STOCK ACQUISITION AGREEMENT
AND PLAN OF REORGANIZATION
by
and
among
VAALCO ENERGY, INC.
a Delaware corporation
("Vaalco"),
and
The 1818 Fund II, L.P.
a Delaware limited partnership
("Fund"),
covering all of the capital stock of
1818 Oil Corp.
a Delaware corporation
(the "Company")
Dated as of February 17, 1998
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS.......................................................1
Section 1.1 Definitions..................................................1
ARTICLE 2. EXCHANGE OF STOCK.................................................4
Section 2.1 Acquisition of Stock.........................................4
Section 2.2 Issuance of Shares...........................................4
ARTICLE 3. CLOSING...........................................................4
Section 3.1 Closing Date, Time and Place.................................4
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF VAALCO..........................4
Section 4.1 Organization.................................................4
Section 4.2 Affiliated Entities..........................................5
Section 4.3 Capitalization...............................................5
Section 4.4 Authority; Enforceable Agreements; Validity of
Vaalco Shares................................................5
Section 4.5 No Conflicts or Consents.....................................6
Section 4.6 Corporate Documents, Stockholder Agreements and Board of
Directors....................................................6
Section 4.7 SEC Documents; Financial Statements; Liabilities.............7
Section 4.8 Oil and Gas Properties.......................................7
Section 4.9 Investment Company...........................................9
Section 4.10 Public Utility Company.......................................9
Section 4.11 Environmental and Safety Matters.............................9
Section 4.12 Tax Matters.................................................10
Section 4.13 Litigation..................................................11
Section 4.14 Broker's and Finder's Fee...................................11
Section 4.15 Absence of Sensitive Payments...............................11
Section 4.16 Compliance with Law.........................................12
Section 4.17 Contracts...................................................12
Section 4.18 Employment Plans/Employment Agreements......................12
Section 4.19 Absence of Certain Changes or Events........................14
Section 4.20 Investment Experience.......................................14
Section 4.21 Purchase for Own Account....................................14
Section 4.22 Settlement Payments.........................................15
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF FUND...........................15
Section 5.1 Organization................................................15
Section 5.2 Affiliated Entities.........................................15
Section 5.3 Capitalization..............................................15
Section 5.4 Seller Status...............................................16
Section 5.5 Authority; Enforceable Agreements...........................16
Section 5.6 No Conflicts or Consents....................................16
Section 5.7 Corporate Documents, Stockholder Agreements and Board of
Directors...................................................17
Section 5.8 Financial Statements; Liabilities...........................17
Section 5.9 Absence of Certain Changes or Events........................17
Section 5.10 Investment Experience.......................................18
Section 5.11 Purchase for Own Account....................................18
Section 5.12 ▇▇▇▇ Overseas Exploration Company, L.P......................18
Section 5.13 Employees...................................................19
Section 5.14 Litigation..................................................19
Section 5.15 Contracts...................................................19
Section 5.16 Investment Company..........................................19
Section 5.17 Public Utility Company......................................19
Section 5.18 Environmental and Safety Matters............................19
Section 5.19 Tax Matters.................................................20
Section 5.20 Broker's and Finder's Fee...................................21
Section 5.21 Absence of Sensitive Payments...............................21
Section 5.22 Compliance with Law.........................................21
Section 5.23 Employment Plans/Employment Agreements......................21
Section 5.24 ▇▇▇▇ Representations........................................23
ARTICLE 6. COVENANTS........................................................23
Section 6.1 Cooperation and Best Efforts................................23
Section 6.2 Conduct of Business By Both Parties Prior to
the Closing Date............................................23
Section 6.3 Press Releases..............................................24
Section 6.4 Access to Information and Confidentiality...................24
Section 6.5 ▇▇▇▇ Arrangements...........................................25
Section 6.6 Financial Statements........................................25
Section 6.7 Certificates; Other Information.............................26
Section 6.8 Preservation of Corporate Existence and Legally
Available Funds.............................................26
Section 6.9 Compliance with Organizational Documents....................27
Section 6.10 Compliance with Laws........................................27
Section 6.11 Notices.....................................................27
Section 6.12 Reservation of Shares.......................................27
Section 6.13 Inspection..................................................27
Section 6.14 Registration and Listing....................................28
Section 6.15 Registrations...............................................28
Section 6.16 Contribution of Company Debt................................28
Section 6.17 Private Placement Memorandum................................28
Section 6.18 Directors and Officers Insurance............................29
ARTICLE 7. NEGATIVE COVENANTS...............................................29
Section 7.1 Consolidation and Mergers...................................29
Section 7.2 Transactions with Affiliates................................29
Section 7.3 No Inconsistent Agreements..................................29
Section 7.4 Fiscal Year.................................................30
Section 7.5 Amendments to Certificate of Incorporation and By-Laws......30
Section 7.6 Registration Rights.........................................30
ARTICLE 8. CLOSING CONDITIONS...............................................30
Section 8.1 Conditions Applicable to All................................30
Section 8.2 Conditions to Vaalco's Obligations..........................31
Section 8.3 Conditions to Fund's Obligations............................32
Section 8.4 Waiver of Conditions........................................34
Section 8.5 Vaalco Deliveries...........................................34
Section 8.6 Fund Deliveries.............................................34
ARTICLE 9. TERMINATION......................................................35
Section 9.1 Termination of Agreement....................................35
Section 9.2 Procedure for and Effect of Termination.....................35
Section 9.3 Sole Remedy; Waiver.........................................35
ARTICLE 10. MISCELLANEOUS...................................................35
Section 10.1 Notices.....................................................35
Section 10.2 Governing Law...............................................36
Section 10.3 Counterparts................................................36
Section 10.4 Interpretation; Schedules...................................36
Section 10.5 Entire Agreement; Severability..............................37
Section 10.6 Amendment and Modification..................................37
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Section 10.7 Binding Effect; Benefits...................................37
Section 10.8 Assignability..............................................37
Section 10.9 Expenses...................................................37
Section 10.10 Gender and Certain Definitions.............................37
Section 10.11 Survival of Representations and Warranties; Remedies.......37
Section 10.12 Waiver of Jury Trial.......................................37
Certificate of Designation Exhibit A
Registration Rights Agreement Exhibit B
Amendments to By-Laws Exhibit C
Agreements with Schneeflock Exhibit D
Certificate of Incorporation and By-Laws of Vaalco Exhibit E
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STOCK PURCHASE AGREEMENT
This AGREEMENT dated as of February 17, 1998, by and among Vaalco Energy,
Inc., a Delaware corporation ("Vaalco"), and The 1818 Fund II, L.P., a Delaware
limited partnership ("Fund"), and 1818 Oil Corp., a Delaware corporation (the
"Company").
WITNESSETH:
WHEREAS, Vaalco desires to acquire all of the issued and outstanding
capital stock of the Company pursuant to the terms and conditions hereof; and
WHEREAS, Fund desires to transfer all of the capital stock of the Company
to Vaalco in exchange for the Vaalco Shares (as defined herein) pursuant to a
plan of reorganization under Sections 354 and 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended;
NOW, THEREFORE, in consideration of the representations, warranties and
covenants contained herein, the parties agree as follows:
ARTICLE 1. DEFINITIONS
SECTION 1.1 DEFINITIONS. As used in this Agreement, the following
terms when capitalized have the meanings indicated.
"AFFILIATE" shall have the meaning ascribed by Rule 12b-2 promulgated
under the Exchange Act.
"AGREEMENT" shall mean this Agreement, including the Schedules and
Exhibits hereto, all as amended or otherwise modified from time to time.
"CERTIFICATE OF DESIGNATION" means the Certificate of Designation
designating the rights, privileges and preferences of the Vaalco Shares, in the
form attached hereto as Exhibit A.
"CLOSING" shall have the meaning ascribed to it in Section 3.1.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY AUDITED FINANCIAL STATEMENTS" shall mean the audited balance
sheets, and the related statements of earnings, stockholders' equity and cash
flows, and the related notes thereto of Company as of and for the three months
ended December 31, 1995 and the twelve months ended December 31, 1996.
"COMPANY FINANCIAL STATEMENTS" shall mean the Company Audited Financial
Statements and the Company Interim Financial Statements.
"COMPANY INTERIM FINANCIAL STATEMENTS" shall mean the unaudited balance
sheet, and the related unaudited statements of earnings and cash flows of the
Company as of and for the nine months ended September 30, 1997.
"COMPANY LATEST BALANCE SHEET" shall mean the balance sheet included in
the Company Interim Financial Statements.
"CONSOLIDATED NET WORTH" means, as of the date of determination with
respect to any Person, the consolidated stockholders' equity of the Person and
its consolidated subsidiaries, determined in accordance with generally accepted
accounting principles.
"CONTRACTUAL OBLIGATIONS" means as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument to which such Person is a
party or by which it or any of its property is bound.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"GOVERNMENTAL AUTHORITY" means the government of any nation, state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing (including,
without limitation, a government controlled oil company).
"HAZARDOUS MATERIALS" means those substances which are regulated by or
form the basis of liability under Environmental Laws.
"HOLDER" means the Fund and any subsequent direct or indirect transferee
of the Vaalco Shares or Common Stock issued upon conversion of the Vaalco
Shares, other than a transferee, (i) who has acquired the Vaalco Shares or the
Common Stock issuable upon conversion of such Vaalco Shares that have been the
subject of a distribution registered under the Securities Act or (ii) in the
case of Common Stock issuable upon conversion of the Vaalco Shares, who has
acquired such Common Stock after such stock has been the subject of a
distribution to the public pursuant to Rule 144 under the Securities Act or
otherwise distributed under circumstances not requiring a legend as described in
Section 2.2.
"LIENS" shall mean pledges, liens, defects, leases, licenses, equities,
conditional sales contracts, charges, claims, encumbrances, security interests,
easements, restrictions, chattel mortgages, mortgages or deeds of trust, of any
kind or nature whatsoever.
"MAJORITY HOLDERS" means Holders who own a majority of the shares of
Vaalco Common Stock issued or issuable upon conversion of the Vaalco Shares.
"MATERIAL ADVERSE CHANGE" is a change which had or would have a Material
Adverse Effect.
"MATERIAL ADVERSE EFFECT" shall mean with respect to any Person, a
material adverse effect on the financial condition, results of operations,
business or prospects of such Person and, in the case of Vaalco, its
Consolidated Group taken as a whole.
"PERSON" shall mean an individual, firm, corporation, general or limited
partnership, limited liability company, limited liability partnership, joint
venture, trust, governmental authority or body, association, unincorporated
organization or other entity.
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"PRE-CLOSING PERIODS" shall mean all Tax periods ending at or before the
Closing and, with respect to any Tax period that includes but does not end at
the Closing, the portion of such period that ends at and includes the Closing.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
between Vaalco and the Fund, in the form attached as Exhibit B.
"RETURNS" shall mean all returns, reports, estimates, declarations and
statements of any nature regarding Taxes for any Pre-Closing Period required to
be filed by the taxpayer relating to its income, properties or operations.
"REQUIREMENTS OF LAW" means as to any Person, any law, treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
"SEC" means the U. S Securities and Exchange Commission or any similar
agency then having jurisdiction to enforce the Securities Act.
"SECURITIES ACT" means The Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder.
"SOLVENT" means, with respect to any Person, that the fair saleable value
of the assets and property of such Person is, on the date of determination,
greater than the total amount of liabilities (including contingent and
unliquidated liabilities) of such Person as of such date and that, as of such
date, such Person is able to pay all liabilities of such Person as such
liabilities mature. In computing the amount of contingent or liquidated
liabilities at any time, such liabilities will be computed as the amount which,
in light of all the facts and circumstances existing at such time, represents
the amount that is probable to become an absolute and matured liability.
"TAXES" shall mean any federal, state, local, foreign or other taxes
(including, without limitation, income, alternative minimum, franchise,
property, sales, use, lease, excise, premium, payroll, wage, employment or
withholding taxes), fees, duties, assessments, withholdings or governmental
charges of any kind whatsoever (including interest, penalties and additions to
tax).
"VAALCO AUDITED FINANCIAL STATEMENTS" shall mean the audited balance
sheets and related statements of income, stockholders' equity and cash flows,
and the related notes thereto of the Vaalco Consolidated Group as of and for the
three years December 31, 1996.
"VAALCO CONSOLIDATED GROUP" shall mean Vaalco and any entity in which
Vaalco owns an equity interest and which is consolidated with Vaalco under
generally accepted accounting principles.
"VAALCO FINANCIAL STATEMENTS" shall mean the Vaalco Audited Financial
Statements and the Vaalco Interim Financial Statements, collectively.
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"VAALCO INTERIM FINANCIAL STATEMENTS" shall mean the unaudited balance
sheet, and the related unaudited statements of income and cash flows of the
Vaalco Consolidated Group as of and for the nine months ended September 30,
1997.
"VAALCO LATEST BALANCE SHEET" shall mean the balance sheet of Vaalco
included in the Vaalco Interim Financial Statements.
