer Plan. There are no accumulated funding
deficiencies as defined in Section 412 of the Code (whether or not waived) with
respect to any Employee Plan. The fair market value of the assets held with
respect to each Employee Plan which is an employee pension benefit plan, as
defined in Section 3(2) of ERISA, exceeds the actuarially determined present
value of all benefit liabilities accrued under such Employee Plan (whether or
not vested) determined using reasonable actuarial assumptions. Neither Buyer
nor any affiliate of Buyer has incurred any material liability under Title IV of
ERISA arising in connection with the termination of, or complete or partial
withdrawal from, any plan covered or previously covered by Title IV of ERISA.
Buyer and all of the affiliates of Buyer have paid and discharged promptly when
due all liabilities and obligations arising under ERISA or the Code of a
character which if unpaid or unperformed might result in the imposition of a
lien against any of the assets of Buyer or any Subsidiary. Nothing done or
omitted to be done and no transaction or holding of any asset under
24
or in connection with any Employee Plan has or will make Buyer or any Subsidiary
or any director or officer of Buyer or any Subsidiary subject to any liability
under Title I of ERISA or liable for any Tax pursuant to Section 4975 of the
Code that could have a Material Adverse Effect. There are no threatened or
pending claims by or on behalf of the Employee Plans, or by any participant
therein, alleging a breach or breaches of fiduciary duties or violations of
Applicable Laws which could result in liability on the part of Buyer, its
officers or directors, or such Employee Plans, under ERISA or any other
Applicable Law and there is no basis for any such claim.
(c) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified since the date of
its adoption, and each trust forming a part thereof is exempt from Tax pursuant
to Section 501(a) of the Code. Set forth on Schedule 5.18 is a list of the most
-------------
recent IRS determination letters with respect to any such Plans, accurate and
complete copies of which letters have been delivered or made available to Buyer.
Each Employee Plan has been maintained in compliance with its terms and with the
requirements prescribed by all Applicable Laws, including but not limited to
ERISA and the Code, which are applicable to such Employee Plans.
(d) Set forth on Schedule 5.18 is a list of each employment,
-------------
severance, or other similar contract, arrangement, or policy and each plan or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits,
deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation rights, or other forms of incentive compensation or post-retirement
insurance, compensation, or benefits which (i) is not an Employee Plan, (ii) is
entered into, maintained, or contributed to, as the case may be, by Buyer or any
affiliate of Buyer, and (iii) covers any employee or former employee of Buyer or
any affiliate of Buyer or under which Buyer or any affiliate of Buyer has any
liability. Such contracts, plans, and arrangements as are described in the
preceding sentence are referred to for purposes of this Section as the "Benefit
Arrangements". Each Benefit Arrangement has been maintained in substantial
compliance with its terms and with the requirements prescribed by Applicable
Laws.
(e) Neither Buyer nor any affiliate of Buyer has performed any act or
failed to perform any act, and there is no contract, agreement, plan, or
arrangement covering any employee or former employee of Buyer or any affiliate
of Buyer, that, individually or collectively, could give rise to the payment of
any amount that would not be deductible pursuant to the terms of Section
162(a)(1) or 280G of the Code, or could give rise to any penalty or excise Tax
pursuant to Section 4980B or 4999 of the Code.
Section 5.19. Agreements.
----------
(a) Set forth on Schedule 5.19 is a list of all the following
-------------
agreements, arrangements, and understandings (written or oral, formal or
informal) (collectively, for purposes of this Section, "agreements") to which
Buyer or any Subsidiary is a party or by which Buyer or any Subsidiary or any of
their respective properties is otherwise bound:
25
(i) collective bargaining agreements and similar agreements
with employees as a group;
(ii) agreements with any current or former shareholder,
director, officer, employee, consultant or advisor or any affiliate of any
such Person;
(iii) agreements between or among Buyer and any of the
Subsidiaries;
(iv) exclusive of those relating to the Senior Credit Facility,
indentures, mortgages, security agreements, notes, loan or credit
agreements, or other agreements relating to the borrowing of money by Buyer
or any Subsidiary or to the direct or indirect guarantee or assumption by
Buyer or any Subsidiary of any obligation of others, including any
agreement that has the economic effect although not the legal form of any
of the foregoing;
(v) agreements relating to the acquisition or disposition of
assets, other than those entered into in the ordinary course of business
consistent with past practice;
(vi) agreements relating to the acquisition or disposition of
any interest in any business enterprise;
(vii) exclusive of oil, gas and mineral leases, agreements with
respect to the lease of real or personal property;
(viii) exclusive of oil and gas operating or similar agreements,
agreements concerning the management or operation of any real property;
(ix) partnership, joint venture, and profit sharing agreements;
(x) agreements with any Governmental Entity;
(xi) agreements relating to the release or disposal of
Hazardous Material;
(xii) agreements containing any covenant limiting the freedom of
Buyer or any Subsidiary to engage in any line of business or compete with
any other Person in any geographic area or during any period of time, other
than those that would not have a Material Adverse Effect;
(xiii) agreements not made in the ordinary course of business;
and
(xiv) other agreements, whether or not made in the ordinary
course of business, that are material to the business, assets, results of
operations, condition (financial or otherwise), or prospects of Buyer and
the Subsidiaries considered as a whole.
26
(b) Buyer has delivered or made available to Seller accurate and
complete copies of the agreements listed in Schedule 5.19. Each of such
-------------
agreements is a valid and binding agreement of Buyer and the Subsidiaries (to
the extent each is a party thereto) and (to the best knowledge of Buyer) the
other party or parties thereto, enforceable against Buyer and the Subsidiaries
(to the extent each is a party thereto) and (to the best knowledge of Buyer)
such other party or parties in accordance with its terms. Neither Buyer nor any
Subsidiary is in breach of or in default under, nor has any event occurred which
(with or without the giving of notice or the passage of time or both) would
constitute a default by Buyer or any Subsidiary under, any of such agreements,
and neither Buyer nor any Subsidiary has received any notice from, or given any
notice to, any other party indicating that Buyer or any Subsidiary is in breach
of or in default under any of such agreements. To the best knowledge of Buyer,
no other party to any of such agreements is in breach of or in default under
such agreements, nor has any assertion been made by Buyer or any Subsidiary of
any such breach or default.
(c) Neither Buyer nor any Subsidiary has received notice of any plan
or intention of any other party to any agreement to exercise any right of offset
with respect to, or any right to cancel or terminate, any agreement, and neither
Buyer nor any Subsidiary knows of any fact or circumstance that would justify
the exercise by any such other party of such a right other than the automatic
termination of such agreement in accordance with its terms. Neither Buyer nor
any Subsidiary currently contemplates, or has reason to believe any other Person
currently contemplates, any amendment or change to any agreement, which
amendment or change could have a Material Adverse Effect.
(d) Without limiting the generality of the other provisions in this
Section 5.19, the Key Employment Agreements are in full force and effect, and
each of ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇ is currently employed by Buyer pursuant to
a renewal term under such agreements.
Section 5.20. Labor Disputes and Acts of God. Neither the business nor
------------------------------
the properties of Buyer nor any Subsidiary has been affected by any fire,
explosion, accident, strike, lockout or other labor dispute, drought, storm,
hail, earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance), which, individually or in the aggregate,
could cause a Material Adverse Effect.
Section 5.21. Insurance. The Company and each Subsidiary carries
---------
insurance covering its properties and business adequate and customary for the
type and scope of its properties and business.
Section 5.22. Offering of Securities. All securities which have been
----------------------
offered or sold by Buyer and it Subsidiaries have been registered pursuant to
the Securities Act and applicable foreign and state securities laws or were
offered and sold pursuant to valid exemptions therefrom.
Section 5.23. Government Regulation. Buyer is not subject to regulation
---------------------
under the Public Utility Holding Company Act of 1935. Buyer is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment
27
Company Act of 1940, as amended or an "investment advisor" within the meaning of
the Advisers Act of 1940, as amended.
Section 5.24. Brokerage Fees. Neither Buyer nor any of its affiliates has
--------------
retained any financial advisor, broker, agent or finder or paid or agreed to pay
any financial advisor, broker, agent or finder on account of this Agreement or
any transaction contemplated hereby, which action would subject Seller or any of
its affiliates to any liability. Buyer shall indemnify and hold harmless Seller
from and against any and all losses, claims, damages and liabilities (including
legal and other expenses reasonably incurred in connection with investigating or
defending any claims or actions) with respect to any finder's fee, brokerage
commission or similar payment in connection with any transaction contemplated
hereby asserted by any Person on the basis of any act or statement made or
alleged to have been made by Buyer or any of its affiliates.
