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EXHIBIT 10.10.1
TITAN RESOURCES, L.P.
DESIGNATION AGREEMENT
THIS DESIGNATION AGREEMENT (this "Agreement"), dated as of December 11,
1995, is made by and between Titan Resources, L.P., a Texas limited partnership
(the "Partnership"), and Joint Energy Development Investments Limited
Partnership, a Delaware limited partnership (along with its permitted
successors and assigns, "JEDI").
W I T N E S S E T H :
WHEREAS, concurrently with the execution of this Agreement, the
Partnership, Titan Resources I, Inc., a Texas corporation (the "General
Partner") and JEDI have entered into that certain Stock and Unit Purchase
Agreement pursuant to which JEDI shall acquire limited partnership units of the
Partnership; and
WHEREAS, Section 3.2 of the Agreement of Limited Partnership dated as of
March 31, 1995, as amended, of the Partnership (the "Partnership Agreement")
provides that the Partnership may enter into separate agreements to set forth
the respective rights of additional Units issued by the Partnership to a
Limited Partner; and
WHEREAS, the parties hereto desire to enter into this Agreement in order
to designate certain rights and privileges that pertain to the Units that JEDI
has acquired in the Partnership;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements contained herein, in the Stock and Unit Purchase Agreement and
in the Partnership Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Certain Definitions. Terms used in this Agreement and not
otherwise defined shall have the meanings set forth in the Partnership
Agreement.
2. Additional Definitions. The following additional terms used
herein shall be defined as follows:
"Enron Group" shall mean JEDI and its affiliates to which a
Permitted Transfer is made.
"Permitted Transfer" shall mean a transfer of the Partnership
interest of JEDI to any person that is an affiliate of JEDI; provided,
however, that for the purpose of this Agreement, (i) a person shall be
an "affiliate" of JEDI only in the event that such person directly or
indirectly controls or manages, is controlled or managed by or is under
common control or management with JEDI. As used in the preceding
sentence, control
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includes the control of the management and policies of another person,
whether through the ownership of voting securities, partnership
interests, by contract or otherwise; and without limiting the foregoing,
it shall be deemed that the ownership of more than 50% of the voting
securities, partnership interests or percentage interest of another
person shall be deemed to meet such control test.
"Transfer" or "transfer" shall mean the sale, transfer,
assignment, hypothecation, or other disposition, encumbrance or
alienation of any interest in the Partnership (including Units), or any
right or interest therein.
3. Special Preemptive Rights.
(a) Notwithstanding any contrary provision of the Partnership
Agreement, JEDI shall have preemptive rights to acquire any (i) additional
Units, (ii) classes or series thereof, (iii) options, rights, warrants or
appreciation rights relating thereto, (iv) any other type of equity security
that the Partnership may lawfully issue, (v) any debt obligations of the
Partnership convertible into any class or series of equity securities of the
Partnership (collectively, "Partnership Securities"), to be issued for cash
such that JEDI may retain its Sharing Ratio equal to that existing at the time
immediately prior to the issuance of such Partnership Securities; provided,
however, that JEDI shall not have preemptive rights to acquire any Partnership
Securities issued for cash relating to employees of the Partnership or
employees of the General Partner engaged primarily in the business and affairs
of the Partnership pursuant to the incentive option plan adopted by the
Partnership on March 31, 1995.
(b) The Partnership shall provide JEDI with notice prior to the time
that the Partnership proposes to issue additional Partnership Securities for
cash consideration, which notice shall contain the terms pursuant to which the
Partnership proposes to issue such additional Partnership Securities. Within
ten (10) days of its receipt of such notice, JEDI shall inform the Partnership
whether it will waive its preemptive rights to acquire such Partnership
Securities or exercise its right to acquire such additional Partnership
Securities on the same terms as set forth in the Partnership's notice. Any
failure of JEDI to respond to the Partnership's notice within the required time
period shall be deemed to be a waiver of its preemptive rights to acquire the
Partnership Securities described in such notice.