ARTICLE 2. EXCHANGE OF STOCK
SECTION 2.1 ACQUISITION OF STOCK. Subject to the terms and conditions
herein set forth, (i) Vaalco agrees that it will acquire, and the Fund agrees to
transfer to Vaalco, 229 shares of the common stock, $.01 par value (the "Company
Shares"), of the Company, and (ii) the Fund agrees to acquire shares (the
"Vaalco Common Shares") of common stock of Vaalco, $0.10 par value ("Vaalco
Common Stock") in an aggregate amount of $5,000,000. Upon payment for the
Company Shares pursuant to Section 2.2 hereof, the Fund will deliver
certificates representing the Company Shares, duly endorsed for transfer to
Vaalco, free and clear of any Liens, other than any restrictions on transfer
arising under federal and state securities laws which may constitute Liens.
SECTION 2.2 ISSUANCE OF SHARES. The consideration for the Company Shares
will be 10,000 shares of the preferred stock, $25.00 par value (the "Vaalco
Preferred Shares" and, together with the Vaalco Common Shares, the "Vaalco
Shares"), of Vaalco which shares will be validly issued, fully paid and
non-assessable. The Vaalco Preferred Shares shall have the rights and
preferences set forth herein and in the Certificate of Designation. The
consideration for the Vaalco Common Shares payable by the Fund to Vaalco shall
be a price per share equal to the lesser of the Placement Price (as hereinafter
defined) and $2.50. The Vaalco Shares and any shares of common stock of Vaalco,
$0.10 par value per share ("Vaalco Common Stock"), issued upon conversion of the
Vaalco Preferred Shares will not be registered, and will bear a restrictive
legend as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE
EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH LAWS.
ARTICLE 3. CLOSING
SECTION 3.1 CLOSING DATE, TIME AND PLACE. The closing of the transactions
provided for in this Agreement ("Closing"), shall take place at 10:00 a.m. on
March 11, 1998 at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., or at such other date,
time and place as the parties hereto shall agree. At the Closing, the parties
shall make the deliveries required by Article 8 hereof.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF VAALCO
Vaalco represents and warrants to Fund, as of the date hereof as follows:
SECTION 4.1 ORGANIZATION. Vaalco is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all corporate power
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and authority to carry on its business as now being conducted and to own its
properties. Each other member of the Vaalco Consolidated Group is duly organized
under the laws of the state of its organization and has all the requisite power
and authority under the laws of such jurisdiction to carry on its business as
now being conducted and to own its properties. Each member of the Vaalco
Consolidated Group is duly qualified to do business and is in good standing in
each state and foreign jurisdiction in which the character or location of the
properties owned or leased by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so qualified
or in good standing would not have a Material Adverse Effect on Vaalco.
SECTION 4.2 AFFILIATED ENTITIES.
(a) Schedule 4.2 lists each member of the Vaalco Consolidated Group.
All shares of the outstanding capital stock or equity interests in each member
of the Vaalco Consolidated Group have been duly authorized and validly issued
and are fully paid and nonassessable and are not subject to preemptive rights
and, except as set forth in Schedule 4.2, are owned by Vaalco, by another member
of the Vaalco Consolidated Group or by Vaalco and another member of the Vaalco
Consolidated Group, free and clear of all Liens.
(b) Except as listed on Schedule 4.2, Vaalco does not, directly or
indirectly, own of record or beneficially, or has the right or obligation to
acquire, any outstanding securities or other interest in any corporation,
partnership, joint venture or other entity.
SECTION 4.3 CAPITALIZATION. The authorized capital stock of Vaalco
consists exclusively of 50,000,000 shares of Vaalco Common Stock, of which
15,566,527 shares are issued and outstanding and 5,395 shares are held in its
treasury as of the date hereof, and 5,000,000 shares of preferred stock, $25.00
par value per share, none of which shares are outstanding as of the date hereof
or held in its treasury. The Vaalco Shares to be issued at the Closing have been
duly authorized and when issued will have been validly issued and fully paid and
non-assessable and not subject to preemptive rights. All issued and outstanding
shares of capital stock have been validly issued, are fully paid and
non-assessable and were issued free of preemptive rights, in compliance with any
rights of first refusal, and in compliance with all legal requirements. No share
of capital stock of Vaalco has been, or may be required to be, reacquired by
Vaalco for any reason or is, or may be required to be, issued by Vaalco for any
reason, including, without limitation, by reason of any option, warrant,
security or right convertible into or exchangeable for such shares, or any
agreement to issue any of the foregoing, except for 3,075,000 of Vaalco Common
Stock shares reserved for issuance pursuant to options described in Schedule 4.3
granted to the current and former employees of the Vaalco Consolidated Group
named in Schedule 4.3.
SECTION 4.4 AUTHORITY; ENFORCEABLE AGREEMENTS; VALIDITY OF VAALCO SHARES.
(a) Vaalco has the requisite corporate power and authority to enter
into this Agreement and to consummate the transactions described herein. The
execution and delivery of this Agreement by Vaalco and the consummation by
Vaalco of the transactions described herein have been duly authorized by all
necessary corporate action on the part of Vaalco.
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(b) This Agreement has been duly executed and delivered by Vaalco,
and (assuming due execution and delivery by the other parties hereto)
constitutes a valid and binding obligation of Vaalco, enforceable against Vaalco
in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally and general principles of equity. The other agreements entered,
or to be entered, into by Vaalco in connection with this Agreement have been, or
will be, duly executed and delivered by Vaalco, and (assuming due execution and
delivery by the other parties thereto) constitute, or will constitute, valid and
binding obligations of Vaalco, enforceable against Vaalco in accordance with
their terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
and general principles of equity.
(c) The Vaalco Shares have been duly authorized and, when issued as
contemplated by this Agreement, will be fully paid and non-assessable, and will
entitle the holder thereof to the rights and preferences set forth in the
Certificate of Designation.
SECTION 4.5 NO CONFLICTS OR CONSENTS.
(a) Neither the execution, delivery or performance of this Agreement
by Vaalco nor the consummation of the transactions contemplated hereby will (i)
violate, conflict with, or result in a breach of any provision of, constitute a
default (or an event that, with notice or lapse of time or both, would
constitute a default) under, result in the termination of, or accelerate the
performance required by, or result in the creation of any adverse claim against
any of the properties or assets of any member of the Vaalco Consolidated Group
under, (A) the certificates of incorporation, bylaws or any other organizational
documents of any member of the Vaalco Consolidated Group, or (B) any note, bond,
mortgage, indenture, deed of trust, lease, license, agreement, production
sharing contract, concession or other instrument or obligation to which any
member of the Vaalco Consolidated Group is a party, or by which any member of
the Vaalco Consolidated Group or any of its assets are bound, or (ii) violate
any order, writ, injunction, decree, judgment, statute, rule or regulation of
any governmental body to which any member of the Vaalco Consolidated Group is
subject or by which any member of the Vaalco Consolidated Group or any of the
assets of the foregoing are bound.
(b) Except as set forth on Schedule 4.5(b), no consent, approval,
order, permit or authorization of, or registration, declaration or filing with,
any Person or of any Governmental Agency is required for the execution, delivery
and performance by Vaalco of this Agreement and the covenants and transactions
contemplated hereby or for the execution, delivery and performance by Vaalco of
any other agreements entered, or to be entered, into by Vaalco in connection
with this Agreement.
SECTION 4.6 CORPORATE DOCUMENTS, STOCKHOLDER AGREEMENTS AND BOARD OF
DIRECTORS. Vaalco has delivered to the Fund true and complete copies of its
certificate of incorporation and bylaws, as amended or restated through the date
of this Agreement. The minute books of each member of the Vaalco Consolidated
Group contain reasonably complete and accurate records of all corporate actions
of the equity owners of the various entities and of the boards of directors or
other governing bodies, including committees of such boards or governing bodies.
The stock transfer records of Vaalco are maintained by its transfer agent and
registrar and, to the knowledge of Vaalco, contain complete and accurate records
of all issuances and redemptions of stock by Vaalco. Except as set forth
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on Schedule 4.6, neither Vaalco nor, to the knowledge of Vaalco, any of its
Affiliates, is a party to any agreement with respect to the capital stock of
Vaalco other than this Agreement.
SECTION 4.7 SEC DOCUMENTS; FINANCIAL STATEMENTS; LIABILITIES.
(a) Except as disclosed to the Fund, since January 1, 1995, Vaalco
has filed all reports, schedules, forms, statements and other documents required
to be filed with the SEC (the "Vaalco SEC Documents"). The Vaalco SEC Documents,
and any such reports, forms and documents filed by Vaalco with the SEC after the
date hereof, as amended, complied, or will comply, as to form in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Vaalco SEC Documents, and none of the Vaalco SEC Documents
contained, any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) The Vaalco Financial Statements included in the Vaalco SEC
Documents have been audited by Deloitte & Touche, independent accountants (in
the case of the Vaalco Audited Financial Statements) in accordance with
generally accepted auditing standards, have been prepared in accordance with
United States generally accepted accounting principles applied on a basis
consistent with prior periods, and present fairly the financial position of
Vaalco at such dates and the results of operations and cash flows for the
periods then ended, except, in the case of the Vaalco Interim Financial
Statements, as permitted by Regulations S-B and S-X of the SEC. The Vaalco
Interim Financial Statements reflect all adjustments (consisting only of normal,
recurring adjustments) that are necessary for a fair statement of the results
for the interim periods presented therein. Except as set forth on Schedule 4.7,
there has not been any Material Adverse Change in the financial condition of
Vaalco since December 31, 1996.
(c) The Vaalco Latest Balance Sheet includes appropriate reserves
for all Taxes and other liabilities incurred as of such date but not yet
payable.
(d) Since the date of the Vaalco Latest Balance Sheet, there has
been no change that has had or is likely to have a Material Adverse Effect on
Vaalco.
SECTION 4.8 OIL AND GAS PROPERTIES.
(a) Each member of the Vaalco Consolidated Group has good and
marketable title to and is possessed of its oil and gas properties and has good
title to all of its personal property including concessions, licenses,
production sharing contracts, joint operating agreements, and gas contracts,
free of any and all adverse claims, rights of others, liens, encumbrances,
security interests, contracts, agreements, preferential purchase rights or other
restrictions or limitations of any nature or kind except those which are
Permitted Encumbrances as defined below. All proceeds from the sale of each
member of the Vaalco Consolidated Group's share of the hydrocarbons being
produced from its oil and gas properties are currently being paid in full to the
Vaalco Consolidated Group by the purchasers thereof on a timely basis and none
of such proceeds are currently being held in suspense by such purchaser or any
other party. "Permitted Encumbrances" means:
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(i) the matters reflected in or otherwise disclosed by the provisions
hereof, or the matters referred to therein;
(ii) liens for taxes not yet delinquent;
(iii) mechanics' and materialmen's liens (and other similar liens), and
liens under operating and similar agreements, to the extent the same relate to
expenses incurred in the ordinary course of business and which are not yet due
or are being withheld by law or the validity of which is being contested in good
faith by appropriate action; .
(iv) preferential purchase rights and third party consents and transfer
restrictions entered into in the ordinary course of business which affect the
transferability of interests in the oil and gas properties;
(v) easements, rights-of-way, servitudes, exceptions, encroachments,
reservations, restrictions, covenants, conditions or limitations which do not in
the aggregate materially interfere with or impair the operation, value or use of
the oil and gas properties affected thereby for the purposes for which they have
been used by the Vaalco Consolidated Group in the ordinary course of its
business;
(vi) rights reserved to, or vested in, or any obligations or duties
affecting any of the oil and gas properties, to any public or governmental or
regulatory body, agency, department, commission, board, bureau or other
authority or instrumentality by the terms of any permit;
(vii) present or future zoning laws and ordinances;
(viii) third party interests and division orders and sales contracts
entered into in the ordinary course of business containing such terms and
provisions as are typical and customary for the oil and gas industry covering
oil, gas or associated liquid or gaseous hydrocarbons, reversionary interests,
similar burdens and all contractually binding arrangements to which the oil and
gas properties are subject which do not in the aggregate materially interfere or
impair the operation, value or use of any of the oil and gas properties for the
purposes for which they have been used by the Vaalco Consolidated Group in the
ordinary course of its business;
(ix) all other liens, charges, encumbrances, contracts, agreements,
instruments, obligations, defects and irregularities affecting the assets of the
Vaalco Consolidated Group which individually or in the aggregate are not such as
to interfere materially with the operation, value or use of any of the assets of
the Vaalco Consolidated Group, do not prevent the Vaalco Consolidated Group from
receiving the proceeds of production from any of the oil and gas properties;
(x) rights reserved to or vested in any municipality or governmental,
statutory or public authority to control or regulate any asset of the Vaalco
Consolidated Group in any manner, and all applicable laws, rules and orders of
governmental authority, which do not in the aggregate materially interfere or
impair the operation, value or use of any of the oil and gas properties for the
purposes for which they have been used by the Vaalco Consolidated Group in the
ordinary course of its business; and
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(xi) typical and customary agreements among owners of oil and gas
interests relating to oil field operations and pipelines which do not in the
aggregate materially interfere or impair the operation, value or use of any of
the oil and gas properties for the purposes for which they have been used by the
Vaalco Consolidated Group in the ordinary course of its business.