Section 5.25. Bankruptcy. There are no bankruptcy, reorganization or
----------
arrangement proceedings pending, being contemplated by, or to the knowledge of
Seller, threatened against Seller.
Section 5.26. Nature of Company Assets. The assets of the Buyer and its
------------------------
Subsidiaries consist solely of (a) reserves of oil, rights to reserves of oil
and associated exploration and production assets with a fair market value not
exceeding $500,000,000 and (b) other assets with a fair market value not
exceeding $15,000,000. For purposes of this Section 5.26, the term "associated
exploration and production assets" shall have the meaning ascribed thereto in
Section 802.3 of the Rules promulgated pursuant to the HSR Act.
Section 5.27. Full Disclosure. No representation or warranty made by
---------------
Buyer in this Agreement, and no statement of Buyer contained in any document,
certificate or other writing furnished or to be furnished by Buyer or its
representatives to Seller pursuant hereto or in connection herewith, contains or
will contain, at the time of delivery, any untrue statement of a material fact
or omits or will omit, at the time of delivery, to state any material fact
(other than industry-wide risks normally associated with the type of business
conducted by Buyer) necessary to make the statements contained therein, in light
of the circumstances in which they are made, not misleading. There is no fact
known to Buyer (other than industry-wide risks normally associated with the type
of business conducted by Buyer) that has not been disclosed to Seller in writing
which Buyer reasonably anticipates would result in a Material Adverse Effect.
ARTICLE VI
Certain Covenants of Seller and Buyer Pending Closing
-------------------------------------------------------
Section 6.1. Pre-Closing Covenants of Seller.
-------------------------------
(a) From the date hereof until Closing, Seller will use its reasonable
best efforts to give Buyer, and its attorneys and other representatives, access
at all reasonable times to
28
the Properties and to any contract files, lease or other title files, production
files, well files and other files of Seller pertaining to the ownership and/or
operation by the Partnerships of the Properties, and Seller will use its
reasonable best efforts to arrange for Buyer, and its attorneys and other
representatives, to have access to any such files. Seller shall not be obligated
to provide Buyer with access to any records or data which Seller or any
Partnership cannot provide to Buyer without, in its opinion, breaching
confidentiality agreements with other parties.
(b) Seller will use its reasonable best efforts to cause the
Partnerships to (i) continue the routine operation of the Properties in the
ordinary course of business and as would a prudent operator, (ii) operate the
Properties in conformity (in all material respects) with all applicable laws,
and all applicable rules, regulations and orders of all governmental agencies
having jurisdiction, and in conformity with all oil, gas and/or mineral leases,
and in conformity (in all material respects) with all Basic Documents other than
such leases, and (iii) fulfill all obligations (including without limitation all
obligations to make payments under leases or other Basic Documents) under such
leases, and (in all material respects) under such other Basic Documents and (in
all material respects) under such laws, rules, regulations and orders (without
limitation of the foregoing, the failure to perform an obligation, when such
failure could result in forfeiture or termination of rights of a Partnership
under a Basic Document, shall be considered material).
(c) Seller will not, without Buyer's prior consent:
(i) agree to make any new capital contributions to any
Partnership in connection with the ownership of the Interests;
(ii) to the extent of its rights under the Partnership
Agreements, propose the drilling of any additional ▇▇▇▇▇, or propose the
deepening, plugging back or reworking of any existing ▇▇▇▇▇, or propose the
conducting of any other operations which require consent under the
applicable operating agreement, or propose the conducting of any other
operations other than the normal operation of the existing ▇▇▇▇▇ on the Oil
and Gas Properties, or propose the abandonment of any ▇▇▇▇▇ on the Oil and
Gas Properties (and Seller agrees that it will advise Buyer of any such
proposals made by a general partner of a Partnership or (to the extent it
has knowledge) any third party and will respond to each such proposal in
the manner requested by Buyer);
(iii) to the extent of its rights under the Partnership
Agreements, consent to the sale, transfer or abandonment of any portion of
the Properties other than items of materials, supplies, machinery,
equipment, improvements or other personal property or fixtures forming a
part of the Properties (and then only if the same is replaced with an item
of equal suitability and value free of liens and security interests, which
replacement item will then, for the purposes of this Agreement, become part
of the Properties); or
29
(iv) agree to any amendment, modification or change to any
Partnership Agreement or waive any rights, duties or obligations of any
general partner of the Partnerships.
Notwithstanding the foregoing or anything else herein to the contrary, it is
acknowledged and agreed that Seller either has or will, prior to Closing,
execute and deliver an agreement to liquidate and dissolve the Partnerships
(exclusive of Famcor Oil W.T., L.P.), substantially in the form of the
instrument heretofore provided to Buyer in all material respects, and that such
execution and delivery will not be deemed a breach by Seller of any covenant and
agreement contained in this Section 6.1 or elsewhere herein.
Section 6.2. Pre-Closing Covenants of Buyer.
------------------------------
(a) During the period from the date hereof to the Closing, Buyer covenants
and agrees with Seller that Buyer and its Subsidiaries (i) shall each conduct
its operations according to its ordinary course of business consistent with past
practice and in compliance with Applicable Laws; (ii) shall each use its
reasonable best efforts to preserve, maintain and protect its properties; and
(iii) shall each use its reasonable best efforts to preserve intact its business
organization, to keep available the services of its officers and employees and
to maintain existing relationships with suppliers, operators, customers and
others having business relationships with it.
(b) During the period from the date hereof to the Closing, neither Buyer
nor any Subsidiary shall without the prior written consent of Seller:
(i) amend its Organic Documents or other governing instruments;
(ii) (A) issue, sell, or deliver (whether through the issuance
or granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any shares of its capital stock of any class or any
other securities or equity equivalents, exclusive of any shares issued
pursuant to options, warrants, commitments, subscriptions, rights to
purchase or otherwise existing on the date hereof); or (B) amend in any
respect any of the terms of any such securities outstanding as of the date
hereof;
(iii) (A) split, combine, or reclassify any shares of its
capital stock; or (B) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing a liquidation or dissolution of
Buyer or any Subsidiary;
(iv) except as provided in subsection (c) below, make any loans,
advances, or capital contributions to, or investments in, any other Person
(other than customary loans or advances to employees in amounts not
material to the maker of such loan or advance);
(v) (A) enter into, adopt, or (except as may be required by
law) amend or terminate any bonus, profit sharing, compensation, severance,
termination, stock
30
option, stock appreciation right, restricted stock, performance unit, stock
equivalent, stock purchase, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreement, trust, plan,
fund or other arrangement for the benefit or welfare of any director,
officer or employee; (B) except for normal increases in the ordinary course
of business consistent with past practice that, in the aggregate, do not
result in a material increase in benefits or compensation expense to Buyer,
increase in any manner the compensation or fringe benefits of any director,
officer or employee; or (C) pay to any director, officer or employee any
benefit not required by any employee benefit agreement, trust, plan, fund
or other arrangement as in effect on the date hereof;
(vi) make any capital expenditure or expenditures which,
individually, is in excess of $100,000 or, in the aggregate, are in excess
of $250,000;
(vii) amend any Tax Return or make any Tax election or settle or
compromise any federal, state, local, or foreign Tax liability material to
Buyer and the Subsidiaries considered as a whole;
(viii) pay, discharge, or satisfy any claims, liabilities, or
obligations (whether accrued, absolute, contingent, unliquidated, or
otherwise, and whether asserted or unasserted), other than the payment,
discharge, or satisfaction in the ordinary course of business consistent
with past practice, or in accordance with their terms, of liabilities
reflected or reserved against in the Financial Statements or incurred since
the date of the Latest Balance Sheet in the ordinary course of business
consistent with past practice; provided, however, that in no event shall
Buyer or any Subsidiary repay any long-term indebtedness except to the
extent required by the terms thereof;
(ix) take any action which would or might make any of the
representations or warranties of Buyer contained in this Agreement untrue
or inaccurate as of any time from the date of this Agreement to the Closing
or would or might result in any of the conditions set forth in this
Agreement not being satisfied; or
(x) authorize or propose, or agree in writing or otherwise to
take, any of the actions described in this Section.