4. Special Rights of JEDI to Transfer Units. Notwithstanding any
contrary provision of the Partnership Agreement, JEDI may transfer its interest
in the Partnership as follows:
(a) JEDI shall have the right to transfer all or any portion of its
interest in the Partnership pursuant to a Permitted Transfer without complying
with the other provisions of this Section 4; provided, however, that (i) any
such transferee of the Partnership interest of JEDI may not become a
substituted Limited Partner unless such transferee shall comply with the
provisions of Section 5 of this Agreement, and (ii) the Enron Group shall
designate one person that shall receive notices and other communications from
the Partnership and communicate with the Partnership regarding the
Partnership's affairs.
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(b) No person may make more than two transfers of its Partnership
interest pursuant to this Section 4, other than Permitted Transfers. Any
transferee of any portion of JEDI's Partnership interest pursuant to this
Section 4, other than a member of the Enron Group, may not transfer any portion
of its Partnership Interest pursuant to this Section 4 unless such transfer is
for all of its Partnership interest.
(c) In the event that JEDI desires to transfer all or any portion of
its interest in the Partnership other than pursuant to a Permitted Transfer,
JEDI shall comply with the terms contained in the remainder of this Section 4.
Unless JEDI shall have received an "Unsolicited Offer" from an unrelated third
party (as defined in Section 4(f)) and thereby elect to proceed in accordance
with Section 4(f), JEDI shall first offer to sell the interest in the
Partnership sought to be transferred to the Partnership (the "Offer to Sell")
in accordance with the terms of this Section 4(c). The Offer to Sell to the
Partnership shall be in writing and shall set forth the Partnership interest of
JEDI proposed to be transferred (the "Subject Interest"). For 30 days (or
such longer period that JEDI in its sole discretion may grant to the
Partnership) from the date of the Offer to Sell (the "Expiration Date"), JEDI
shall provide the Partnership with the exclusive right to negotiate a mutually
acceptable agreement (a "Negotiated Agreement") pursuant to which the
Partnership shall purchase, and JEDI shall sell, the Subject Interest proposed
to be transferred. In the event that JEDI and the Partnership shall reach a
Negotiated Agreement with respect to the purchase of the Subject Interest prior
to the Expiration Date, then the Partnership and JEDI shall be obligated to
proceed with a sale and purchase of such Subject Interest for the consideration
and upon the other terms provided in the Negotiated Agreement in accordance
with Section 4(g).
(d) In the event that JEDI and the Partnership are unable to reach a
Negotiated Agreement prior to the Expiration Date, the Partnership shall
certify in writing to JEDI within three days subsequent to the Expiration Date
the best offer made by the Partnership to JEDI prior to the Expiration Date
(the "Benchmark Offer"). The Partnership shall not have any obligation to make
a Benchmark Offer, but if it shall not do so, JEDI may proceed to transfer the
Subject Interest pursuant to Section 4(e) without offering the Subject Interest
to the Partnership on the same terms as the Benchmark Offer. The Benchmark
Offer made to JEDI by the Partnership may be accepted by JEDI at any time
within 90 days after the Expiration Date; provided that the terms of such
Benchmark Offer shall be subject to downward adjustment in the event that JEDI
shall receive a "Bona-Fide Offer" (as such term is defined in Section 4(e))
that is less than the Benchmark Offer. Subsequent to the Expiration Date, JEDI
shall have an unrestricted right to seek a third party purchaser of the Subject
Interest pursuant to a Bona-Fide Offer, and the Partnership shall use its
reasonable best efforts to facilitate the effort of JEDI to sell such Subject
Interest; provided that in using such reasonable best efforts, the Partnership
shall not be required to take any action which in the opinion of counsel to the
Partnership would (i) cause the Partnership to breach any material agreement to
which the Partnership is a party, (ii) cause the Partnership to be treated as
an association taxable as a corporation for federal income tax purposes, or
(iii) cause the Partnership to incur any material liability. In addition, JEDI
shall have the obligation to reimburse all reasonable out-of-pocket expenses
incurred by the Partnership in taking such action within 30 days of the
Partnership's presentation of its statement for such
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expenses to JEDI. Notwithstanding the preceding provisions of this Section
4(c), the Partnership shall have no obligation to facilitate the effort of JEDI
to sell the Subject Interest more frequently than twice every three years
regardless of the number of times that JEDI shall initiate an Offer to Sell
pursuant to Section 4(c); provided, however, that notwithstanding such
limitations, the Partnership shall with respect to additional attempts to sell
by JEDI provide any information reasonably requested by JEDI and cooperate with
the reasonable requests of JEDI to the extent such cooperation does not require
an undue time commitment from the Partnership.