(b) Vaalco has delivered to Fund a copy of the reserve report
("Reserve Report") dated as of January 1, 1997, prepared by Netherland, ▇▇▇▇▇▇ &
Associates, Inc., independent reserve engineers ("Reserve Engineers") relating
to the oil and gas reserves of the Vaalco Consolidated Group; provided that
Reserves attributable to the properties described on Schedule 4.8(b) have been
sold since the date of such Reserve Report. The factual information underlying
the estimates of the reserves of the Vaalco Consolidated Group, which was
supplied by the Vaalco to the Reserve Engineers for the purpose of preparing the
Reserve Report, including, without limitation, production, volumes, sales prices
for production, contractual pricing provisions under oil or gas sales or
marketing contracts under hedging arrangements, costs of operations and
development, and working interest and net revenue information relating to the
Vaalco Consolidated Group's ownership interests in properties, was true and
correct in all material respects on the date of such Reserve Report; the
estimates of future capital expenditures and other future exploration and
development costs supplied to the Reserve Engineers were prepared in good faith
and with a reasonable basis; the information provided to the Reserve Engineers
for purposes of preparing the Reserve Reports were prepared in accordance with
customary industry practices; each of the Reserve Engineers were, as of the date
of any Reserve Report prepared by it, and are, as of the date hereof,
independent petroleum engineers with respect to the Vaalco Consolidated Group;
other than normal production of the reserves and intervening oil and gas price
fluctuations, Vaalco is not as of the date hereof and as of the date of Closing
will not be, aware of any facts or circumstances that would result in a
materially adverse change in the reserves in the aggregate, or the aggregate
present value of future net cash flows therefrom, as described in the Reserve
Reports; estimates of such reserves and the present value of the future net cash
flows therefrom in the Reserve Report comply in all material respects to the
applicable requirements of Regulation S-X and Industry Guide 2 under the Act;
SECTION 4.9 INVESTMENT COMPANY. Neither Vaalco or any other member of the
Vaalco Consolidated Group is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 4.10 PUBLIC UTILITY COMPANY. Neither Vaalco or any other member of
the Vaalco Consolidated Group is a "public utility," a "holding company" or a
subsidiary or "affiliate" of a public utility within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
SECTION 4.11 ENVIRONMENTAL AND SAFETY MATTERS. Except as set forth on
Schedule 4.11 hereto and except for such of the following as would not,
individually or in the aggregate, have a Material Adverse Effect with respect to
the Vaalco Consolidated Group: (i) each member of the Vaalco Consolidated Group
is in compliance with all applicable Environmental Laws; (ii) neither Vaalco nor
any other member of the Vaalco Consolidated Group has received a notice, report
or information regarding any liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), or any corrective, investigatory or remedial
obligations, arising under applicable Environmental Laws with respect to its
past or present operations or properties; (iii) Vaalco or another member of
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the Vaalco Consolidated Group has obtained, and is and has been in compliance
with all terms and conditions of, all permits, licenses and other authorizations
required pursuant to Environmental Laws for its occupation of the real property
owned by the Vaalco Consolidated Group ("Owned Property") the property leased by
the Vaalco Consolidated Group ("Leased Property") and the other assets and
operations of the Vaalco Consolidated Group and the conduct of their business;
(iv) the transactions contemplated by this Agreement do not impose any
obligations under Environmental Laws for the site investigation or cleanup or
notification to or consent of any governmental agencies or third parties; and
(v) no member of the Vaalco Consolidated Group has any contingent liability
which is material to the Vaalco Consolidated Group as a whole in connection with
the release of any Hazardous Materials into the environment in violation of any
Environmental Law. Vaalco has made available to the Fund true, complete and
correct copies of all environmental reports, analyses, tests or monitoring in
the possession of the Vaalco during the past two years pertaining to any Owned
Property or Leased Property. As used in this Agreement, "ENVIRONMENTAL LAWS"
shall mean all material federal, foreign, state or local statutes, laws, codes,
rules, regulations, ordinances, orders, permits, licenses or requirements
relating to public or employee health and safety, including without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. ss. 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
ss. 6901 et seq., the Emergency Planning and Community Right to Know Act, 42
U.S.C. ss. 11001 et seq., the Clean Air Act, 42 U.S.C. ss. 7401 et seq., the
Federal Water Pollution Control Act, 33 U.S.C. ss. 1251 et seq., the Toxic
Substances Control Act, 15 U.S.C. ss. 2601 et seq., the Safe Drinking Water Act,
42 U.S.C. ss. 300F et seq., and the Occupational Safety and Health Act, 29
U.S.C. ss. 651 et seq. As used in this Agreement, "Hazardous Materials" means
those substances which are regulated by or form the basis of liability under
Environmental Laws.
SECTION 4.12 TAX MATTERS.
(a) Each of the following is true with respect to each member of the
Vaalco Consolidated Group to the extent applicable to such member:
(i) all Returns have been or will be timely filed by each
member of the Vaalco Consolidated Group when due in accordance with all
applicable laws; all Taxes shown on the Returns have been or will be
timely paid when due; the Returns have been properly completed in
compliance with all applicable laws and regulations and completely and
accurately reflect the facts regarding the income, expenses, properties,
business and operations required to be shown thereon; the Returns are not
subject to penalties under Section 6662 of the Code (or any corresponding
provision of state, local or foreign tax law);
(ii) except as set forth on Schedule 4.12(a)(ii), each member
of the Vaalco Consolidated Group has paid all Taxes required to be paid by
it (whether or not shown on a Return) or for which it could be liable
(provided that it shall not be considered a breach of this representation
if it is ultimately determined that additional tax payments are due but
such assessment is based on an adjustment to a return or position, if such
member has a reasonable basis for the position taken with respect to such
Taxes), whether to taxing authorities or to other persons under tax
allocation agreements or otherwise, and the charges, accruals, and
reserves for Taxes
- 10 -
due, or accrued but not yet due, relating to its income, properties,
transactions or operations for any Pre-Closing Period as reflected on its
books (including, without limitation, the Vaalco's Latest Balance Sheet)
are adequate to cover such Taxes;
(iii) there are no agreements or consents currently in effect
for the extension or waiver of the time (A) to file any Return or (B) for
assessment or collection of any taxes relating to the income, properties
or operations of any member of the Vaalco Consolidated Group for any
Pre-Closing Period, and no member the Vaalco Consolidated Group has been
requested to enter into any such agreement or consent;
(iv) there are no Liens for Taxes (other than for current
Taxes not yet due and payable) upon the assets of any member of the Vaalco
Consolidated Group; and
(v) to the knowledge of Vaalco, each member of the Vaalco
Consolidated Group has complied in all material respects with all
applicable tax laws.
SECTION 4.13 LITIGATION. Except as disclosed on Schedule 4.13, there are
no actions, suits, proceedings, arbitrations or investigations pending or, to
the knowledge of Vaalco, threatened before any court, any governmental agency or
instrumentality or any arbitration panel, against or affecting any member of the
Vaalco Consolidated Group. To the knowledge of Vaalco, no facts or circumstances
exist that would be likely to result in the filing of any such action that would
have a Material Adverse Effect on Vaalco. Except as disclosed on Schedule 4.13,
no member of the Vaalco Consolidated Group is subject to any currently pending
judgment, order or decree entered in any lawsuit or proceeding.
SECTION 4.14 BROKER'S AND FINDER'S FEE. No agent, broker, Person or firm
acting on behalf of Vaalco is or will be entitled to any commission or broker's
or finder's fee from any member of the Vaalco Consolidated Group in connection
with any of the transactions contemplated herein.
SECTION 4.15 ABSENCE OF SENSITIVE PAYMENTS. No member of the Vaalco
Consolidated Group or any Affiliate thereof or any officer or director of any of
them acting alone or together, has performed any of the following acts: (i) the
making of any contribution, payment, remuneration, gift or other form of
economic benefit (a "Payment") to or for the private use of any governmental
official, employee or agent where the Payment or the purpose of the Payment was
illegal under the laws of the United States or the jurisdiction in which such
payment was made, (ii) the establishment or maintenance of any unrecorded fund,
asset or liability for any purpose or the making of any false or artificial
entries on its books, (iii) the making of any Payment or the receipt of any
Payment with the intention or understanding that any part of the Payment was to
be used for any purpose other than that described in the documents supporting
the Payment, or (iv) the giving of any Payment to, or the receipt of any Payment
from, any person who was or could have been in a position to help or hinder the
business of the Vaalco Consolidated Group (or assist any member of the Vaalco
Consolidated Group in connection with any actual or proposed transaction) which
(A) would reasonably have been expected to subject any member of the Vaalco
Consolidated Group to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (B) if not given in the past, would have
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had a Material Adverse Effect on the Vaalco Consolidated Group or (C) if not
continued in the future, would have a Material Adverse Effect on the Vaalco
Consolidated Group.
SECTION 4.16 COMPLIANCE WITH LAW. Except as set forth on Schedule 4.16
hereto, no member of the Vaalco Consolidated Group is in violation of any
statute, law, ordinance, regulation, rule or order of any foreign, United States
federal, or state or local Governmental Authority or any judgment, decree or
order of any court, except where any such violation would not, individually or
in the aggregate, have a Material Adverse Effect on the Vaalco Consolidated
Group. Except as set forth on Schedule 4.16, each member of the Vaalco
Consolidated Group has all permits, approvals, licenses and franchises from
Governmental Authorities required to conduct its business as now being
conducted, except for such permits, approvals, licenses and franchises the
absence of which would not, individually or in the aggregate, have a Material
Adverse Effect on the Vaalco Consolidated Group.
SECTION 4.17 CONTRACTS. (a) Schedule 4.17 sets forth, as of the date
hereof, a list of all of the following material contracts and other agreements
to which any member of the Vaalco Consolidated Group is a party or by which any
of them or any material portion of their properties or assets are bound or
subject (other than those set forth on any other Schedule): (i) contracts,
severance agreements and other agreements with any current or former officer,
director, employee, consultant, agent or other representative; (ii) contracts
and other agreements with any labor union or association representing any
employee of the Vaalco Consolidated Group; (iii) contracts, agreements or other
agreements relating to the Vaalco Consolidated Group between any member of the
Vaalco Consolidated Group, on the one hand, and any stockholder or any of his,
her or its Affiliates on the other hand; (iv) joint venture agreements; (v)
contracts and other agreements under which any member of the Vaalco Consolidated
Group agrees to indemnify any party; (vi) contracts and other agreements
relating to the borrowing of money; or (vii) any other material contract or
other agreement whether or not made in the ordinary course of business. There
have been delivered or made available to the Fund true and complete copies of
all such contracts and other agreements set forth on Schedule 4.17.
(b) All contracts, agreements and understandings set forth on
Schedule 4.17 are valid and binding and are in full force and effect and
enforceable in accordance with their respective terms other than contracts,
agreements or understandings which are by their terms no longer in force or
effect. Except as set forth on Schedule 4.17 (or on another Schedule), (i) no
approval or consent of, or notice to, any Person is needed in order that such
contract, agreement or understanding shall continue in full force and effect in
accordance with its terms without penalty, acceleration or rights of early
termination following the consummation of the transactions contemplated by this
Agreement, and (ii) no member of the Vaalco Consolidated Group is in violation
or breach of or default under any such contract, agreement or understanding nor
to the knowledge of Vaalco is any other party to any such contract, agreement or
understanding.
SECTION 4.18 EMPLOYMENT PLANS/EMPLOYMENT AGREEMENTS
(a) Schedule 4.18 contains a true and complete list of each
"employee benefit plan" (within the meaning of section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), including, without
limitation, multiemployer plans within the meaning of ERISA section 3(37)),
stock purchase, stock option, severance, employment, change-in-control, fringe
benefit, welfare benefit,
- 12 -
collective bargaining, bonus, incentive, deferred compensation and all other
employee benefit plans, agreements, programs, policies or other arrangements,
whether or not subject to ERISA (including any funding mechanism therefor now in
effect or required in the future as a result of the transaction contemplated by
this Agreement or otherwise), whether formal or informal, oral or written,
legally binding or not, under which any employee or former employee of a member
of the Vaalco Consolidated Group has any present or future right to benefits or
under which a member of the Vaalco Consolidated Group has any present or future
liability. All such plans, agreements, programs, policies and arrangements shall
be collectively referred to as the "Vaalco Plans".
(b) With respect to each Vaalco Plan, Vaalco has delivered to the
Fund a current, accurate and complete copy (or, to the extent no such copy
exists, an accurate description) thereof and, to the extent applicable: (i) any
related trust agreement or other funding instrument; (ii) the most recent
determination letter, if applicable; (iii) any summary plan description and
other written communications (or a description of any oral communications) by
any member of the Vaalco Consolidated Group to its employees concerning the
extent of the benefits provided under a Vaalco Plan; and (iv) for the three most
recent ears (A) the Form 5500 and attached schedules, (B) audited financial
statements, and (C) attorney's response to an auditor's request for information.