(c) Notwithstanding anything in this Section 6.2 to the contrary, it
is expressly agreed that the execution and delivery by Buyer of (i) the Other
Acquisition Agreements, (ii) the Preferred Stock Purchase Agreement, (iii) the
Senior Credit Facility and (iv) the Subordinated Debt Agreement, and the
consummation of the respective transactions contemplated thereunder will not be
deemed to be a breach by Buyer of any covenant and agreement contained in this
Section 6.2 or elsewhere herein.
(d) Between the date hereof and the Closing, Buyer (i) shall give
Seller and its authorized representatives reasonable access, during regular
business hours, to all employees, all plants, offices, warehouses, and other
facilities, and all books and records, including work papers
31
and other materials prepared by Buyer's independent public accountants, of Buyer
and the Subsidiaries, (ii) shall permit Seller and its authorized
representatives to make such inspections as they may reasonably require and
(iii) shall cause Buyer's officers and those of the Subsidiaries to furnish
Seller and its authorized representatives with such financial and operating data
and other information with respect to Buyer and the Subsidiaries as Seller may
from time to time reasonably request; provided, however, that Buyer shall have
the right to have a representative present at all times of any such inspections,
interviews and examinations conducted at or on the offices or other facilities
or properties of Buyer or its affiliates or representatives.
Section 6.3. Pre-Closing Covenants of Seller and Buyer. Each party
-----------------------------------------
hereto agrees that it will not voluntarily undertake any course of action
inconsistent with the provisions or intent of this Agreement and will use its
reasonable best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things reasonably necessary, proper or advisable under
Applicable Law to consummate the transactions contemplated by this Agreement.
ARTICLE VII
Due Diligence Examination With Respect to the Properties
--------------------------------------------------------
Section 7.1. Inspection and Assertion of Defects.
-----------------------------------
(a) Buyer may, to the extent it deems appropriate, conduct, at its
sole cost, such title examination or investigation as it may choose to conduct
with respect to the Properties. Should, as a result of such examination and
investigation, or otherwise, matters come to Buyer's attention which would
constitute "Defects" (as below defined), and should there be one or more of such
Defects which Buyer determines it is unwilling to waive and close the
transaction contemplated hereby notwithstanding the fact that such Defects
exist, Buyer shall notify Seller in writing of such Defects as soon as they are
identified by Buyer, but in no event later than two business days prior to
Closing. Such Defects of which Buyer so provides notice are herein called
"Asserted Defects." All Defects with respect to which Buyer fails to so give
Seller notice will be deemed waived for all purposes. In the event that Buyer
notifies Seller of Asserted Defects, Seller shall have the right (but not the
obligation) to attempt to cure, prior to Closing, such Asserted Defects to the
reasonable satisfaction of Buyer (exclusive of a Defect in subsection (b)(iii)
below.
(b) The term "Defect" as used in this Section shall mean the
following:
(i) A Partnership's ownership of its Oil and Gas Properties is
such that, with respect to a well listed in Section 7.1(b)(i) of the Seller
Disclosure Schedule for such Partnership, it (A) entitles such Partnership
to receive a percentage share of the oil, gas and other hydrocarbons
produced from, or allocated to, such well which is less than the percentage
share set forth in Section 7.1(b)(i) of the Seller Disclosure Schedule in
connection with such well in the column headed "NRI" or (B) causes the
Partnership to be
32
obligated to bear a percentage share of the cost of operation of such well
greater than the percentage share set forth in Section 7.1(b)(i) of the
Seller Disclosure Schedule in connection with such well in the column
headed "WI" (unless the share of production from such well to which such
Partnership is entitled is proportionately larger than the "NRI" shown for
such well in Section 7.1(b)(i) of the Seller Disclosure Schedule); or
(ii) A Partnership's ownership of an Oil and Gas Property is
subject to a lien other than (A) a lien for taxes not yet delinquent, or
(B) a mechanic's or materialmen's lien (or other similar lien), or a lien
under an operating agreement or similar agreement, to the extent the same
relates to expenses incurred which are not yet due; or
(iii) A Partnership's ownership of an Oil and Gas Property is
subject to an imperfection in title which, if asserted, would cause a
Defect, as defined in clause (i) above, to exist, and such imperfection in
title is not such as would normally be waived by persons engaged in the oil
and gas business who are purchasing producing properties.
Section 7.2. Certain Price Adjustments.
-------------------------
(a) In the event that, as a part of the due diligence review provided
for in Section 7.1 above, Asserted Defects are presented to Seller and Seller is
unable (or unwilling) to cure such Asserted Defects, or in the event that Buyer
has elected to treat an Oil and Gas Property affected by a casualty loss as if
it was an Oil and Gas Property affected by an Asserted Defect (as provided in
Section 7.4), then Buyer and Seller shall, with respect to each Oil and Gas
Property affected by one or more Asserted Defects, attempt in good faith to
agree upon an appropriate adjustment to the Purchase Price to account for such
Asserted Defects. Notwithstanding the foregoing or anything herein to the
contrary, Seller may elect to specify as an appropriate adjustment to the
Purchase Price for a Defect of the type specified in Section 7.1(b)(ii), the
------------------
amount required to discharge the lien.
(b) Should Seller determine (or should Buyer, in the course of its
due diligence review contemplated by Section 7.1, determine) that the ownership
of Properties by a Partnership entitles such Partnership to a share of the
production from a well listed in Section 7.1(b)(i) of the Seller Disclosure
Schedule greater than the share shown for such well under the column headed
"NRI" on Schedule 7.1(b)(i) of the Seller Disclosure Schedule, then Seller may
propose an upward adjustment to the Base Purchase Price to account for such
fact, in which case such adjustment shall be handled in a similar manner as
provided above with respect to adjustments for Asserted Defects; provided that
the party making such determination shall notify the other party no later than
ten business days prior to the Closing.
(c) If the Net Title Adjustments (as defined below) do not exceed
$100,000, then the Base Purchase Price shall not be adjusted. If the Net Title
Adjustments do exceed $100,000, the Base Purchase Price shall be adjusted as
provided in subsection (d) or subsection (e) below by the amount by which the
Net Title Adjustments exceed $100,000. As used in this subsection (c), the term
"Net Title Adjustments" means the net amount of the adjustments to the
33
Base Purchase Price resulting from the procedures provided for above or Section
7.5 and attributable to any of the Defects referenced in subsections (i) through
(iv) of Section 7.1(b).
(d) Any reduction to the Base Purchase Price under subsection (c)
shall be effected by a decrease in the number of Preferred Shares equal to A
minus B, where "A" equals the number of shares of Buyer's Series A Convertible
Preferred Stock specified in Article III, where "B" equals C divided by D, where
"C" equals the Net Title Adjustments minus $100,000, and where "D" equals
$50.00.
(e) Any increase in the Base Purchase Price under subsection (c)
shall be effected by an increase in the number of Preferred Shares equal to A
plus B, with "A" and "B" being determined as provided in subsection (d) above.
Section 7.3. Waiver. Without limiting Section 7.1 and notwithstanding
------
anything else herein to the contrary, all Defects not raised by Buyer within the
time period specified in Section 7.1 shall be waived by Buyer for all purposes,
and Buyer shall have no right to seek an adjustment to the Purchase Price, make
a claim against Seller or seek indemnification from Seller with respect thereto.
Section 7.4. Casualty Loss. In the event of damage by fire or other
-------------
casualty to the Properties after the Effective Date and prior to the Closing,
then this Agreement shall remain in full force and effect, and (unless Buyer and
Seller shall otherwise agree) in such event as to each such Property so damaged
which is an Oil and Gas Property, such Property shall be treated as if it had an
Asserted Defect associated with it and the procedure provided for in this
Article VII shall be applicable thereto.
Section 7.5. Disputes. In the event Buyer and Seller are unable to agree
--------
prior to the Closing upon the existence of one or more Defects affecting an Oil
and Gas Property or one or more adjustments claimed by Buyer or Seller pursuant
to this Article VII as it relates to an Oil and Gas Property, any such dispute
(a "Disputed Claim") shall be settled pursuant to this Section 7.5 and shall
not prevent or delay the Closing. At Closing, the Purchase Price shall not be
adjusted on account of and no effect shall be given to the Disputed Claim.
Either Buyer or Seller shall have the right to submit the Disputed Claim to
final and binding arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association (the "AAA Rules"). Buyer and
Seller shall endeavor to select three neutral arbitrators by mutual agreement.