(e) If, within 90 days of the expiration of the Expiration Date, JEDI
shall receive a bona-fide written offer from an unrelated third party to
purchase for cash the Subject Interest (a "Bona-Fide Offer"), and JEDI desires
to accept such Bona-Fide Offer, JEDI shall, as a condition precedent to its
right to do so, by notice in writing, inform the Partnership of the receipt of
such Bona-Fide Offer, the identity of the party that made such Bona-Fide Offer,
the offered price for the Subject Interest and all other terms and conditions
of such Bona-Fide Offer. In the event that the Bona-Fide Offer is in excess of
the Benchmark Offer or in the event that the Partnership did not make a
Benchmark Offer, JEDI shall have the right to accept such Bona-Fide Offer or to
elect to retain its Subject Interest without any obligation to offer to
transfer the Subject Interest to the Partnership upon substantially the same
terms as the Bona-Fide Offer; provided, however, that in the event that JEDI
does not consummate the transfer of the Subject Interest within 90 days from
the date of the Bona-Fide Offer, JEDI shall be required to comply with the
provisions of this Section 4 prior to any transfer of the Subject Interest. In
the event that such Bona-Fide Offer is less than the Benchmark Offer, then JEDI
shall have the option, in its sole discretion, to (i) cause the Partnership to
purchase the Subject Interest on the same terms and conditions described in the
Bona-Fide Offer (provided that the Partnership shall consummate such purchase
of the Subject Interest on such date that is the later of (1) 30 days
subsequent to the Partnership's receipt of notice from JEDI as to the existence
of the Bona-Fide Offer, (2) 30 days subsequent to the Partnership's receipt of
JEDI's election to transfer the Subject Interest pursuant to this Section 4(e)
or (3) such longer period as contained in the Bona-Fide Offer) or (ii) elect to
retain the Subject Interest.
(f) In the event that JEDI shall receive a bona fide written offer
from an unrelated third party to purchase all or any part of its interest in
the Partnership and such offer arose other than pursuant to a solicitation by
JEDI after an Offer to sell, arose subsequent to the 90 day period after the
Expiration Date or is for consideration other than cash (an "Unsolicited
Offer"), and JEDI desires to accept such Unsolicited Offer, JEDI shall, as a
condition precedent to its right to do so, by notice in writing ("Unsolicited
Notice"), inform the Partnership of the receipt of such Unsolicited Offer, the
identity of the party that made such Unsolicited Offer, the Subject Interest
subject to the Unsolicited Offer, the offered price for such Subject Interest
(including the value that JEDI in good faith places on any consideration other
than cash, the manner that JEDI used to obtain such value and any information
that JEDI has utilized to determine such value) and all other terms and
conditions of such Unsolicited Offer. Within ten (10) business days after the
Partnership's receipt of the Unsolicited Notice, the Partnership shall notify
JEDI in writing of the Partnership's election to purchase the Subject Interest
that JEDI proposes to sell pursuant to the Unsolicited Offer. If the
Partnership makes such election, the Partnership shall purchase
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the Subject Interest on the same terms and conditions described in the
Unsolicited Offer (or for the equivalent cash amount set forth in the
Unsolicited Notice with respect to any portion of the Unsolicited Offer that is
not for cash); provided that the Partnership shall consummate such purchase of
the Subject Interest within 30 days of the Partnership's receipt of the
Unsolicited Notice or such longer period as contained in the Unsolicited Offer.