(c) (i) Each Vaalco Plan has been established and administered in
all material respects in accordance with its terms, and in compliance with the
applicable provisions of ERISA, the Code and other applicable laws, rules and
regulations; (ii) each Vaalco Plan which is intended to be qualified within the
meaning of Code section 401(a) is so qualified and has received a favorable
determination letter as to its qualification, and to the knowledge of Vaalco
nothing has occurred, whether by action or failure to act, that could reasonably
be expected to cause the loss of such qualification; (iii) for each Vaalco Plan
that is a "welfare plan" within the meaning of ERISA section 3(1), no member of
the Vaalco Consolidated Group has or will have any liability or obligation under
any plan which provides medical or death benefits with respect to current or
former employees of a member of the Vaalco Consolidated Group beyond their
termination of employment (other than coverage mandated by law); (iv) to the
knowledge of Vaalco no event has occurred and no condition exists that would
subject any member of Vaalco Consolidated Group, either directly or by reason of
their affiliation with any member of their "Controlled Group" (defined as any
organization which is a member of a controlled group of organizations within the
meaning of Code sections 414(b), (c), (m) or (o)), to any tax, fine, lien,
penalty or other liability imposed by ERISA, the Code or other applicable laws,
rules and regulations; (v) for each Vaalco Plan with respect to which a Form
5500 has been filed, no material change has occurred with respect to the matters
covered by the most recent Form since the date thereof; and (vi) to the best
knowledge of Vaalco, no non-exempt "prohibited transaction" (as such term is
defined in ERISA section 406 and Code section 4975) has occurred with respect to
any Vaalco Plan which has resulted to or could reasonably be expected to result
in a Material Adverse Effect.
(d) None of the Vaalco Plans is subject to Title IV of ERISA or is a
multiemployer plan within the meaning of Section 4001(a)(3) of ERISA.
(e) With respect to any Vaalco Plan, (i) no actions, suits or claims
(other than routine claims for benefits in the ordinary course) are pending or,
to the best knowledge of Vaalco, threatened, which have resulted or could
reasonably be expected to
- 13 -
result in a Material Adverse Effect and (ii) to the best knowledge of Vaalco, no
facts or circumstances exist that could give rise to any such actions, suits or
claims.
(f) No Vaalco Plan exists that could result in the payment to any
present or former employee of a member of the Vaalco Consolidated Group or any
money or other property or accelerate or provide any other rights or benefits to
any present or former employee of a member of the Vaalco Consolidated Group as a
result of the transaction contemplated by this Agreement, whether or not such
payment would constitute a parachute payment within the meaning of Code Section
280G.
SECTION 4.19 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the
Vaalco Latest Balance Sheet, each member of the Vaalco Consolidated Group has
conducted its business only in the ordinary course, and has not:
(a) amended its certificate of incorporation, bylaws or similar
organizational documents;
(b) merged or consolidated with another entity (other than a
subsidiary) or acquired or agreed to acquire any business or any corporation,
partnership or other business organization, or sold, leased, transferred or
otherwise disposed of any material portion of its assets except for fair value
in the ordinary course of business;
(c) suffered any damage, destruction or loss (whether or not covered
by insurance) which has had or could have a Material Adverse Effect on the
Vaalco Consolidated Group;
(d) suffered the termination, suspension or revocation of any
license or permit necessary for the operation of its business;
(e) entered into any transaction other than on an arm's-length
basis;
(f) declared or paid any dividend or made any distribution with
respect to any of its equity interests, or redeemed, purchased or otherwise
acquired any of its equity interests, or issued, sold or granted any equity
interests or any option, warrant or other right to purchase or acquire any such
interest; or
(g) agreed, whether or not in writing, to do any of the foregoing.
SECTION 4.20 INVESTMENT EXPERIENCE. Vaalco is an "accredited
investor" as defined in Rule 501(a) of the Securities Act.
SECTION 4.21 PURCHASE FOR OWN ACCOUNT. The Company Shares to be acquired
by Vaalco pursuant to this Agreement are being acquired for its own account and
with no intention of distributing or reselling the Company Shares or any part
thereof in any transaction that would be violation of the securities laws of the
United States of America, or any state, without prejudice, however, to the
rights of Vaalco at all times to sell or otherwise dispose of all or any part of
the Company Shares under an effective registration statement under the
Securities Act, or under an exemption from such registration available under the
Securities Act, and subject, nevertheless, to the disposition of the Vaalco's
property being at all times within its control. If Vaalco should in the future
decide to dispose of any of the Company Shares, Vaalco understands and agrees
that it may do so
- 14 -
only in compliance with the Securities Act and applicable state securities laws,
as then in effect, and that stop-transfer instructions to that effect, where
applicable, will be in effect with respect to the Company Shares. Vaalco agrees
to the imprinting, so long as required by law, of a legend on the Company Shares
as stated in Section 2.2 hereof.
SECTION 4.22 SETTLEMENT PAYMENTS. Schedule 4.22 sets forth all amounts
payable by any member of the Vaalco Consolidated Group to any Person in
settlement of or otherwise in connection with any and all claims, actions,
disputes or arbitration proceedings relating in any manner to Service Contract
14 in the Philippines including, without limitation, those claims and disputes
relating to such Service Contract 14 described in the Quarterly Report on Form
10-QSB filed by Vaalco with the SEC on November 14, 1997.
SECTION 4.23 VAALCO'S ASSETS. The assets of Vaalco and of its subsidiaries
consist solely of (i) reserves of oil, rights to reserves of oil and associated
exploration and production assets with a fair market value not exceeding $500
million and (ii) other assets with a fair market value not exceeding $15
million. For purposes of this Section 4.23, the term "associated exploration and
production assets" shall have the meaning ascribed thereto in Section 802.3 of
the Rules promulgated pursuant to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976 ("HSR Act").
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF FUND
The Fund represents and warrant to Vaalco, as of the date hereof that,
except as set forth in the Schedules numbered to correspond to the applicable
representation or warranty:
SECTION 5.1 ORGANIZATION. The Company is duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
corporate power and authority to carry on its business as now being conducted
and to own its properties. The Company is duly qualified to do business and is
in good standing in each state and foreign jurisdiction in which the character
or location of the properties owned or leased by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect on the Company.
SECTION 5.2 AFFILIATED ENTITIES. The Company has no subsidiaries. Except
for the ▇▇▇▇ Interest (as defined herein), the Company does not, directly or
indirectly, own of record or beneficially, or have the right or obligation to
acquire, any outstanding securities or other interest in any corporation,
partnership, joint venture or other entity.
SECTION 5.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists exclusively
of 1,000 shares of common stock, of which only the Company Shares are
outstanding as of the date hereof. All of such Company shares have been validly
issued, are fully paid and nonassessable and were issued free of preemptive
rights, in compliance with any rights of first refusal, and in compliance with
all legal requirements. No share of capital stock of Company has been, or may be
required to be, reacquired by Company for any reason or is, or may be required
to be, issued by Company for any reason, including,
- 15 -
without limitation, by reason of any option, warrant, security or right
convertible into or exchangeable for such shares, or any agreement to issue any
of the foregoing.
(b) As of the Closing, the Fund shall own, free and clear of any
Liens, the Company Shares and, upon delivery of and payment for such Company
Shares as herein provided, the Fund will convey to Vaalco good and valid title
thereto, free and clear of any Liens.
SECTION 5.4 SELLER STATUS. The Fund is a limited partnership, duly
organized and existing under the laws of the state of Delaware. The Fund has the
power and authority to own and operate its properties and to conduct its
business as now conducted, or proposed to be conducted.
SECTION 5.5 AUTHORITY; ENFORCEABLE AGREEMENTS.
(a) Each of Fund and the Company has the requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
described herein. The execution and delivery of this Agreement by the Company
and Fund and the consummation by the Company and Fund of the transactions
described herein have been duly authorized by all necessary corporate action on
the part of the Company and Fund.
(b) This Agreement has been duly executed and delivered by the
Company and Fund, and (assuming due execution and delivery by the other parties
thereto) constitutes a valid and binding obligation of Fund and the Company,
enforceable against the Company and the Fund, as the case may be, in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
and general principles of equity. The other agreements entered, or to be
entered, into by the Company and Fund in connection with this Agreement have
been, or will be, duly executed and delivered by the Company and Fund, and
(assuming due execution and delivery by the other parties thereto) constitute,
or will constitute, valid and binding obligations of the Company and Fund,
enforceable against the Company and the Fund, as the case may be, in accordance
with their terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
and general principles of equity.
SECTION 5.6 NO CONFLICTS OR CONSENTS.
(a) Neither the execution, delivery or performance of this Agreement
by Fund or the Company nor the consummation of the transactions contemplated
hereby will (i) violate, conflict with, or result in a breach of any provision
of, constitute a default (or an event that, with notice or lapse of time or
both, would constitute a default) under, result in the termination of, or
accelerate the performance required by, or result in the creation of any adverse
claim against any of the properties or assets of the Company under, (A) the
certificate of incorporation or bylaws of the Company, or (B) any note, bond,
mortgage, indenture, deed of trust, lease, license, agreement, concession,
production sharing agreement or other instrument or obligation to which the
Company, is a party, or by which the Company or any of its assets are bound, or
(ii) violate any order, writ, injunction, decree, judgment, statute, rule or
regulation of any Governmental Authority to which the Company is subject or by
which the Company or any of its assets of the foregoing are bound.
- 16 -
(b) Except with respect to filings which may be required under HSR
Act and the consent of ▇▇▇▇ (as defined herein) to the transactions contemplated
under this Agreement, no consent, approval, order, permit or authorization of,
or registration, declaration or filing with, any Person or of any Governmental
Authority is required for the execution, delivery and performance by the Company
and Fund of this Agreement and the covenants and transactions contemplated
hereby or for the execution, delivery and performance by the Company and Fund of
any other agreements entered, or to be entered, into by the Company or Fund in
connection with this Agreement.
SECTION 5.7 CORPORATE DOCUMENTS, STOCKHOLDER AGREEMENTS AND BOARD OF
DIRECTORS. Fund has delivered to Vaalco true and complete copies of the
Company's certificate of incorporation and bylaws, as amended or restated
through the date of this Agreement. The minute books of the Company contain
reasonably complete and accurate records of all corporate actions of the equity
owners of the Company and of the boards of directors of the Company, including
committees of such board. The stock transfer records of the Company contain
complete and accurate records of all issuances and redemptions of stock by
Company. Except for subscription agreements listed in Schedule 5.7, neither the
Company nor any of its Affiliates is a party to any agreement with respect to
the capital stock of the Company other than this Agreement.
SECTION 5.8 FINANCIAL STATEMENTS; LIABILITIES.
(a) The Company Financial Statements attached hereto as Schedule 5.8
have been audited by certified public accountants in accordance with generally
accepted auditing standards, have been prepared in accordance with United States
generally accepted accounting principles and, except as disclosed therein,
applied on a basis consistent with prior periods, and present fairly the
financial position of the Company at such dates and the results of operations
and cash flows for the periods then ended. The Company Interim Financial
Statements reflect all adjustments (consisting only of normal recurring
adjustments) that are necessary for a fair statement of the results for the
interim periods presented therein. There has not been a Material Adverse Change
in the financial condition of the Company since December 31, 1997.
(b) The Company Latest Balance Sheet includes appropriate reserves
for all Taxes and other liabilities incurred as of such date but not yet
payable.
(c) Since the date of the Company Latest Balance Sheet, there has
been no change that has had or is likely to have a Material Adverse Effect on
the Company.
SECTION 5.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of
the Company Latest Balance Sheet, the Company has conducted its business only in
the ordinary course, and has not:
(a) amended its certificate of incorporation, bylaws or similar
organizational documents;
(b) merged or consolidated with another entity (other than a
subsidiary) or acquired or agreed to acquire any business or any corporation,
partnership or other business organization, or sold, leased, transferred or
otherwise disposed of any material portion of its assets except for fair value
in the ordinary course of business;
- 17 -
(c) suffered any damage, destruction or loss (whether or not covered
by insurance) which has had or could have a Material Adverse Effect on the
Company;
(d) suffered the termination, suspension or revocation of any
license or permit necessary for the operation of its business;
(e) entered into any transaction other than on an arm's-length
basis;
(f) declared or paid any dividend or made any distribution with
respect to any of its equity interests, or redeemed, purchased or otherwise
acquired any of its equity interests, or issued, sold or granted any equity
interests or any option, warrant or other right to purchase or acquire any such
interest; or
(g) agreed, whether or not in writing, to do any of the foregoing.
SECTION 5.10 INVESTMENT EXPERIENCE. The Fund is an "accredited
investor" as defined in Rule 501(a) of the Securities Act.
SECTION 5.11 PURCHASE FOR OWN ACCOUNT. The Vaalco Shares to be acquired by
the Fund pursuant to this Agreement are being acquired for its own account and
with no intention of distributing or reselling the Vaalco Shares or any part
thereof in any transaction that would be in violation of the securities laws of
the United States of America, or any state, without prejudice, however, to the
rights of the Fund at all times to sell or otherwise dispose of all or any part
of the Vaalco Shares under an effective registration statement under the
Securities Act, or under an exemption from such registration available under the
Securities Act, and subject, nevertheless, to the disposition of the Fund's
property being at all times within its control. If the Fund should in the future
decide to dispose of any of the Vaalco Shares, the Fund understands and agrees
that it may do so only in compliance with the Securities Act and applicable
state securities laws, as then in effect, and that stop-transfer instructions to
that effect, where applicable, will be in effect with respect to the Vaalco
Shares. The Fund agrees to the imprinting, so long as required by law, of a
legend on the Vaalco Shares as stated in Section 2.2 hereof.