If such agreement cannot be reached within 30 calendar days after the Closing,
each party shall select its own neutral arbitrator within 15 days of the
expiration of such 30-day period and the two neutral arbitrators so selected
shall select a third neutral arbitrator within 10 days of the expiration of such
15-day period. If they fail to do so, either arbitrator or Buyer or Seller may
request the judge of the United States District Court for the Southern District
of Texas having greatest tenure, but not yet on retired or senior status, to
appoint a third neutral arbitrator. The three persons thus selected shall be
the arbitrators for such arbitration. Each arbitrator must be experienced in
and knowledgeable about the oil and gas exploration business and third
arbitrator shall be required to meet the qualification requirements of the AAA
Rules, whether appointed by
34
the arbitrators or by the judge as provided above. The board of arbitrators may
in all matters act through a majority of its members on each Disputed Claim if
unanimity is not attained. The award as to any Disputed Claim shall be made
within 30 days following the close of the final hearing and the filing of any
post hearing briefs authorized by the arbitrator(s) in respect of such claim.
The award of the arbitrator shall be final and binding on the parties hereto and
the subject matter. Judgment upon the award rendered by the arbitrator(s) may be
entered by any court having jurisdiction. The place of arbitration shall be in
Houston, Texas. The amount of any reduction in the Purchase Price to which Buyer
becomes entitled under the final and binding decision of the arbitrators shall
be effected in a manner similar to that set forth in Section 7.2(d). Each party
shall be entitled to inspect and obtain a copy of relevant documents in the
possession or control of the other party and to take depositions of the other
parties' employees, agents, representatives and witnesses (including expert
witnesses). All such discovery shall be in accordance with procedures approved
by the arbitrators. Unless otherwise provided in the award, each party shall
bear its own costs of discovery. All discovery shall be expedited, consistent
with the nature and complexity of the Disputed Claim and consistent with
fairness and justice. The arbitrators shall have the power to compel any party
to comply with discovery requests of the other parties and to issue binding
orders relating to any discovery dispute which shall be enforceable in the same
manner as awards. The arbitrators also shall have the power to impose sanctions
for abuse or frustration of the arbitration process, including without
limitation, the refusal to comply with orders of the arbitrators relating to
discovery and compliance with subpoenas. Each of the parties hereto hereby
irrevocably submits to the jurisdiction of the courts of the State of Texas for
entry of any arbitration decision or to obtain any preliminary relief which may
be necessary and hereby consents to the enforcement by such courts of any award
rendered in such arbitration. The compensation and expenses of the arbitrators
shall be borne equally by the parties. Each party shall bear and pay any and all
costs and expenses incurred by it in connection with the arbitration.
ARTICLE VIII
Conditions Precedent to the Obligations of the Parties
------------------------------------------------------
Section 8.1. Conditions Precedent to the Obligations of Buyer. The
------------------------------------------------
obligations of Buyer under this Agreement are subject to each of the following
conditions being met:
(a) All the representations and warranties of Seller contained in
this Agreement, and in any agreement, instrument or document delivered pursuant
hereto or in connection herewith on or prior to the Closing Date, shall be true
and correct in all material respects on and as of the Closing Date as if made on
and as of such date, except as affected by transactions permitted by this
Agreement, and except to the extent that any such representation or warranty is
made as of a specified date, in which case such representation or warranty shall
have been true and correct in all material respects as of such specified date.
For the sole purpose of determining whether or not any of such representations
and warranties are true and correct as aforesaid on and as of the Closing Date,
no effect shall be given to any materiality qualification contained in such
representation or warranty.
35
(b) Seller shall have performed and complied in all material respects
with (or compliance therewith shall have been waived by Buyer) each and every
covenant, agreement and condition required by this Agreement to be performed or
complied with by Seller prior to or at the Closing.
(c) No suit, action or other proceedings shall, on the Closing Date,
be pending or threatened before any Governmental Entity seeking to restrain,
prohibit, or obtain damages or other relief in connection with the consummation
of the transactions contemplated by this Agreement.
(d) There shall have been obtained any and all consents, approvals,
authorizations, licenses, orders or permits set forth on Schedule 5.7; and no
------------
other consent, approval, authorization, license, order or permit of, or
declaration, filing or registration with, or notification to, any Governmental
Entity, or any other Person or entity, the failure to comply with which would
have a Material Adverse Effect, shall be required to be made or obtained by
Buyer or any Subsidiary in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby.
(e) All waiting periods (and any extensions thereof) applicable to
this Agreement and the transactions contemplated hereby under the HSR Act shall
have expired or been terminated.
(f) GP Approval shall have been obtained.
Section 8.2. Conditions Precedent to the Obligations of Seller. The
-------------------------------------------------
obligations of Seller under this Agreement are subject to each of the following
conditions being met:
(a) All the representations and warranties of Buyer contained in this
Agreement, and in any agreement, instrument or document delivered pursuant
hereto or in connection herewith on or prior to the Closing Date, shall be true
and correct in all material respects on and as of the Closing Date as if made on
and as of such date, except as affected by transactions permitted by this
Agreement, and except to the extent that any such representation or warranty is
made as of a specified date, in which case such representation or warranty shall
have been true and correct in all material respects as of such specified date.
For the sole purpose of determining whether or not any of such representations
and warranties are true and correct as aforesaid on and as of the Closing Date,
no effect shall be given to any materiality qualification contained in such
representation or warranty.
(b) Buyer shall have performed and complied in all material respects
with (or compliance therewith shall have been waived by Seller) each and every
covenant, agreement and condition required by this Agreement to be performed or
complied with by Buyer prior to or at the Closing.
36
(c) No suit, action or other proceedings shall, on the date of
Closing, be pending or threatened before any Governmental Entity seeking to
restrain, prohibit, or obtain damages or other relief in connection with the
consummation of the transactions contemplated by this Agreement.
(d) The total of the net Purchase Price reductions (if any) which
result from the application of Article VII do not exceed 30% of the original
aggregate stated value of the Preferred Shares.
(e) All waiting periods (and any extensions thereof) applicable to
this Agreement and the transactions contemplated hereby under the HSR Act shall
have expired or been terminated.
(f) There shall have been obtained any and all consents, approvals,
authorizations, licenses, orders or permits set forth on Schedule 5.7; and no
------------
other consent, approval, authorization, license, order or permit of, or
declaration, filing or registration with, or notification to, any Governmental
Entity, or any other Person or entity, the failure to comply with which would
have a Material Adverse Effect, shall be required to be made or obtained by
Buyer or any Subsidiary in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby.
(g) Since the date of this Agreement, there shall not have been any
material adverse change in the business, assets, results of operations,
condition (financial or otherwise) or prospects of Buyer and the Subsidiaries
considered as a whole.
(h) GP Approval shall have been obtained.
ARTICLE IX
Closing of Transaction
----------------------
Section 9.1. The Closing. The closing (herein called the "Closing") of
-----------
the transaction contemplated hereby shall take place in the offices of ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P., at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇, at 10:00 a.m. Central Standard Time, on May 1, 2000, or at such other
date and time as Buyer and Seller may mutually agree upon (such date and time
being herein called the "Closing Date").
Section 9.2. Seller's Closing Obligations. At the Closing, Seller shall:
----------------------------
(a) execute, acknowledge and deliver to Buyer (or its designated
Subsidiary) an assignment or assignments of the Interests (the "Assignment"),
substantially in the form attached hereto as Exhibit 9.2(a) in all material
--------------
respects, effective as of 12:01 o'clock a.m., Central Daylight Time on May 1,
2000 (the "Effective Date"); and
37
(b) deliver to Buyer such other certificates, instruments, and
documents as may be reasonably requested by Buyer prior to the Closing Date to
carry out the intent and purposes of this Agreement.
Section 9.3. Buyer's Closing Obligations. At the Closing, Buyer shall:
---------------------------
(a) deliver to Seller a stock certificate evidencing the Preferred
Shares;
(b) execute and deliver to Seller a certificate executed on behalf of
Buyer by an authorized signatory of Buyer, dated the Closing Date, representing
and certifying, in such detail as Seller may reasonably request, that the
conditions set forth in Sections 8.2(a) and 8.2(b) have been fulfilled;
(c) deliver to Seller an opinion, in form, scope and content
reasonably acceptable to Seller, of Jenkens & ▇▇▇▇▇▇▇▇▇, counsel to Buyer,
dated the Closing Date;
(d) deliver to Seller the certificates, instruments and documents
listed below:
(i) certified copy of a written consent or resolutions of the
Board of Directors of Buyer authorizing the execution, delivery and
performance by Buyer of this Agreement and the Ancillary Documents, as
necessary;
(ii) such other certificates, instruments, and documents as may
be reasonably requested by Seller prior to the Closing Date to carry out
the intent and purposes of this Agreement.