If JEDI does not receive the Partnership's notice of such election within the
above-described time period, or, if the Partnership notifies JEDI in writing
that the Partnership will not make such election, JEDI shall have the right to
accept the Unsolicited Offer or to elect to retain the Subject Interest without
any obligation to offer to transfer the subject interest upon substantially the
same terms as the Unsolicited Offer. If JEDI does not accept the Unsolicited
Offer and retains the Subject Interest, JEDI shall be required to comply with
the provisions of this Section 4 prior to any transfer of the Subject Interest.
(g) The consummation of the sale provided in a Negotiated Agreement
pursuant to Section 4(c), pursuant to the consummation of a Bona-Fide Offer
pursuant to Section 4(e) or pursuant to the exercise of the right of first
refusal in Section 4(f) (the "Closing") shall occur within the 30 day period
next following the Expiration Date or such longer period of time as provided in
Section 4(e) or Section 4(f), as applicable. At the time of Closing, the
Partnership shall deliver the consideration as required pursuant to the
Negotiated Agreement, the Bona-Fide Offer or the Unsolicited Offer, as
applicable, and JEDI shall deliver or cause to be delivered to the Partnership,
against receipt of such consideration, such assignments and other instruments
of conveyance, warranty of title, transfer, and assignment of the Subject
Interest to be conveyed hereunder, as shall be effective to vest in the
Partnership good title and interest in and to such interest in the Partnership,
free and clear of any and all liens, encumbrances, conditions, assessments, and
restrictions. Subsequent to such Closing, JEDI from time to time at the
request of the Partnership and without further consideration, shall do,
execute, acknowledge, and deliver, or shall cause to be done, executed,
acknowledged, and delivered, all such further acts, deeds, assignments,
acquittance, transfers, conveyances, powers of attorney, and assurances as the
Partnership may reasonably require more fully to convey, assign, transfer, or
confirm the Partnership interest so conveyed to the Partnership.
5. Substitution of Transferee of JEDI. Notwithstanding any
provision to the contrary contained in the Partnership Agreement, any
transferee of any portion of the Partnership interest of JEDI may become a
substituted Partner if, and only if, such transferee shall comply with the
following provisions:
(a) No transfer of any Partnership interest shall be made by JEDI,
(i) unless in the opinion of counsel to the Partnership, such transfer would
not cause the termination of the Partnership for federal income tax purposes
under section 708 of the Internal Revenue Code, (ii) unless waived by the
General Partner an opinion is rendered to the Partnership by counsel reasonably
satisfactory to the Partnership, to the effect that such transfer may be
effected without registration under the Securities Act of 1933, as amended, and
would not result in the violation of any applicable state securities laws, and
(iii) unless waived in writing by the General Partner,
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if the proposed transfer would result in a person that is not a citizen of the
United States having a direct interest in such Partnership interest.
(b) No transfer of a Partnership interest shall be made by JEDI if
such transfer would cause, as reasonably determined by the General Partner (i)
the Partnership to incur a material liability under the tax laws of any
applicable federal, state, local, or foreign jurisdiction, or (ii) the
Partnership to be in violation of any applicable laws.
(c) The Partnership shall not be required to recognize any transfer
of a Partnership interest until the instrument conveying such Partnership
interest has been delivered to the General Partner for recordation on the books
of the Partnership.
(d) The transferor shall notify the General Partner of any transfer
of a Partnership interest and provide the General Partner with such information
regarding the transferee and such transfer (including the name, address, and
taxpayer identification number of the transferor and transferee and the date of
the transfer) as is required under section 6050K of the Internal Revenue Code
(if the transfer of a Partnership interest is a sale or exchange described in
section 751(a) of the Internal Revenue Code) and section 6112 of the Internal
Revenue Code (relating to tax shelter investor lists) and Treasury Regulations
promulgated thereunder by the Internal Revenue Service in the manner and at the
time prescribed by law.