SECTION 5.12 ▇▇▇▇ OVERSEAS EXPLORATION COMPANY, L.P.
(a) The Company owns a limited partner interest ("▇▇▇▇ Interest") in
▇▇▇▇ Overseas Exploration Company, L.P. ("▇▇▇▇") free and clear of any Lien.
Subject to the provisions of the Agreement of Partnership, the ▇▇▇▇ Interest
entitles the Company to a 7.5% interest in the income, gain and revenue of ▇▇▇▇.
▇▇▇▇ is a limited partnership, duly organized, existing and in good standing
under the laws of the state of Delaware. The Company has delivered to Vaalco a
copy of the Agreement of Partnership, and all amendments thereto, for ▇▇▇▇. The
sale and transfer of the Company Shares does not violate the terms and
provisions of the Agreement of Partnership of ▇▇▇▇.
(b) Except for the Agreement of Partnership for ▇▇▇▇ and the
Subscription Agreement for Limited Partner Interest in ▇▇▇▇ Overseas Exploration
Company, L.P., dated as of September 13, 1995, executed by the Company and
accepted by ▇▇▇▇ Overseas Operating Company, a Delaware corporation ("HOOC"),
and ▇▇▇▇ pursuant to a Letter, dated as of September 13, 1995 from HOOC (for
itself and as
- 18 -
managing partner of ▇▇▇▇) to the Company, the Company has no obligation,
liability or responsibility with respect to ▇▇▇▇.
SECTION 5.13 EMPLOYEES. The Company does not have and has never had
any employees.
SECTION 5.14 LITIGATION. Except as listed on Schedule 5.14, there are no
actions, suits, proceedings, arbitrations or investigations pending or, to the
knowledge of the Company, threatened, before any court, any governmental agency
or instrumentality or any arbitration panel, against or affecting the Company,
and to the knowledge of the Company no facts or circumstances exist that would
be likely to result in the filing of any such action that would have a Material
Adverse Effect on the Company. The Company is not subject to any currently
pending judgment, order or decree entered in any lawsuit or proceeding.
SECTION 5.15 CONTRACTS. (a) Schedule 5.15 sets forth, as of the date
hereof, a list of all of the following material contracts and other agreements
to which the Company is a party or by which it or any material portion of its
properties or assets are bound or subject (other than those set forth on any
other Schedule): (i) contracts, severance agreements and other agreements with
any current or former officer, director, employee, consultant, agent or other
representative; (ii) contracts and other agreements with any labor union or
association representing any employee of the Company; (iii) contracts,
agreements or other agreements relating to the Company between the Company, on
the one hand, and any stockholder or any of his, her or its Affiliates on the
other hand; (iv) joint venture agreements; (v) contracts and other agreements
under which the Company agrees to indemnify any party; (vi) contracts and other
agreements relating to the borrowing of money; or (vii) any other material
contract or other agreement whether or not made in the ordinary course of
business. There have been delivered or made available to Vaalco true and
complete copies of all such contracts and other agreements set forth on Schedule
5.15.
(b) All contracts, agreements and understandings set forth on
Schedule 5.15 are valid and binding and are in full force and effect and
enforceable in accordance with their respective terms other than contracts,
agreements or understandings which are by their terms no longer in force or
effect. Except as set forth on Schedule 5.15 (or on another Schedule), (i) no
approval or consent of, or notice to, any Person is needed in order that such
contract, agreement or understanding shall continue in full force and effect in
accordance with its terms without penalty, acceleration or rights of early
termination following the consummation of the transactions contemplated by this
Agreement, and (ii) the Company is not in violation or breach of or default
under any such contract, agreement or understanding nor to the knowledge of the
Fund is any other party to any such contract, agreement or understanding.
SECTION 5.16 INVESTMENT COMPANY. The Company is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
SECTION 5.17 PUBLIC UTILITY COMPANY. The Company is not a "public
utility," a "holding company" or a subsidiary or "affiliate" of a public utility
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
SECTION 5.18 ENVIRONMENTAL AND SAFETY MATTERS. Except as set forth on
Schedule 5.18 hereto and except for such of the following as would not,
individually or in the
- 19 -
aggregate, have a Material Adverse Effect with respect to the Company: (i) the
Company is in compliance with all applicable Environmental Laws; (ii) the
Company has not received a notice, report or information regarding any
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise),
or any corrective, investigatory or remedial obligations, arising under
applicable Environmental Laws with respect to its past or present operations or
properties; (iii) the Company has obtained, and is and have been in compliance
with all terms and conditions of, all permits, licenses and other authorizations
required pursuant to Environmental Laws for its occupation of the real property
owned by the Company ("Company Owned Property") the property leased by the
Company ("Company Leased Property") and the other assets and operations of the
Company and the conduct of its business; (iv) the transactions contemplated by
this Agreement do not impose any obligations under Environmental Laws for the
site investigation or cleanup or notification to or consent of any governmental
agencies or third parties; and (v) the Company does not have any contingent
liability which is material to the Company in connection with the release of any
Hazardous Materials into the environment in violation of any Environmental Law.
The Company has made available to Vaalco true, complete and correct copies of
all environmental reports, analyses, tests or monitoring in the possession of
the Company during the past two years pertaining to any Company Owned Property
or Company Leased Property.
SECTION 5.19 TAX MATTERS.
(a) Each of the following is true with respect to the Company to the
extent applicable:
(i) all Returns have been or will be timely filed by the
Company when due in accordance with all applicable laws; all Taxes shown
on the Returns have been or will be timely paid when due; the Returns have
been properly completed in compliance with all applicable laws and
regulations and completely and accurately reflect the facts regarding the
income, expenses, properties, business and operations required to be shown
thereon; the Returns are not subject to penalties under Section 6662 of
the Code (or any corresponding provision of state, local or foreign tax
law);
(ii) except as set forth on Schedule 5.19(a)(ii), the Company
has paid all Taxes required to be paid by it (whether or not shown on a
Return) or for which it could be liable (provided that it shall not be
considered a breach of this representation if it is ultimately determined
that additional tax payments are due but such assessment is based on an
adjustment to a return or position, if such member has a reasonable basis
for the position taken with respect to such Taxes), whether to taxing
authorities or to other persons under tax allocation agreements or
otherwise, and the charges, accruals, and reserves for Taxes due, or
accrued but not yet due, relating to its income, properties, transactions
or operations for any Pre-Closing Period as reflected on its books
(including, without limitation, the Company's Latest Balance Sheet) are
adequate to cover such Taxes;
(iii) there are no agreements or consents currently in effect
for the extension or waiver of the time (A) to file any Return or (B) for
assessment or collection of any taxes relating to the income, properties
or
- 20 -
operations of the Company for any Pre-Closing Period, and the Company has
not been requested to enter into any such agreement or consent;
(iv) there are no Liens for Taxes (other than for current
Taxes not yet due and payable) upon the assets of the Company; and
(v) to the knowledge of the Fund, the Company has complied in
all material respects with all applicable tax laws.
SECTION 5.20 BROKER'S AND FINDER'S FEE. No agent, broker, Person or firm
acting on behalf of the Fund or Company is or will be entitled to any commission
or broker's or finder's fee from the Company in connection with any of the
transactions contemplated herein.
SECTION 5.21 ABSENCE OF SENSITIVE PAYMENTS. Neither the Company nor any
Affiliate thereof nor any officer or director of any of them acting alone or
together, has performed any of the following acts: (i) the making of any Payment
to or for the private use of any governmental official, employee or agent where
the Payment or the purpose of the Payment was illegal under the laws of the
United States or the jurisdiction in which such payment was made, (ii) the
establishment or maintenance of any unrecorded fund, asset or liability for any
purpose or the making of any false or artificial entries on its books, (iii) the
making of any Payment or the receipt of any Payment with the intention or
understanding that any part of the Payment was to be used for any purpose other
than that described in the documents supporting the Payment, or (iv) the giving
of any Payment to, or the receipt of any Payment from, any person who was or
could have been in a position to help or hinder the business of the Company (or
assist the Company in connection with any actual or proposed transaction) which
(A) would reasonably have been expected to subject the Company to any damage or
penalty in any civil, criminal or governmental litigation or proceeding, (B) if
not given in the past, would have had a Material Adverse Effect on the Company
or (C) if not continued in the future, would have a Material Adverse Effect on
the Company.
SECTION 5.22 COMPLIANCE WITH LAW. Except as set forth on Schedule 5.22
hereto, the Company is not in violation of any statute, law, ordinance,
regulation, rule or order of any foreign, United States federal, or state or
local Governmental Authority or any judgment, decree or order of any court,
except where any such violation would not, individually or in the aggregate,
have a Material Adverse Effect on the Company. Except as set forth on Schedule
5.22, the Company has all permits, approvals, licenses and franchises from
Governmental Authorities required to conduct its business as now being
conducted, except for such permits, approvals, licenses and franchises the
absence of which would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
SECTION 5.23 EMPLOYMENT PLANS/EMPLOYMENT AGREEMENTS.
(a) Schedule 5.23 contains a true and complete list of each
"employee benefit plan" (within the meaning of section 3(3) of ERISA, including,
without limitation, multiemployer plans within the meaning of ERISA section
3.(37)), stock purchase, stock option, severance, employment, change-in-control,
fringe benefit, welfare benefit, collective bargaining, bonus, incentive,
deferred compensation and all other employee benefit plans, agreements,
programs, policies or other arrangements, whether or not
- 21 -
subject to ERISA (including any funding mechanism therefor now in effect or
required in the future as a result of the transaction contemplated by this
Agreement or otherwise), whether formal or informal, oral or written, legally
binding or not, under which any employee or former employee of the Company has
any present or future right to benefits or under which the Company has any
present or future liability. All such plans, agreements, programs, policies and
arrangements shall be collectively referred to as the "Company Plans."
(b) With respect to each Company Plan, the Company has delivered to
Vaalco a current, accurate and complete copy (or, to the extent no such copy
exists, an accurate description) thereof and, to the extent applicable: (i) any
related trust agreement or other funding instrument; (ii) the most recent
determination letter, if applicable; (iii) any summary plan description and
other written communications (or a description of any oral communications) by
the Company to its employees concerning the extent of the benefits provided
under a Company Plan; and (iv) for the three most recent ears (A) the Form 5500
and attached schedules, (B) audited financial statements, (c) actuarial
valuation reports and (D) attorney's response to an auditor's request for
information.
(c) (i) Each Company Plan has been established and administered in
all material respects in accordance with its terms, and in compliance with the
applicable provisions of ERISA, the Code and other applicable laws, rules and
regulations; (ii) each Company Plan which is intended to be qualified within the
meaning of Code section 401(a) is so qualified and has received a favorable
determination letter as to its qualification, and nothing has occurred, whether
by action or failure to act, that could reasonably be expected to cause the loss
of such qualification; (iii) for each Company Plan that is a "welfare plan"
within the meaning of ERISA section 3(1), the Company has no or will not have
any liability or obligation under any plan which provides medical or death
benefits with respect to current or former employees of the Company beyond their
termination of employment (other than coverage mandated by law); (iv) to the
knowledge of the Company no event has occurred and no condition exists that
would subject the Company, either directly or by reason of their affiliation
with any member of their "Controlled Group" (defined as any organization which
is a member of a controlled group of organizations within the meaning of Code
sections 414(b), (c), (m) or (o)), to any tax, fine, lien, penalty or other
liability imposed by ERISA, the Code or other applicable laws, rules and
regulations; (v) for each Company Plan with respect to which a Form 5500 has
been filed, no material change has occurred with respect to the matters covered
by the most recent Form since the date thereof; and (vi) to the knowledge of the
Company no "reportable event" (as such term is defined in ERISA section 4043),
"prohibited transaction" (as such term is defined in ERISA section 406 and Code
section 4975) or "accumulated funding deficiency" (as such term is defined in
ERISA section 302 and Code Section 412 (whether or not waived)) has occurred
with respect to any Company Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect.
(d) None of the Company Plans is subject to Title IV of ERISA or is
a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA.
(e) With respect to any Company Plan, (i) no actions, suits or
claims (other than routine claims for benefits in the ordinary course) are
pending or, to the best knowledge of the Company, threatened which have resulted
or could reasonably be expected to result in a Material Adverse Effect, and (ii)
to the best knowledge of the
- 22 -
Company, no facts or circumstances exist that could give rise to any such
actions, suits or claims.
(f) No Company Plan exists that could result in the payment to any
present or former employee of the Company or any money or other property or
accelerate or provide any other rights or benefits to any present or former
employee of the Company as a result of the transaction contemplated by this
Agreement, whether or not such payment would constitute a parachute payment
within the meaning of Code Section 280G.
SECTION 5.24 ▇▇▇▇ REPRESENTATIONS. Except as expressly set forth in
Section 5.12, the Fund and the Company make no representation or warranty,
either directly or indirectly or express or implied, as to any matters
whatsoever with respect to ▇▇▇▇ or ▇▇▇▇'▇ operations and assets.
ARTICLE 6. COVENANTS
SECTION 6.1 COOPERATION AND BEST EFFORTS. Each party shall cooperate with
the other and use its reasonable efforts to (i) receive all necessary and
appropriate consents of third parties to the transactions contemplated
hereunder, (ii) satisfy all requirements prescribed by law for, and all
conditions set forth in this Agreement to, the consummation of the transactions
provided from here; PROVIDED, that no party shall be required to pay any amount
of money in connection with its or any other parties obtaining any consent
pursuant to clause (i) of this Section 6.1.