Section 9.4. Delivery of Files. No later than 10 business days after the
-----------------
Closing, Seller shall deliver to Buyer such of Seller's files and other
materials pertaining to the ownership of the Interests as Buyer may request.
ARTICLE X
Pre-Closing Termination
------------------------
Section 10.1. Termination. This Agreement may be terminated and the
-----------
transactions contemplated hereby abandoned at any time prior to the Closing in
the following manner:
(a) by mutual written consent of Seller and Buyer;
(b) by either Seller or Buyer if any Governmental Entity with
jurisdiction over such matters shall have issued an order or injunction
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereunder, and such order, decree, ruling or other
action shall have become final and unappealable; or
38
(c) by either Seller or Buyer if the Closing shall not have occurred
on or before May 30, 2000; provided, however, that the right to terminate this
Agreement under this Section 10.1(c) shall not be available to any party whose
failure to fulfill any obligation under this Agreement shall have been the cause
of, or shall have resulted in, the failure of the Closing to occur prior to such
date.
Section 10.2. Effect of Termination. In the event of termination of this
---------------------
Agreement pursuant to Section 10.1 by Seller, on the one hand, or Buyer, on the
other hand, written notice thereof shall forthwith be given to the other party
specifying the provision hereof pursuant to which such termination is made, and
this Agreement shall become void and have no effect, except that the agreements
contained in this Section and in Article XVI shall survive the termination
hereof. Nothing contained in this Section shall relieve any party from
liability for damages actually incurred as a result of any breach of this
Agreement.
ARTICLE XI
Rights to Distributions, Assumption of Liabilities and Indemnification
----------------------------------------------------------------------
Upon consummation of the transactions contemplated hereunder, Buyer (a)
shall (i) be entitled to receive all distributions of cash and property made by
the Partnerships on or after the Closing Date and attributable to the Interests,
regardless of whether such distributions arise or are otherwise attributable to
sales of production or other events occurring before, on or after the Effective
Date and (ii) assume and timely pay and perform all duties, obligations and
liabilities relating to the ownership of the Interests, regardless of whether
such duties, obligations and liabilities arise or are otherwise attributable to
events occurring before, on or after the Effective Date, and (b) shall,
indemnify and hold Seller harmless from and against any and all claims,
obligations, actions, liabilities, damages, or expenses arising out of the
ownership of the Interests, whether arising before, on or after the Effective
Date.
ARTICLE XII
Affirmative Post Closing Covenants of Buyer
-------------------------------------------
To induce Seller to enter into this Agreement, Buyer warrants, covenants
and agrees that it will comply with and observe the following covenants and
provisions, and will cause each Subsidiary to comply with and observe such of
the following covenants and provisions as are applicable to such Subsidiary:
Section 12.1. Inspection Rights. At any reasonable time and from time to
-----------------
time upon reasonable notice, Buyer will permit Seller or its agents or
representatives to examine and make copies of and extracts from the records and
books of account of, and visit and inspect the properties of Buyer and any
Subsidiary, and to discuss the affairs, finances and accounts of Buyer and any
Subsidiary with any of their officers or directors and independent accountants.
39
Section 12.2. Books, Financial Statements and Reports. Buyer and each of
---------------------------------------
its Subsidiaries will at all times maintain full and accurate books of account
and records. Buyer will maintain and will cause its Subsidiaries to maintain a
standard system of accounting, will maintain its Fiscal Year, and will furnish
the following statements and reports to Seller at Buyer's expense:
(a) As soon as available, and in any event within one hundred five
(105) days after the end of each Fiscal Year, complete consolidated financial
statements of Buyer together with all notes thereto, prepared in reasonable
detail in accordance with U.S. GAAP, together with an unqualified opinion, based
on an audit using generally accepted auditing standards, by independent
certified public accountants selected by Buyer and reasonably acceptable to
Seller, stating that such consolidated financial statements have been so
prepared. These financial statements shall contain a consolidated balance sheet
as of the end of such Fiscal Year and consolidated statements of earnings, of
cash flows, and of changes in owners' equity for such Fiscal Year, each setting
forth in comparative form the corresponding figures for the preceding Fiscal
Year.
(b) As soon as available, and in any event within fifty (50) days
after the end of each Fiscal Quarter, Buyer's consolidated balance sheet as of
the end of such Fiscal Quarter and consolidated statements of Buyer's earnings
and cash flows for the period from the beginning of the then current Fiscal Year
to the end of such Fiscal Quarter, all in reasonable detail and prepared in
accordance with U.S. GAAP, subject to changes resulting from normal year-end
adjustments. In addition Buyer will, together with each such set of financial
statements and each set of financial statements furnished under subsection (a)
of this section, furnish a certificate in a form reasonably acceptable to Seller
signed by the chief financial officer of Buyer stating that such financial
statements are accurate and complete (subject to normal year-end adjustments)
and stating that no Default exists at the end of such Fiscal Quarter or at the
time of such certificate or specifying the nature and period of existence of any
such Default.
(c) Promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent by Buyer to its
stockholders and all registration statements, periodic reports and other
statements and schedules filed by Buyer with any securities exchange, the
Securities and Exchange Commission or any similar Governmental Entity.
(d) Annually within 60 days after the end of each Fiscal Year
beginning with the Fiscal Year ending April 30, 2000, a report containing (i) an
estimation of the oil and gas reserves, classified by appropriate categories, as
of the end of the preceding fiscal year attributable to the interest of Buyer
therein, (ii) a projection of the rate of production of and net income from such
reserves with respect to each such interest, (iii) a calculation of the present
worth of such net income discounted at a rate of 10% and (iv) a schedule or
complete description of all assumptions, estimates and projections made or used
in the preparation of such report. Each such report shall be prepared in
accordance with customary and generally accepted standards and practices for
petroleum engineers, and shall be based on (1) prices determined by the Holders
of a Requisite Majority, (2) lease operating expenses and production taxes
derived from and
40
consistent with those actually incurred by Buyer, escalated at the same rate, if
any, being applied to prices and (3) such other assumptions as shall be
designated by the Holders of a Requisite Majority. In addition to the foregoing,
the Holders of a Requisite Majority shall have the right from time to time to
cause the independent petroleum engineer referenced below to prepare an
additional report of the type described above, not to exceed one additional
report in any one calendar year, in which event all fees and expenses incurred
in connection with obtaining such additional report shall be paid by Buyer. Each
report under this subsection shall be prepared by an independent petroleum
engineer designated by Buyer and approved by the Holders of a Requisite
Majority. Each annual report referenced above shall also include an estimate of
Buyer's proved oil and gas reserves (as defined in Regulation S-X promulgated by
the Securities and Exchange Commission) and a calculation of the "present value
of estimated future net revenues" from such proved oil and gas reserves, with
such present worth calculation to be made in accordance with Regulation S-X, as
promulgated by the Securities and Exchange Commission.
(e) Promptly, such other information with respect to the business and
operations of Buyer and its Subsidiaries, as Seller may reasonably request.
Section 12.3. Notice of Material Events and Change of Address. Buyer will
-----------------------------------------------
promptly notify Seller in writing, stating that such notice is being given
pursuant to this Agreement, of:
(a) the occurrence of an event or circumstance that could reasonably
be expected to have a Material Adverse Effect,
(b) the occurrence of any Default,
(c) the acceleration of the maturity of any indebtedness owed by
Buyer or any Subsidiary thereof or of any default by any Buyer or any such
Subsidiary under any indenture, mortgage, agreement, contract or other
instrument to which any of them is a party or by which any of them or any of
their properties is bound, if such acceleration or default could reasonably be
expected to have a Material Adverse Effect,
(d) any claim of $100,000 or more, any notice of potential liability
under any Environmental Laws which might exceed such amount, or any other
material adverse claim asserted against Buyer or any Subsidiary thereof or with
respect to Buyer or any of such Subsidiary's properties, and
(e) the filing of any suit or proceeding against Buyer or any
Subsidiary thereof in which an adverse decision could cause a Material Adverse
Effect.
Upon the occurrence of any of the foregoing Buyer and any Subsidiary thereof
will take all necessary or appropriate steps to remedy promptly any such
Material Adverse Effect, Default, acceleration or default, to protect against
any such adverse claim, to defend any such suit or proceeding, and to resolve
all controversies on account of any of the foregoing.