(e) A transfer of Partnership interest by JEDI in violation of any
provision contained in this Agreement shall be void and ineffectual and shall
not bind the Partnership or any other Partner. The transferee of JEDI's
Partnership interest shall pay all costs and expenses incurred by the
Partnership in connection with such transfer. In the discretion of the General
Partner, such costs and expenses may be collected out of revenues otherwise
allocable to such transferee under this Agreement.
(f) JEDI gives the transferee such right.
(g) The transferee pays to the Partnership all costs and expenses
incurred in connection with such substitution, which costs and expenses, in the
discretion of the General Partner, may be collected out of revenues otherwise
allocable to such substituted Partner under this Agreement.
(h) The transferee executes and delivers such instruments, in form
and substance satisfactory to the General Partner, as the General Partner may
reasonably determine in its sole discretion is necessary or desirable to effect
such substitution and to confirm the agreement of the transferee to be bound by
all of the terms and provisions of this Agreement.
(i) The consent of the Limited Partners shall not be required for
admission to the Partnership of a substituted Partner for the Partnership
interest of JEDI. The Partnership and the General Partner shall be entitled to
treat the record owner of any Limited Partner's Partnership interest as the
absolute owner thereof in all respects, and shall incur no liability for
distributions of cash or other property made in good faith to such record owner
until such time as a written
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assignment of such Limited Partner's Partnership interest has been received and
accepted by the General Partner and recorded on the books of the Partnership.
In no event shall any Limited Partner's Partnership interest, or any portion
thereof, be transferred to a minor or incompetent or any other person not
legally qualified to become an Limited Partner hereunder, and any such
attempted transfer shall be void and ineffectual and shall not bind the
Partnership or the General Partner. The effective date of any transfer of
Limited Partner's Partnership interest shall be the date on which all of the
prerequisites to the transfer specified in this Section 5 have been met. In
the case of a transfer, where the transferee does not become a substituted
Limited Partner, the Partnership shall recognize such transfer not later than
the last day of the calendar month following receipt of notice of assignment
and required documentation.
6. Miscellaneous.
(a) Notices. All notices, elections, demands or other communications
required or permitted to be made or given pursuant to this Agreement shall be
in writing and shall be considered as properly given or made if given by (a)
personal delivery, (b) United States mail, (c) expedited delivery service with
proof of delivery, or (d) via facsimile with confirmation of delivery,
addressed to the respective addressee(s) at the address set forth in the books
and records of the Partnership. Any party may change its address by giving
notice in writing to the other party of its new address.
(b) Amendment. This Agreement may be changed, modified or amended
only by an instrument in writing agreed upon by the parties hereto.
(c) Entire Agreement. This Agreement constitutes the full and
complete agreement of the parties hereto with respect to the subject matter
hereof.
(d) No Waiver. The failure of any party to insist upon strict
performance of a covenant hereunder or of any obligation hereunder,
irrespective of the length of time for which such failure continues, shall not
constitute a waiver of such party's right to demand strict compliance in the
future. No consent or waiver, express or implied, to or of any breach or
default in the performance of any obligation hereunder shall constitute a
consent or waiver to or of any other breach or default in the performance of
the same or any other obligation hereunder.
(e) Applicable Law. This Agreement and the rights and
obligations of the parties hereunder shall be governed by and interpreted,
construed and enforced in accordance with the laws of the State of Texas.
(f) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective permitted
successors and assigns.
(g) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TITAN RESOURCES, L.P.
By: Titan Resources I, Inc., its general
partner
By: /s/ XXXX X. XXXXXXXXX
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Xxxx X. Xxxxxxxxx, President
JOINT ENERGY DEVELOPMENT INVESTMENTS
LIMITED PARTNERSHIP
By: Enron Capital Management Limited
Partnership, its general partner
By: Enron Capital Corp., its general
partner
By: /s/ XXXXX XXXXXX, XX.
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