SECTION 6.2 CONDUCT OF BUSINESS BY BOTH PARTIES PRIOR TO THE CLOSING DATE.
During the period from the date of this Agreement to the Closing, the Company
and Vaalco shall each use its reasonable best efforts to preserve the goodwill
of suppliers, general partners, customers and others having business relations
with them and to do nothing knowingly to impair their ability to keep and
preserve their businesses as it exists on the date of this Agreement. Without
limiting the generality of the foregoing, during the period from the date of
this Agreement to the Closing each of the Company and Vaalco shall not, without
the prior written consent of the other:
(a) declare, set aside, increase or pay any dividend (including any
stock dividends), or declare or make any distribution on, or directly or
indirectly combine, redeem, reclassify, purchase, or otherwise acquire, any
shares of its capital stock or authorize the creation or issuance of, or issue,
deliver or sell any additional shares of its capital stock or any securities or
obligations convertible into or exchangeable for its capital stock or effect any
stock split or reverse stock split or other recapitalization.
(b) amend its certificate of incorporation or by-laws otherwise than
as contemplated by this Agreement;
(c) pledge or otherwise encumber any shares of its capital stock,
any other voting securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, or any other voting securities
or convertible securities;
(d) commit or omit to do any act which act or omission would cause a
breach of any covenant contained in this Agreement or would cause any
representation or warranty contained in this Agreement to become untrue, as if
each such representation and warranty were continuously made from and after the
date hereof;
- 23 -
(e) violate any applicable law, statute, rule, governmental
regulation or order;
(f) fail to maintain its books, accounts and records in the usual
manner on a basis consistent with that heretofore employed;
(g) fail to pay, or to make adequate provision in all material
respects for the payment of, all Taxes, interest payments and penalties due and
payable (for all periods up to the date of Closing, including that portion of
its fiscal year to and including the date of Closing) to any city, parish,
county, state, the United States, foreign or any other taxing authority, except
those being contested in good faith by appropriate proceedings and for which
sufficient reserves have been established, or make any elections with respect to
taxes;
(h) make any material Tax election that is inconsistent with any
corresponding election made on a prior return or settle or compromise any income
Tax liability for an amount materially in excess of the liability therefor that
is reflected on the Vaalco Financial Statements or the Company Financial
Statements, as the case may be;
(i) authorize any of, or agree or commit to do any of, the
foregoing actions;
(j) (i) increase the compensation or fringe benefits of any present
or former director, officer or employee of any member of the Vaalco Consolidated
Group (except for increases in salary or wages in the ordinary course of
business consistent with past practice), (ii) grant any severance or termination
pay to any present or former director, officer or employee of any member of the
Vaalco Consolidated Group, (iii) loan or advance any money or other property to
any present or former director, officer or employee of any member of the Vaalco
Consolidated Group or (iv) establish, adopt, enter into, amend or terminate any
Vaalco Plan or any plan, agreement, program, policy, trust, fund or other
arrangement that would be a Vaalco Plan if it were in existence as of the date
of this Agreement; or
(k) consent to an amendment to the ▇▇▇▇ Partnership Agreement.
SECTION 6.3 PRESS RELEASES. Fund and Vaalco will consult with each other
before issuing, and provide each other the opportunity to review and comment
upon, any press releases or other public statements with respect to any
transactions described in this Agreement, and shall not issue any such press
releases or make any such public statement prior to such consultation, except as
may be required by applicable law, court process or by obligations pursuant to
an agreement pursuant to which the Vaalco stock is listed or approved for
trading.
SECTION 6.4 ACCESS TO INFORMATION AND CONFIDENTIALITY.
(a) Prior to the Closing Date, Vaalco shall afford to the Fund, and
the Company shall afford to Vaalco and to the officers, employees, accountants,
counsel, financial advisors and other representatives of such other party,
reasonable access during normal business hours to their respective premises,
books and records and will furnish to the other party (i) a copy of each report,
schedule, registration statement and other
- 24 -
documents filed by it during such period pursuant to the requirements of federal
or state securities laws, and (ii) such other information with respect to its
business and properties as such other party reasonably requests. The Company
agrees to provide Vaalco prompt notice of any proposed amendment to the
partnership agreement of ▇▇▇▇ upon becoming aware of such amendment.
(b) Each of Vaalco and the Fund will, and will cause its officers,
directors, employees, agents and representatives to, (i) hold in confidence,
unless compelled to disclose by judicial or administrative process, or, in the
opinion of its counsel, by other requirements of law, all nonpublic information
concerning the other party furnished in connection with the transactions
contemplated by this Agreement until such time as such information becomes
publicly available (otherwise than through the wrongful act of such person),
(ii) not release or disclose such information to any other person, except in
connection with this Agreement to its auditors, attorneys, financial advisors,
other consultants and advisors, and (iii) not use such information for any
competitive or other purpose other than with respect to its consideration and
evaluation of the transactions contemplated by this Agreement. In the event of
termination of this Agreement for any reason, Vaalco and the Fund will promptly
return or destroy all documents containing nonpublic information so obtained
from the other party and any copies made of such documents and any summaries,
analyses or compilations made therefrom.
SECTION 6.5 ▇▇▇▇ ARRANGEMENTS. Immediately prior to the Closing, the
Company shall enter into the following agreements and instruments, each of which
shall be satisfactory to Vaalco and the Fund: (i) a letter of credit arrangement
in favor of ▇▇▇▇ in the amount of approximately $13.6 million (or such lesser
amount as is equal to the Company's unfunded Committed Capital Contributions (as
defined in the Agreement of Partnership of ▇▇▇▇) as of the Closing Date) to
provide for the funding after the Closing of the Company's commitment to ▇▇▇▇
with respect to the ▇▇▇▇ Interest, (ii) a letter of credit reimbursement and
cash collateral agreement with the issuer of such letter of credit, which
agreement shall provide for the reimbursement of such issuer for the amount of
all drawings under such letter of credit from the cash collateral account
established pursuant to such agreement, (iii) an agreement with ▇▇▇▇, pursuant
to which (x) ▇▇▇▇ releases the Fund and ▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ & Co., a
Delaware limited partnership ("BBH&Co."), from all obligations and liabilities
under any agreements entered into by them in connection with the ▇▇▇▇ Interest,
(y) ▇▇▇▇ consents to the arrangements described in this Section 6.5 and (z) ▇▇▇▇
agrees that proceeds of the aforesaid letter of credit will be used as provided
in the Agreement of Partnership for ▇▇▇▇, or in the case the entire letter of
credit is drawn pursuant to the terms thereof, invested as agreed by the
parties; PROVIDED, that Vaalco shall bear all reasonable fees, costs and
expenses incurred by any party to this Agreement in connection with the issuance
of the letter of credit and letter of credit reimbursement and cash collateral
agreement entered into pursuant to this Section 6.5. The aforesaid agreements
and arrangements will be in form an substance satisfactory to the Company, ▇▇▇▇
and Vaalco.
SECTION 6.6 FINANCIAL STATEMENTS. Vaalco shall deliver to the Holders,
in form and substance reasonably satisfactory to the Majority Holders:
(a) as soon as available, but not later than one hundred days after
the end of each fiscal year of Vaalco, a copy of the audited consolidated
balance sheet of Vaalco and its subsidiaries as of the end of such year and the
related consolidated statements of
- 25 -
income and cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous year, all in reasonable detail and
accompanied by a management summary and analysis of the operations of Vaalco and
its subsidiaries for such fiscal year and by the opinion of Deloitte & Touche
(or any successor thereto) or another nationally recognized independent public
accounting firm which report shall state that such consolidated financial
statements present fairly the financial position for the periods indicated in
conformity with generally accepted accounting principles applied on a basis
consistent, except as otherwise stated therein, with prior years; PROVIDED,
HOWEVER, that the delivery of a copy of Vaalco's Annual Report on Form 10-K or
10-KSB filed pursuant to the Exchange Act shall satisfy the requirements of this
Section 6.6(a);
(b) as soon as available and, in any event, within 45 days of each
of the first three fiscal quarters of each year the unaudited consolidated
balance sheet of Vaalco and its subsidiaries, and the related consolidated
statements of income and cash flow for such quarter and for the period
commencing on the first day of the fiscal year and ending on the last day of
such quarter, all certified by an appropriate officer of Vaalco; PROVIDED,
HOWEVER, that the delivery of a copy of Vaalco's Quarterly Report filed pursuant
to the Exchange Act shall satisfy the requirements of this Section 6.6(b);
(c) as soon as available, and in any event, within 30 days of the
end of each fiscal month, internally prepared monthly financial reports in form
and substance reasonably satisfactory in the Fund; PROVIDED, HOWEVER, that
Vaalco shall not be required to provide such monthly reports if Vaalco files
reports pursuant to the Exchange Act;
(d) budgets, documentation of material financial transactions,
projections, operating reports, acquisition analyses, presentations to banks,
financial institutions or potential investors, consultants' reports and such
other financial and operating data of Vaalco and its subsidiaries as the Fund
reasonably may request (any such information to be subject to the provisions of
Section 6.13(b));
(e) at any time when it is not subject to Section 13 or 15(d) of the
Exchange Act, upon request, to the Fund and prospective purchasers of Vaalco
Shares or Common Stock issued upon conversion of the Preferred Shares,
information of the type that would satisfy the requirement of subsection
(d)(4)(i) of Rule 144A (or any similar successor provision) under the Securities
Act; and
(f) except as otherwise provided in Section 6.6(a) and (b), promptly
after the same are filed, copies of all reports, statements and other documents
filed with the Commission.
SECTION 6.7 CERTIFICATES; OTHER INFORMATION. Vaalco shall furnish to the
Fund concurrently with the delivery of the financial statements referred to in
Section 6.6(a) above, a certificate of Vaalco's Chief Financial Officer stating
that, to the best of such officer's knowledge, there exists no default under or
breach of Sections 6.6 through 6.14 and Article 7, except as specified in such
certificates.
SECTION 6.8 PRESERVATION OF CORPORATE EXISTENCE AND LEGALLY AVAILABLE
FUNDS. Vaalco shall, and shall cause each of its subsidiaries to:
- 26 -
(a) preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its jurisdiction of incorporation
or organization except as permitted by Section 7.1; and
(b) preserve and maintain in full force and effect all material
rights, privileges, qualifications, licenses and franchises necessary in the
normal conduct of its business.
SECTION 6.9 COMPLIANCE WITH ORGANIZATIONAL DOCUMENTS. The Company shall
comply, and shall cause each Subsidiary to comply, in all material respects with
its certificate of incorporation and by-laws or other organizational or
governing documents.
SECTION 6.10 COMPLIANCE WITH LAWS. Vaalco shall comply, and shall cause
each subsidiary to comply, in all material respects with all Requirements of Law
and with the directions of any Governmental Authority having jurisdiction over
it or its business, except if such failure to comply would not have a Material
Adverse Effect on the condition of Vaalco.
SECTION 6.11 NOTICES. Upon knowledge of the Chief Executive Officer, the
President or the Chief Financial Officer of Vaalco of the events described
below, Vaalco shall give written notice within 10 days to the Fund upon (a) the
occurrence of any default under, or breach of, any of the provisions of Sections
6.6 through 6.14 or Article 7; and (b) any (i) material default or event of
default under any contractual obligation of Vaalco or any of its subsidiaries,
or (ii) material dispute, litigation, investigation, proceeding or suspension
which may exist at any time between Vaalco or any of its subsidiaries and any
governmental authority. Each notice pursuant to this Section 6.11 shall be
accompanied by a statement by the Chief Executive Officer, President or Chief
Financial Officer of Vaalco setting forth details of the occurrence referred to
therein, specifying the period of existence thereof and stating what action
Vaalco proposes to take with respect thereto.
SECTION 6.12 RESERVATION OF SHARES. Vaalco shall at all times reserve and
keep available out of its authorized Vaalco Common Stock, solely for the purpose
of issue or delivery upon conversion of all outstanding Vaalco Shares as
provided in the Certificate of Designation, such number of shares of Vaalco
Common Stock as shall then be issuable or deliverable upon the exercise of all
outstanding Vaalco Preferred Shares. Such shares of Vaalco Common Stock shall,
when issued or delivered in accordance with the terms of the Vaalco Preferred
Shares, be duly and validly issued and fully paid and non-assessable. Vaalco
shall issue the Vaalco Common Stock into which the Vaalco Preferred Shares are
convertible upon the proper surrender of the Vaalco Preferred Shares in
accordance with the provisions of the Certificate of Designation and shall
otherwise comply with the terms thereof.
SECTION 6.13 INSPECTION.
(a) At any time, and from time to time after the Closing, Vaalco
will permit, and will cause each of its subsidiaries to permit, representatives
of the Fund to visit and inspect any of its properties, to examine its
corporate, financial and operating records and make copies thereof or abstracts
therefrom, and to discuss its affairs, finances and accounts with their
respective directors, officers and independent public accountants, all at such
reasonable times during normal business hours and as often as may be reasonably
requested, upon reasonable advance notice to Vaalco.