41
Section 12.4. Maintenance of Properties. Buyer and each of its
-------------------------
Subsidiaries will maintain, preserve, protect, and keep all property used or
useful in the conduct of its business in good condition and in compliance with
all Applicable Laws, and will from time to time make all repairs, renewals and
replacements needed to enable the business and operations carried on in
connection therewith to be promptly and advantageously conducted at all times.
Section 12.5. Maintenance of Existence and Qualifications. Buyer and each
-------------------------------------------
of its Subsidiaries will maintain and preserve its existence and its rights and
franchises in full force and effect and will qualify to do business in all
states or jurisdictions where required by Applicable Law, except where the
failure so to qualify will not cause a Material Adverse Effect.
Section 12.6. Payment of Trade Liabilities, Taxes, etc. Buyer and each of
-----------------------------------------
its Subsidiaries will (a) timely file all required Tax Returns; (b) timely pay
all Taxes, assessments, and other governmental charges or levies imposed upon it
or upon its income, profits or property; (c) timely withhold and pay over to the
proper Governmental Entity all amounts required to be withheld and paid over
under Applicable Laws; (d) pay when due all Liabilities owed by it on ordinary
trade terms to vendors, suppliers and other Persons providing goods and services
used by it in the ordinary course of its business; (e) pay and discharge when
due all other Liabilities now or hereafter owed by it; and (f) maintain
appropriate accruals and reserves for all of the foregoing in accordance with
U.S. GAAP. Buyer and each of its Subsidiaries may, however, delay paying or
discharging any of the foregoing so long as it is in good faith contesting the
validity thereof by appropriate proceedings and has set aside on its books
adequate reserves therefor.
Section 12.7. Insurance. Buyer and each of its Subsidiaries will keep or
---------
cause to be kept insured by financially sound and reputable insurers its
properties in such forms and amounts and against such risks as are customary for
Persons engaged in the same or similar business of owning and operating similar
properties.
Section 12.8. Compliance with Agreements and Law. Buyer and each of its
----------------------------------
Subsidiaries will perform all material obligations it is required to perform
under the terms of each indenture, mortgage, deed of trust, security agreement,
lease, franchise, agreement, contract or other instrument or obligation to which
it is a party or by which it or any of its properties is bound. Buyer and each
of its Subsidiaries will conduct its business and affairs in compliance with all
Applicable Law.
Section 12.9. Charter Amendment Approval. Buyer shall cause Charter
--------------------------
Amendment Approval by September 30, 2000.
42
ARTICLE XIII
Post Closing Negative Covenants of Buyer
----------------------------------------
To induce Seller to enter into this Agreement, Buyer warrants, covenants
and agrees that, until all of the Preferred Shares have been converted into
Preferred Conversion Shares, it will comply with and observe the following
covenants and provisions, and will cause each Subsidiary to comply with and
observe such of the following covenants and provisions as are applicable to such
Subsidiary:
Section 13.1. Indebtedness. Neither Buyer nor any Subsidiary thereof will
------------
in any manner owe or be liable for Indebtedness except:
(a) the Senior Credit Facility;
(b) the Subordinated Debt;
(c) purchase money Indebtedness and Indebtedness under leases of
Buyer or such Subsidiary as lessee which are capitalized in accordance with U.S.
GAAP, in an aggregate principal amount not to exceed $100,000 at any time,
provided that such purchase money Indebtedness and Indebtedness under capital
leases do not in the aggregate exceed $250,000; and
(d) Old Latex Payables.
Section 13.2. Limitation on Liens. Neither Buyer nor any Subsidiary
-------------------
thereof will create, assume or permit to exist any Lien upon any of the
properties or assets which it now owns or hereafter acquires, except the
following ("Permitted Liens"):
(a) Liens which secure the Senior Credit Facility; and
(b) Statutory Liens for taxes, statutory mechanics' and materialmen's
Liens incurred in the ordinary course of business, and other similar Liens
incurred in the ordinary course of business, provided such Liens do not secure
Indebtedness or secure only Indebtedness which is not delinquent or for which
adequate reserves have been set aside.
Section 13.3. Limitation on Mergers. Except as expressly provided in this
---------------------
Section, neither Buyer nor any Subsidiary thereof will merge or consolidate with
or into any other business entity. Any Subsidiary of Buyer may, however, be
merged into or consolidated with either Buyer or another Subsidiary which is
wholly-owned by Buyer, so long as Buyer or the Subsidiary wholly-owned by Buyer
is the surviving business entity. Buyer will not issue any securities other than
(i) Common Stock (including the shares of Common Stock to be issued upon the
conversion of the Series A Preferred) or (ii) any options or warrants giving
the holders thereof only the right to acquire such shares. No Subsidiary of
Buyer will issue any additional shares of its capital stock or other securities
or any options, warrants or other rights to acquire such additional shares or
43
other securities except to Buyer or to another Subsidiary. No Subsidiary of
Buyer which is a partnership will allow any diminution of Buyer's interest
(direct or indirect) therein.
Section 13.4. Limitation on Sales of Property. Neither Buyer nor any
-------------------------------
Subsidiary thereof will sell, transfer, lease, exchange, alienate or dispose of
any of its assets or properties except:
(a) equipment which is worthless or obsolete or which is replaced by
equipment of equal suitability and value;
(b) inventory (including oil and gas sold as produced and seismic
data) which is sold in the ordinary course of business on ordinary trade terms;
or
(c) other property which is sold for fair consideration not in the
aggregate in excess of $500,000 in any Fiscal Year (commencing with Fiscal Year
2000).
Section 13.5. Limitation on Investments and New Businesses. Neither Buyer
--------------------------------------------
nor any Subsidiary thereof will make any expenditure or commitment or incur any
obligation or enter into or engage in any transaction except in the ordinary
course of business (which ordinary course of business includes the acquisition,
directly or indirectly, of oil and gas properties), engage directly or
indirectly in any business or conduct any operations except in connection with
or incidental to its present businesses and operations, make any acquisitions of
or capital contributions to or other investments in any Person, other than
Permitted Investments, or make any significant acquisitions or investments in
any properties other than oil and gas properties.
Section 13.6. Transactions with Affiliates. Neither Buyer nor any of its
----------------------------
Subsidiaries will engage in any material transaction with any of its affiliates
on terms which are less favorable to it than those which would have been
obtainable at the time in arm's-length dealing with Persons other than such
affiliates.
Section 13.7. Restricted Payments. Buyer will not, and will not permit
-------------------
any of its Subsidiaries to, declare or make, or incur any liability to declare
or make, any Restricted Payment.
ARTICLE XIV
Events of Default and Remedies
------------------------------
Section 14.1. Events of Default. If any of the following events ("Events
-----------------
of Default") shall occur and be continuing:
(a) Buyer fails to pay any dividends on the Preferred Shares when due
as required under the terms of the Certificate of Designation;
44
(b) Buyer fails to redeem the Preferred Shares when due as required
under the terms of the Certificate of Designation;
(c) a default in the performance or observation of any covenant,
agreement or condition contained in (i) Article XII or Article XIII, (ii) the
Organic Documents with respect to the Series A Preferred (exclusive of a
default described in subsection (a) or subsection (b) above, or (iii) any other
Ancillary Document, which default is not remedied within 15 days after the
earlier of (A) the day on which Buyer first obtains knowledge of such default or
(B) the day on which written notice thereof is given to Buyer by any registered
holder of the Preferred Shares;
(d) any representation or warranty previously, presently or hereafter
made in writing by or on behalf of Buyer or any Subsidiary thereof in
connection with this Agreement or any Ancillary Document shall prove to have
been false or incorrect in any material respect on any date on or as of which
made, which default is not remedied within 30 days after the earlier of (i) the
day on which Buyer first obtains knowledge of such default or (ii) the day on
which written notice thereof is given to Buyer by any registered holder of the
Preferred Shares;
(e) Buyer or any Subsidiary fails to duly observe, perform or comply
with any term or condition of any loan document relating to the Senior Credit
Facility, the Subordinated Debt Agreement or any other agreement or instrument
with any Person, if such agreement or instrument is materially significant to
Buyer or such Subsidiary, and such failure is not remedied within the applicable
period of grace (if any) provided in such agreement or instrument (it being
agreed that each of the Other Acquisition Agreements and the Preferred Stock
Purchase Agreement is materially significant to Buyer);
(f) Buyer or any Subsidiary thereof fails to pay any portion, when
such portion is due, of any of its Indebtedness in excess of $100,000 (exclusive
of the Old LaTex Payables), or breaches or defaults in the performance of any
Agreement or instrument by which any such Indebtedness is issued, evidenced,
governed, or secured, and any such failure, breach or default continues beyond
any applicable period of grace provided therefor;
(g) Buyer or any Subsidiary thereof:
(i) suffers the entry against it of a judgment, decree or order
for relief by a tribunal of competent jurisdiction in an involuntary
proceeding commenced under any applicable bankruptcy, insolvency or other
similar Applicable Law of any jurisdiction now or hereafter in effect,
including the United States federal Bankruptcy Code or similar foreign law,
as from time to time amended, or has any such proceeding commenced against
it which remains undismissed for a period of thirty days; or
(ii) commences a voluntary case under any applicable bankruptcy,
insolvency or similar Applicable Law now or hereafter in effect, including
the United States federal Bankruptcy Code or similar foreign law, as from
time to time amended; or applies for or consents to the entry of an order
for relief in an involuntary case under any
45
such Applicable Law; or makes a general assignment for the benefit of
creditors; or fails generally to pay (or admits in writing its inability to
pay) its debts as such debts become due; or takes corporate or other action
to authorize any of the foregoing; or
(iii) suffers the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of all or a substantial part of its assets in a proceeding brought
against or initiated by it, and such appointment or taking possession is
neither made ineffective nor discharged within thirty days after the making
thereof, or such appointment or taking possession is at any time consented
to, requested by, or acquiesced to by it; or
(iv) suffers the entry against it of a final judgment for the
payment of money in excess of $250,000 (not covered by insurance), unless
the same is discharged within thirty days after the date of entry thereof
or an appeal or appropriate proceeding for review thereof is taken within
such period and a stay of execution pending such appeal is obtained; or
(v) suffers a writ or warrant of attachment or any similar
process to be issued by any tribunal against all or any substantial part of
its assets, and such writ or warrant of attachment or any similar process
is not stayed or released within thirty days after the entry or levy
thereof or after any stay is vacated or set aside;
(h) Any Change in Control occurs; and
(i) Any Material Adverse Effect occurs.
Upon the occurrence of an Event of Default, (x) Seller or any other holder
of the Preferred Shares holding a majority of the Outstanding Common Stock may,
by notice to the Company, request that Buyer redeem all of the Preferred Shares
at a per share purchase price of $50.00 plus all accrued and unpaid dividends
thereon; (y) Seller shall have such rights as provided in the Organic
Documents; and (z) Seller may proceed to protect and enforce its rights by suit
in equity (including a suit for recission), action at law or other appropriate
proceeding either for specific performance of any covenant, provision or
condition contained or incorporated by reference to this Agreement or in aid of
the exercise of any power granted in this Agreement.
Without limiting the rights of the holders of the Series A Preferred, Buyer
and the Subsidiaries hereby agree that the holders of the Series A Preferred
would have no adequate remedy at law, for monetary compensation or otherwise,
for the damages that would be suffered if Buyer or the Subsidiaries were to fail
to comply with its obligations under Article IX, and that Buyer and the
Subsidiaries therefore agree that the holders of the Series A Preferred shall be
entitled to obtain specific performance of Buyer's obligations under this
Agreement.
Section 14.2. Annulment of Defaults. Section 14.1 is subject to the
---------------------
condition that if, at any time after a dividend shall have become due and
payable, and before any judgment or decree
46
for the payment of the moneys so due, or any thereof, shall have been entered,
then and in every such case Seller may, by written instrument filed with Buyer,
rescind and annul such declaration and its consequences; but no such recission
or annulment shall extend to or affect and subsequent default or Event of
Default or impair any right consequent thereon.
Section 14.3. Expiration. The provisions of Sections 14.1 and 14.2 shall
----------
automatically expire and be of no further force or effect upon such date as all
of the Preferred Shares have been converted into Preferred Conversion Shares.
ARTICLE XV
Notices
-------
All notices, requests, demands, and other communications required or
permitted to be given or made hereunder by any party hereto shall be in writing
and shall be deemed to have been duly given or made if (i) delivered personally,
(ii) transmitted by first class registered or certified mail, postage prepaid,
return receipt requested, (iii) sent by prepaid overnight courier service, or
(iv) sent by telecopy or facsimile transmission, answer back requested, to the
parties at the following addresses (or at such other addresses as shall be
specified by the parties by like notice):
If to Seller: Energy Capital Investment Company PLC
------------
ECIC Corporation
c/o EnCap Investments L.L.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
If to Buyer: AROC Inc.
-----------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to: Jenkens & ▇▇▇▇▇▇▇▇▇, a Professional Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: W. ▇▇▇▇ ▇▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
Such notices, requests, demands, and other communications shall be effective (i)
if delivered personally or sent by courier service, upon actual receipt by the
intended recipient, (ii) if mailed, upon the earlier of five days after deposit
in the mail or the date of delivery as shown by the return
47
receipt therefor or (iii) if sent by telecopy or facsimile transmission, when
the answer back is received.
ARTICLE XVI
Miscellaneous Matters
---------------------
Section 16.1. Survival of Provisions. All representations and warranties
----------------------
made herein by Buyer and Seller shall be continuing and shall be true and
correct on and as of the date of Closing with the same force and effect as if
made at that time and, except as provided below, all of such representations and
warranties shall survive the Closing and the delivery of the Assignment. The
representations of Seller contained in Section 4.6 (to the extent such
representations relate to the Properties), in Sections 4.7 through 4.20 and in
Section 4.25 shall expire with, and be terminated and extinguished by, the
Closing, and Seller shall have no liability with respect to such representations
and warranties pursuant to this Section 16.1, 16.5 or otherwise. The provisions
of, and the obligations of the parties under, Article IX (to the extent the
same are, by mutual agreement, not performed at Closing), and Articles X through
XVI inclusive shall survive the Closing and the delivery of the Assignment.
Section 16.2. Public Announcements. Except as may be required by
--------------------
Applicable Law, neither Seller, on the one hand, nor Buyer, on the other, shall
issue any press release or otherwise make any public statement with respect to
this Agreement or the transactions contemplated hereby without the prior written
consent of the other party (which consent shall not be unreasonably withheld).
Any such press release or public statement required by Applicable Law shall only
be made after reasonable notice to the other party, and in such case the party
proposing to make such a press release or public statement shall consult with
the other party.
Section 16.3. Fees and Expenses.
-----------------
(a) Except as otherwise expressly provided in this Agreement or as
agreed upon by the parties hereto, all fees and expense, including fees and
expenses of counsel, incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such fee
or expense.
(b) Notwithstanding anything to the contrary herein, since the
transaction contemplated hereby is an isolated transaction, no sales tax will be
collected from Buyer. If, however, this transaction is later deemed to be other
than an occasional sale, Buyer agrees to be solely responsible, and shall
indemnify and hold Seller (and their respective partners, and each of their and
each such partners' parent and subsidiary companies and other affiliates, and
shareholders, managers, owners, directors, officers, employees, consultants, and
agents, respectively) harmless, from any and all sales or transfer taxes or fees
(including related penalty, interest or legal costs) due by virtue of this
transaction on the Interests or Properties transferred pursuant hereto and Buyer
shall remit such sales or transfer taxes at that time. Seller and Buyer
48
agree to cooperate with each other in demonstrating that the requirements for an
occasional or isolated sale or any other sales tax exemption have been met.
(c) All sales, transfer, filing, recordation, registration, stamp and
similar Taxes and fees arising from or associated with the issue and sale of the
Preferred Shares contemplated hereunder or any transfer hereafter by a
Partnership to Buyer of an interest in the Properties, whether levied on Seller
or Buyer, shall be borne by Buyer, and Buyer shall file all necessary
documentation with respect to, and make all payments of, such Taxes and fees on
a timely basis.
Section 16.4. Costs of Enforcement. If any party hereto is required to
--------------------
take action to enforce its rights under this Agreement, the prevailing party
shall be entitled to its reasonable expenses, including attorneys' fees and
expenses, in connection with any such action.
Section 16.5. Indemnification.
---------------
(a) Subject to the terms and conditions of this Section 16.5, Buyer
shall indemnify, defend and hold harmless Seller from and against any and all
claims, actions, causes of action, demands, assessments, losses, damages,
liabilities, judgments, settlements, penalties, costs and expenses (including
reasonable attorneys' fees and expenses), of any nature (collectively,
"Damages") whatsoever, asserted against, resulting to, imposed upon, or incurred
by Seller, directly or indirectly, by reason of or resulting from any breach by
Buyer of any of its representations, warranties, covenants or agreements
contained in this Agreement or in any certificate, instrument or document
delivered pursuant hereto.