- 27 -
(b) Without limiting any obligations provided under any requirement
of law, the Fund will maintain as confidential any information obtained from
Vaalco (to the extent the Fund is advised by Vaalco that such information is
confidential) pursuant to Section 6.13(a) or 6.6(d) (other than information
which (i) at the time of disclosure or thereafter is generally available to and
known by the public (other than as a result of a disclosure directly or
indirectly by the Fund or any of its representatives), (ii) is available to the
Fund on a non-confidential basis from a source other than Vaalco or its
subsidiaries, provided that such source was not known by the Fund to be bound by
a confidentiality agreement with Vaalco or any of its subsidiaries, or (iii) has
been independently developed by the Fund), and shall not disclose any
information obtained from Vaalco pursuant to Section 6.13(a) or 6.6(d) and
required to be maintained as confidential pursuant hereto, except (i) to BBH&Co.
and their respective advisors, representatives, agents, partners and employees,
(ii) to its advisors, representatives, agents, partners (and their
representatives and advisors) and employees, (iii) to any prospective transferee
of the Vaalco Shares or shares of Common Stock issued upon the conversion of the
Vaalco Shares or of an interest in the Fund or in a successor fund sponsored by
BBH&Co. (iv) as may be required by law (including a court order, subpoena or
other administrative order or process) or applicable regulations to which the
Fund is or becomes subject, (v) in connection with any litigation arising out of
or related to this Agreement, (vi) to the executive officers of Vaalco or any of
its subsidiaries, or (vii) with the consent of Vaalco.
SECTION 6.14 REGISTRATION AND LISTING. If the Vaalco Shares, or any shares
of Common Stock required to be reserved for purposes of conversion of the Vaalco
Preferred Shares as provided in the Certificate of Designation, require
registration with or approval of any governmental authority under any federal or
state or other applicable law before such Vaalco Shares or Common Stock may be
issued or delivered upon conversion of the Vaalco Shares, Vaalco will in good
faith and as expeditiously as possible endeavor to cause such Vaalco Shares or
Common Stock to be duly registered or approved, as the case may be, unless such
registration or approval is required solely because of a breach by a Holder of
the Fund's representation contained in Sections 5.10 or 5.11 or in a any legend
on the certificates representing the Vaalco Shares and the Common Stock issued
upon conversion of the Vaalco Preferred Shares. In the event that, and so long
as, the Common Stock is listed on the New York Stock Exchange ("NYSE") or quoted
or listed on any other national securities exchange or Nasdaq Stock Market
("Nasdaq"), Vaalco will, if permitted by the rules of such system or exchange,
quote or list and keep quoted or listed on such exchange or Nasdaq, upon
official notice of issuance, all Common Stock issuable upon conversion of the
Vaalco Preferred Shares.
SECTION 6.15 RESIGNATIONS. Effective at the Closing, the Fund will cause
each officer and director of the Company to submit their written resignation as
an officer and/or director of the Company.
SECTION 6.16 CONTRIBUTION OF COMPANY DEBT. Immediately prior to Closing,
the Fund shall contribute to the Company all of the outstanding indebtedness of
the Company it holds as of such date, including the Term Notes listed on
Schedule 5.15.
SECTION 6.17 PRIVATE PLACEMENT MEMORANDUM. Vaalco shall deliver to the
Fund the draft private placement memorandum with respect to the sale of Vaalco
Common Stock contemplated by Section 8.3(1) hereof prior to the circulation of
such memorandum
- 28 -
in connection with such sale, and such memorandum shall be in form and substance
reasonably satisfactory to the Fund.
SECTION 6.18 DIRECTORS AND OFFICERS INSURANCE. Prior to the Closing Vaalco
shall obtain an insurance policy for all directors and officers of Vaalco which
is comparable to that of similarly situated companies and is satisfactory to the
Fund.
ARTICLE 7. NEGATIVE COVENANTS
SECTION 7.1 CONSOLIDATION AND MERGERS. Without the prior consent of the
Majority Holders, Vaalco shall not merge, consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets, merge or
consolidate with or into any other Person except another subsidiary of Vaalco,
except Vaalco may consolidate or merge with or into, or sell all or
substantially all of its assets to, any Person if:
(a) the corporation or partnership formed by such consolidation or
surviving such merger or the Person which acquires all or substantially all of
the assets of Vaalco shall be (after giving effect to such transaction) a
Solvent corporation or partnership organized or formed, as the case may be, and
existing under, the laws of the United States, any state thereof, or the
District of Columbia and shall expressly assume in writing all of the
obligations of Vaalco under this Agreement, the Vaalco Shares, the Certificate
of Designation and the Registration Rights Agreement;
(b) immediately after giving effect to such transaction, no default
under, or breach of, any of the provisions of Sections 6.6 through 6.14 or this
Article 7;
(c) the corporation or partnership formed by or surviving any such
transaction or the Person that acquires all or substantially all of the assets
of Vaalco shall have a Consolidated Net Worth at least equal to the Consolidated
Net Worth of Vaalco immediately prior to such transaction; and
(d) Vaalco shall have furnished to the Holders (i) an opinion of
counsel addressing the matters (other than solvency) set forth in clause (a)
above and (ii) the certificate of the Chief Financial Officer of Vaalco to the
effect that such transaction has been consummated in compliance with the
foregoing requirements; PROVIDED that nothing in this Section 7.1 shall affect
the rights of the Holders under this Agreement, the Vaalco Shares, or the
Registration Rights Agreement.
SECTION 7.2 TRANSACTIONS WITH AFFILIATES. Without the prior consent of the
Majority Holders, Vaalco shall not, and shall not permit any of its subsidiaries
to, enter into any transaction or arrangement with any Affiliate of Vaalco or of
any such subsidiary, except for transactions or arrangements between members of
the Vaalco Consolidated Group.
SECTION 7.3 NO INCONSISTENT AGREEMENTS. Without the prior consent of the
Majority Holders, neither Vaalco nor any of its subsidiaries shall (a) enter
into any loan or other agreement after the date hereof or (b) amend or modify
any then existing loan or other agreement, which by its terms restricts or
prohibits the ability of Vaalco to issue Common Stock upon conversion of the
Vaalco Shares, in each case in accordance with the Certificate of Designation
and this Agreement.
- 29 -
SECTION 7.4 FISCAL YEAR. Neither Vaalco nor any of its subsidiaries shall
change its fiscal year without the written consent of the Majority Holders.
SECTION 7.5 AMENDMENTS TO CERTIFICATE OF INCORPORATION AND BY-LAWS.
Neither Vaalco nor any of its subsidiaries shall amend its certificate of
incorporation or by-laws in a manner which would adversely effect the Holders in
any material respect, without the written consent of the Majority Holders.
SECTION 7.6 REGISTRATION RIGHTS. Vaalco shall not grant any Person demand
registration rights without the written consent of the Majority Holders. Vaalco
shall not grant any Person piggy-back registration rights that are inconsistent
with the right granted to the Holders pursuant to the Registration Rights
Agreement including, without limitation, any registration rights which would
require a Holder to reduce the number of shares such Holder has requested to
include in a registration statement pursuant to the terms of the Registration
Rights Agreement.
ARTICLE 8. CLOSING CONDITIONS
SECTION 8.1 CONDITIONS APPLICABLE TO ALL. The obligations of each of the
parties hereto to effect the transactions contemplated by this Agreement are
subject to the satisfaction or waiver of the following conditions at or prior to
the Closing:
(a) No action, suit, or proceeding before any court or governmental
or regulatory authority will be pending, no investigation by any governmental or
regulatory authority will have been commenced, and no action, suit or proceeding
by any governmental or regulatory authority will have been threatened, against
Vaalco, Fund or the Company or any of the principals, partners, officers or
directors of any of them, seeking to restrain, prevent or change the
transactions contemplated hereby or questioning the legality or validity of any
such transactions or seeking damages in connection with any such transactions.
(b) If any filing is required under the HSR Act, the applicable
waiting period (and any extension thereof) applicable to the transaction
contemplated by this Agreement under the HSR Act shall have expired or been
earlier terminated.
(c) Vaalco shall have received from Jefferies & Co. an opinion dated
not more than five days before Closing, satisfactory in form and substance to
Vaalco, that the transaction provided for herein is fair to Vaalco and its
stockholders from a financial point of view.
(d) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in securities
generally on the NYSE or on Nasdaq's National Market; (ii) a suspension or
material limitation in trading in Vaalco's securities on over-the-counter
market; (iii) a general moratorium on commercial banking activities declared by
either federal or New York state authorities; or (iv) the outbreak or escalation
of hostilities involving the United States or the declaration by the United
States of a national emergency or war, or any other crisis or change in
political, financial or economic conditions if the effect of any such event
specified in Clause (i) through (iv) in the judgment of the Company or Vaalco
makes it impracticable or inadvisable to proceed with the transaction
contemplated by this Agreement.
- 30 -
(e) The Fund shall have received (i) from ▇▇▇▇, a consent with
respect to the transactions contemplated hereunder, including entering into the
letter of credit arrangement contemplated by Section 6.5 hereof and (ii) from
▇▇▇▇ and HOOC, a release of the Fund and BBH&Co. as of the Closing, from any and
all of the Fund's and BBH&Co.'s obligations to ▇▇▇▇ and HOOC in connection with
the Fund's ownership of the ▇▇▇▇ Interest, including, without limitation, the
obligations of the Fund and BBH&Co. pursuant to (x) that certain Guaranty and
Covenant Agreement, dated as of September 13, 1995, made by the Fund for the
benefit of HOOC and ▇▇▇▇ and (y) that certain Parent Entity Subscription
Agreement for Limited Partnership Interest in ▇▇▇▇, dated September 13, 1995,
executed by the Fund and delivered to ▇▇▇▇.
SECTION 8.2 CONDITIONS TO VAALCO'S OBLIGATIONS. The obligations of Vaalco
to effect the transactions contemplated by this Agreement are also subject to
the satisfaction or waiver of the following conditions at or prior to the
Closing:
(a) The representations and warranties of the Fund in this Agreement
or in any certificate delivered to Vaalco pursuant hereto as of the date hereof
will be deemed to have been made again at and as of the date of Closing (without
regard to any Schedule updates furnished by the Fund after the date hereof
unless consented to by Vaalco) and will then be true and correct in all material
respects, except to the extent any such representation or warranty is qualified
by materiality or by reference to the term "Material Adverse Effect" in which
case such representation or warranty shall be true and correct, and the Company
and Fund will have performed and complied in all material respects with all
agreements, covenants and conditions required by this Agreement to be performed
or complied with by Fund or the Company prior to or on the date of Closing.
(b) There shall not have occurred any event or circumstance
resulting in a Material Adverse Effect with respect to the Company from the date
of the Company's Latest Balance Sheet to the Closing.
(c) All governmental and other third-party consents and approvals,
if any, necessary to permit the consummation of the transactions contemplated by
this Agreement, or to permit the continued operation of the business of Vaalco
and the Company in substantially the same manner after the date of Closing as
before, will have been received.
(d) The receipt by Vaalco of a certificate executed by the general
partner of Fund dated the Closing, certifying that the conditions specified in
Section 7.2(a) and (b) hereof have been fulfilled.
(e) Fund will have delivered to Vaalco, each dated as of a date not
earlier than five days prior to the date of Closing to the extent issued by such
jurisdiction, (i) certificates from the appropriate governmental official to the
effect that the Company and the Fund exist, and (ii) certificates as to the tax
status of the Company in its jurisdiction of organization and each jurisdiction
in which the Company is qualified to do business.
(f) Vaalco shall have received from ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, counsel to the Company and Fund, an opinion, dated as of the date of
Closing, in form and substance reasonably satisfactory to Vaalco.
- 31 -
(g) Vaalco shall have received a certificate, dated as of the
Closing and signed by the Secretary or Assistant Secretary of the general
partner of Fund, attaching a good standing certificate from the Delaware
Secretary of State with respect to the Company and the Fund and certifying the
truth and correctness of attached copies of the certificate of incorporation of
the Company, and resolutions of the Board of Directors of the Company and the
general partner of the Fund approving this Agreement and the transactions
contemplated hereby.
(h) All consents, waivers, exemptions, authorizations, or other
actions by, or notices to, or filings with, Governmental Authorities and other
Persons necessary or required in connection with the execution, delivery or
performance by the Fund and the Company or enforcement against the Fund of this
Agreement shall have been obtained and shall be in full force and effect, and
Vaalco shall have been furnished with appropriate evidence thereof.
(i) No amendments to the certificate of incorporation or by-laws of
the Company as in effect on the date hereof shall have been effected.
SECTION 8.3 CONDITIONS TO FUND'S OBLIGATIONS. The obligations of Fund to
effect the transactions contemplated by this Agreement are also subject to the
satisfaction or waiver of the following conditions at or prior to the Closing:
(a) The representations and warranties of Vaalco in this Agreement
or in any certificate delivered to Vaalco pursuant hereto as of the date hereof
will be deemed to have been made again at and as of the date of Closing (without
regard to any Schedule updates furnished by Vaalco after the date hereof unless
consented to by Fund) and will then be true and correct in all material
respects, except to the extent any such representation or warranty is qualified
by materiality or by reference to the term "Material Adverse Effect" in which
case such representation or warranty shall be true and correct, and Vaalco will
have performed and complied in all material respects with all agreements,
covenants and conditions required by this Agreement to be performed or complied
with by Vaalco prior to or on the Closing.