(b) Subject to the terms and conditions of this Section 16.5 (and
Section 16.1), Seller shall indemnify, defend and hold harmless Buyer from and
against any and all Damages, asserted against, resulting to, imposed upon, or
incurred by Buyer, directly or indirectly, by reason of or resulting from any
breach by Seller of any of its representations, warranties, covenants or
agreements contained in this Agreement or in any certificate, instrument or
document delivered pursuant hereto.
(c) Promptly after receipt by an indemnified party under Section
16.5(a) or Section 16.5(b) of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party under such Section, give written notice to the indemnifying
party of the commencement thereof , but the failure so to notify the
indemnifying party shall not relieve it of any liability that it may have to any
indemnified party except to the extent the indemnifying party demonstrates that
the defense of such action is prejudiced thereby. In case any such action shall
be brought against an indemnified party and it shall give written notice to the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it may wish, to assume
the defense thereof with counsel reasonably satisfactory to such indemnified
party. If the indemnifying party elects to assume the defense of such action,
the indemnified party shall have the right to employ separate counsel at its own
expense and to participate in the defense thereof. If the indemnifying party
elects not to assume (or fails to assume) the defense of such action, the
49
indemnified party shall be entitled to assume the defense of such action with
counsel of its own choice, at the expense of the indemnifying party. If the
action is asserted against both the indemnifying party and the indemnified party
and there is a conflict of interests which renders it inappropriate for the same
counsel to represent both the indemnifying party and the indemnified party, the
indemnifying party shall be responsible for paying for separate counsel for the
indemnified party; provided, however, that if there is more than one indemnified
party, the indemnifying party shall not be responsible for paying for more than
one separate firm of attorneys to represent the indemnified parties, regardless
of the number of indemnified parties. If the indemnifying party elects to
assume the defense of such action, (a) no compromise or settlement thereof may
be effected by the indemnifying party without the indemnified party's written
consent (which shall not be unreasonably withheld) unless the sole relief
provided is monetary damages that are paid in full by the indemnifying party and
(b) the indemnifying party shall have no liability with respect to any
compromise or settlement thereof effected without its written consent (which
shall not be unreasonably withheld).
(d) It is the express intention of the parties hereto that each person
------------------------------------------------------------------
to be indemnified pursuant to this Section 16.5 or Article XI shall be
----------------------------------------------------------------------
indemnified and held harmless from and against all Damages as to which indemnity
--------------------------------------------------------------------------------
is provided for under this Section 16.5 or Article XI notwithstanding that any
------------------------------------------------------------------------------
such Damages arise out of or result from the ordinary, strict, sole, or
-----------------------------------------------------------------------
contributory negligence of such person and regardless of whether any other
--------------------------------------------------------------------------
person (including the other party to this Agreement) is or is not also
----------------------------------------------------------------------
negligent.
---------
Section 16.6. Waiver and Amendment. No failure or delay (whether by
--------------------
course of conduct or otherwise) by any party hereto in exercising any right,
power or remedy which such holder may have under the Agreement or any of the
Ancillary Documents shall operate as a waiver thereof or of any other right,
power or remedy, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or of any other right, power or remedy. No
waiver of any provision of this Agreement or any Ancillary Document and no
consent to any departure therefrom shall ever be effective unless it is in
writing and signed as provided below in this section, and then such waiver or
consent shall be effective only in the specific instances and for the purposes
for which given and to the extent specified in such writing. No waiver,
consent, release, modification or amendment of or supplement to this Agreement
or any of the Ancillary Documents shall be valid or effective against any party
hereto unless the same is in writing and signed by such party.
Section 16.7. Entire Agreement. This Agreement, together with the
----------------
Schedules and other writings referred to herein or delivered pursuant hereto,
constitute the entire agreement between the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, between the parties with respect to the subject matter
hereof.
Section 16.8. Binding Effect; Assignment; No Third Party Benefit. This
--------------------------------------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided, however, that prior to
Closing, neither party may assign its rights or
50
delegate any of its duties and obligations under this Agreement or the Ancillary
Documents without the prior written consent of the other; provided, further,
that after the Closing, Buyer may not assign its rights or delegate any of its
duties and obligations under this Agreement and the Ancillary Documents without
the prior written consent of Seller. Except as expressly provided herein,
nothing in this Agreement, express or implied, is intended to or shall confer
upon any Person other than the parties hereto, and their respective successors
and permitted assigns, any rights, benefits, or remedies of any nature
whatsoever under or by reason of this Agreement.
Section 16.9. Severability. If any provision of this Agreement is held
------------
to be unenforceable, this Agreement shall be considered divisible and such
provision shall be deemed inoperative to the extent it is deemed unenforceable,
and in all other respects this Agreement shall remain in full force and effect;
provided, however, that if any such provision may be made enforceable by
limitation thereof, then such provision shall be deemed to be so limited and
shall be enforceable to the maximum extent permitted by Applicable Law.
Section 16.10. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
Section 16.11. Remedies Not Exclusive. The rights and remedies herein
----------------------
provided shall be cumulative and not exclusive of any rights or remedies
provided by law. The rights and remedies of any party based upon, arising out
of, or otherwise in respect of any inaccuracy in or breach of any
representation, warranty, covenant, or agreement contained in this Agreement
shall in no way be limited by the fact that the act, omission, occurrence, or
other state of facts upon which any claim of any such inaccuracy or breach is
based may also be the subject matter of any other representation, warranty,
covenant, or agreement contained in this Agreement (or in any other agreement
between the parties) as to which there is no inaccuracy or breach.
Section 16.12. Further Assurances. From time to time following the
------------------
Closing, at the request of any party hereto and without further consideration,
the other party or parties hereto shall execute and deliver to such requesting
party such instruments and documents and take such other action (but without
incurring any material financial obligation) as such requesting party may
reasonably request in order to consummate more fully and effectively the
transactions contemplated hereby.
Section 16.13. Counterparts. This Agreement may be executed by the
------------
parties hereto in any number of counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same agreement. Each
counterpart may consist of a number of copies hereof each signed by less than
all, but together signed by all, the parties hereto.
Section 16.14. Injunctive Relief. The parties hereto acknowledge and
-----------------
agree that irreparable damage would occur in the event any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly
51
agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement, and shall be entitled to
enforce specifically the provisions of this Agreement, in any court of the
United States or any state thereof having jurisdiction, in addition to any other
remedy to which the parties may be entitled under this Agreement or at law or in
equity.
Section 16.15. Consent to Jurisdiction. Subject to Section 7.5, the
-----------------------
parties hereto hereby irrevocably submit to the jurisdiction of the courts of
the State of Texas and the federal courts of the United States of America
located in ▇▇▇▇▇▇ County, Texas, and appropriate appellate courts therefrom,
over any dispute arising out of or relating to this Agreement or any of the
transactions contemplated hereby, and each party hereby irrevocably agrees that
all claims in respect of such dispute or proceeding shall be heard and
determined in such courts. Subject to Section 7.5, the parties hereby
irrevocably waive, to the fullest extent permitted by Applicable Law, any
objection which they may now or hereafter have to the laying of venue of any
dispute arising out of or relating to this Agreement or any of the transactions
contemplated hereby brought in such court or any defense of inconvenient forum
for the maintenance of such dispute. Each of the parties hereto agrees that a
judgment in any such dispute may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by law. This consent to
jurisdiction is being given solely for purposes of this Agreement and is not
intended to, and shall not, confer consent to jurisdiction with respect to any
other dispute in which a party to this Agreement may become involved.
Section 16.16. Payments. All payments to be made hereunder shall be in
--------
lawful money of the United States of America.
Section 16.17. Right to Purchase New Equity Securities. Buyer grants to
---------------------------------------
Seller the same rights as provided to the "Purchasers" under Section 2.03 of the
Preferred Stock Purchase Agreement, and the terms and conditions of such Section
are hereby incorporated herein, mutatis mutandis.
----------------
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
52
IN WITNESS WHEREOF, this Agreement is executed by the parties hereto on the
date set forth above.
SELLER:
ENERGY CAPITAL INVESTMENT COMPANY PLC
By: ______________________________
Director
ECIC CORPORATION
By: ______________________________
Officer
BUYER:
AROC INC.
By: _________________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Vice President