(b) There shall not have occurred any event or circumstance
resulting in a Material Adverse Effect with respect to Vaalco from the date of
the Vaalco's Audited Financial Statements to the date of Closing other than as
described on a schedule to this Agreement.
(c) All governmental and other third-party consents and approvals,
if any, necessary to permit the consummation of the transactions contemplated by
this Agreement will have been received.
(d) The receipt by Fund of a certificate executed by the Chief
Executive Officer of Vaalco dated the date of Closing, certifying that the
conditions specified in Section 8.3(a) and (b) hereof have been fulfilled.
(e) Vaalco will have delivered to Fund, each dated as of a date not
earlier than five days prior to the date of Closing, a certificate from the
state of Delaware to the effect that Vaalco is in good standing in such
jurisdiction and listing all charter documents of Vaalco, and certificates as to
the tax status of Vaalco in its jurisdiction of organization and each
jurisdiction in which Vaalco is qualified to do business.
- 32 -
(f) The receipt by Fund of opinions from (i) ▇▇▇▇▇▇ & ▇▇▇▇▇▇,
L.L.P., U.S counsel to Vaalco, and (ii) counsel to Vaalco in the Philippines,
India and Gabon, dated as of the date of Closing, and in form and substance
reasonably satisfactory to the Fund.
(g) Vaalco's Board of Directors shall have taken such action as is
necessary to appoint three additional members named by Fund to the Vaalco's
Board of Directors, one to each class of directors, such appointment to be
effective on the Closing Date and shall have adopted the amendments to the
by-laws set forth in Exhibit C.
(h) The Fund shall have received a certificate, dated the Closing
and signed by the Secretary or Assistant Secretary of Vaalco, attaching a good
standing certificate from the Delaware Secretary of State with respect to Vaalco
and certifying the truth and correctness of attached copies of the certificate
of incorporation and by-laws of Vaalco, and resolutions of the Board of
Directors of Vaalco approving this Agreement and the transactions contemplated
hereby.
(i) The Certificate of Designation shall have been duly filed by
Vaalco with the Secretary of State of the State of Delaware. The certificate of
incorporation and by-laws of Vaalco shall be in the form attached as Exhibit E.
(j) All consents, waivers, exemptions, authorizations, or other
actions by, or notices to, or filings with, Governmental Authorities and other
Persons necessary or required in connection with the execution, delivery or
performance by Vaalco or enforcement against Vaalco of this Agreement, the
Vaalco Shares, the Certificate of Designation and the Registration Rights
Agreement shall have been obtained and shall be in full force and effect, and
the Fund shall have been furnished with appropriate evidence thereof.
(k) Except for the Certificate of Designation and the amendments to
by-laws set forth on Exhibit C, no amendments to the certificate of
incorporation or by-laws of Vaalco as in effect on the date hereof shall have
been effected.
(l) Vaalco shall have arranged for the sale of Vaalco Common Stock
simultaneously with (or prior to) the closing for an aggregate consideration in
an amount not less than $5,000,000, with the closing of such sale to occur on
the same date as (or prior to) the Closing and the proceeds of such sale to be
transferred to Vaalco simultaneously with the closing of such sale; PROVIDED,
that the sum of (x) the placement agent fees incurred in connection with such
sale and (y) the amounts payable by Vaalco in respect of any and all related
costs and expenses with respect to such sale (including, without limitation, the
disbursements of the placement agent and all legal, accounting and printing
expenses required to be paid by Vaalco) shall in no event be in excess of $1.1
million. The price per share (net of the placement agent fee) of the Vaalco
Common Stock sold in connection with the fulfillment of the closing condition
set forth in the foregoing sentence shall be referred to herein as the
"Placement Price."
(m) The employment agreements between Vaalco and the employees of
Vaalco listed on Schedule 8.3(m) hereto shall be in full force and effect and
the terms of such contracts shall be satisfactory to the Fund and such
agreements shall have been amended, in a manner satisfactory to the Fund, to
terminate on August 1, 1998.
- 33 -
(n) Vaalco, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, ▇▇. and Paramount Petroleum
Company shall have executed the agreements described in Exhibit D, on terms
reasonably satisfactory to the Fund.
(o) Vaalco shall have duly executed and delivered to the Fund the
Registration Rights Agreement.
(p) Coopers & ▇▇▇▇▇▇▇ shall have completed a financial review of
Vaalco's Philippine subsidiary which shall be in form and substance satisfactory
to the Fund.
(q) Vaalco shall have delivered to the Fund 1998 monthly budget
projections for the business operations of Vaalco reasonably acceptable to the
Fund.
(r) The Fund shall have received such opinions as the Fund may
require from its own counsel, including the Fund's counsel in India, the
Phillippines and Gabon, in connection with Vaalco's business and operations and
such opinions shall be in form and substance satisfactory to the Fund.
(s) The Fund shall have received satisfactory evidence or
confirmation from Vaalco regarding such matters as it shall require with respect
to the business and operations of Vaalco Gabon (Etame) Inc. ("Vaalco Etame"),
and Vaalco Energy (Gabon) Inc. ("Vaalco Gabon"), including, without limitation,
(i) Vaalco Etame's and Vaalco Gabon's participation interest in the Production
Sharing Contract, dated July 7, 1995, by and among the Republic of Gabon
("Gabon"), Vaalco Etame, Vaalco Gabon and the other parties signatory thereto
and (ii) Vaalco Etame's and Vaalco Gabon's receipt of all necessary governmental
consents, authorizations, approvals, declarations and registrations which allow
them to own such participation interest and to operate and conduct their
business in Gabon.
SECTION 8.4 WAIVER OF CONDITIONS. Any condition to a party's
obligations hereunder may be waived by that party in writing.
SECTION 8.5 VAALCO DELIVERIES. At the Closing, Vaalco shall deliver:
(a) Certificates representing the Vaalco Shares registered in the
name of the Fund.
(b) The certificate contemplated by Section 8.3(d).
(c) The opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P. and other counsel
contemplated by Section 8.3(f).
SECTION 8.6 FUND DELIVERIES. At the Closing, Fund shall deliver:
(a) A certificate or certificates representing the Company Shares
duly endorsed for transfer to Vaalco or accompanied by a stock power duly
executed for transfer to Vaalco;
(b) The certificate contemplated by Section 8.2(d);
- 34 -
(c) The opinion of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
contemplated by Section 8.2(b).
(d) All books and records and ledgers of the Company;
(e) The resignations contemplated by Section 6.15.
ARTICLE 9. TERMINATION
SECTION 9.1 TERMINATION OF AGREEMENT. This Agreement may be
terminated only as provided below:
(a) The Fund, the Company and Vaalco may terminate this Agreement by
mutual written consent at any time prior to Closing;
(b) The Fund, the Company and Vaalco may terminate this agreement
(i) if a court of competent jurisdiction or other Governmental Authority shall
have issued an order, judgment, injunction or decree (collectively an "Order")
or taken any other action permanently restraining, enjoining or otherwise
prohibiting the transaction contemplated hereunder and such Order or other
action shall have become final and nonappealable or (ii) if the closing shall
not have occurred on or before March 31, 1998;
SECTION 9.2 PROCEDURE FOR AND EFFECT OF TERMINATION. In the event that
this Agreement is terminated by the Fund or the Company, on the one hand, or by
Vaalco, on the other hand, pursuant to Section 9.1(b) hereof, written notice of
such termination and abandonment shall forthwith be given to the other parties
and this Agreement shall terminate without any further action. If this Agreement
is terminated as provided herein, no party hereto shall have any liability or
further obligation to any other party under the terms of this Agreement except
that the provisions of Section 6.3, 6.4(b), 9.3, this Section 9.2 and Article 10
shall survive the termination of this Agreement.
SECTION 9.3 SOLE REMEDY; WAIVER. Each of the Fund, the Company and Vaalco
hereby agree that the sole remedy for the breach of any representation,
warranty, covenant or agreement contained in this Agreement, the failure of any
of the conditions contained in Section 8 hereof to be fulfilled or the
termination of this Agreement for any other reason whatsoever shall be to not
close the transactions contemplated under this Agreement. In furtherance of the
foregoing, each of the Fund, the Company and Vaalco hereby waive, as of the date
hereof, to the fullest extent permitted under applicable law, any and all
rights, claims and causes of action (other than tort claims of, or causes of
action arising from, fraudulent misrepresentation or deceit) it may have against
the Fund, the Company and Vaalco, respectively, relating to the subject matter
of this Agreement and the other agreements contemplated hereby arising under or
based upon any federal, state, local or foreign statute, law, ordinance, rule or
regulation or otherwise.
ARTICLE 10. MISCELLANEOUS
SECTION 10.1 NOTICES. All notices hereunder must be in writing and will be
deemed to have been duly given upon receipt of hand delivery; certified or
registered mail, return receipt requested; or telecopy transmission with
confirmation of receipt:
- 35 -
(a) If to Vaalco: Vaalco Energy, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III,
Chief Executive Officer
(b) If to Fund: c/o Brown Brothers ▇▇▇▇▇▇▇▇ & Co.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Such names and addresses may be changed by written notice to each person listed
above.
SECTION 10.2 GOVERNING LAW. This Agreement shall be governed by, construed
and interpreted in accordance with the laws of the State of New York, regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws thereof. The Fund, the Company and Vaalco agree that the courts of the
State of New York located in New York City and the courts of the United States
of America for the Southern District of New York shall have exclusive
jurisdiction in any legal action or proceedings with respect to this Agreement
and any transaction contemplated hereby.
SECTION 10.3 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which will be deemed an original but all of which together will
constitute one and the same instrument.
SECTION 10.4 INTERPRETATION; SCHEDULES.
(a) When a reference is made in this Agreement to a Section, Exhibit
or Schedule, such reference shall be to a Section of, or an Exhibit or Schedule
to, this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
(b) The information set forth in the Schedules to this Agreement is
qualified in its entirety by reference to the specific provisions of this
Agreement, and is not intended to constitute, and shall not be construed as
constituting, separate representations or warranties of the party to which such
Schedules relate except as and to the extent provided in this Agreement.
Inclusion of information in the Schedules shall not be construed as an admission
that such information is material for purposes of the specific provisions of
this Agreement to which such information relates. Information included in the
Schedules that is not required to be so included under the specific provisions
of this Agreement shall be deemed to be included for informational purposes only
and information of a similar nature need not be included, at the discretion of
the party providing such information. Any information disclosed by a party in
any Schedule shall be deemed to be disclosed in all the Schedules of such party
and for all purposes under this Agreement to the extent the specific provisions
of this Agreement require such disclosure.
- 36 -
SECTION 10.5 ENTIRE AGREEMENT; SEVERABILITY.
(a) This Agreement, including the Exhibits and Schedules hereto,
embodies the entire agreement and understanding of the parties hereto in respect
of the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings (whether written or oral) between the parties with
respect to such subject matter.
(b) If any provision of this Agreement is determined to be invalid
or unenforceable, in whole or in part, it is the parties' intention that such
determination will not be held to affect the validity or enforceability of any
other provision of this Agreement, which provisions will otherwise remain in
full force and effect.
SECTION 10.6 AMENDMENT AND MODIFICATION. This Agreement may be
amended or modified only by written agreement of the parties hereto.
SECTION 10.7 BINDING EFFECT; BENEFITS. This Agreement will inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, express or implied,
is intended to confer on any Person other than the parties hereto and their
respective successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
SECTION 10.8 ASSIGNABILITY. This Agreement is not assignable by any
party hereto without the prior written consent of the other parties.
SECTION 10.9 EXPENSES. Each of the parties hereto shall pay all of its own
expenses relating to the transactions contemplated by this Agreement, including
without limitation the fees and expenses of its own financial, legal and tax
advisors.
SECTION 10.10 GENDER AND CERTAIN DEFINITIONS. All words used herein,
regardless of the number and gender specifically used, shall be deemed and
construed to include any other number, singular or plural, and any other gender,
masculine, feminine or neuter, as the context requires.
SECTION 10.11 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; REMEDIES. The
representations and warranties in this Agreement or in any instrument delivered
pursuant hereto shall not survive the Closing hereunder.
SECTION 10.12 WAIVER OF JURY TRIAL. EACH OF THE FUND, THE COMPANY AND
VAALCO ACKNOWLEDGES THE TIME AND EXPENSE REQUIRED FOR A BENCH TRIAL AND HEREBY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO JURY TRIAL
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
- 37 -
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first written above.
VAALCO ENERGY, INC.
By:/S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
-----------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III,
Chief Executive Officer
THE 1818 FUND II, L.P.
By: ▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ & Co.,
general partner
By:/s/ T. ▇▇▇▇▇▇▇ ▇▇▇▇
-------------------
Name: T. ▇▇▇▇▇▇▇ ▇▇▇▇
Title: Partner
1818 OIL CORP.
By:/s/ T. ▇▇▇▇▇▇▇ ▇▇▇▇
-------------------
Name: T. ▇▇▇▇▇▇▇ ▇▇▇▇
Title: Vice President
- 38 -
