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EXHIBIT
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MANAGEMENT AGREEMENT
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BY AND AMONG
BANC ONE CAPITAL PARTNERS VIII, LTD.,
BOCP ENERGY PARTNERS, L.P.
AND
ENCAP INVESTMENTS L.C.
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DATED AS OF AUGUST 21, 1997
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS, REFERENCES AND CONSTRUCTION...............................................................1
Section 1.1. Definitions................................................................................1
Section 1.2. References and Construction................................................................4
ARTICLE II ENGAGEMENT AS MANAGER.................................................................................5
Section 2.1. Engagement.................................................................................5
Section 2.2. Delegation of Rights, Power and Authority..................................................5
Section 2.3. Representatives of BOCP....................................................................9
ARTICLE III DUTIES AND OBLIGATIONS OF MANAGER...................................................................10
Section 3.1. Investments...............................................................................10
Section 3.2. Time Devoted to Partnership Business......................................................10
Section 3.3. Other Activities..........................................................................11
ARTICLE IV LIABILITY AND INDEMNIFICATION........................................................................13
Section 4.1. Liability.................................................................................13
Section 4.2. Indemnification...........................................................................13
ARTICLE V REIMBURSEMENT; MANAGEMENT FEE.........................................................................14
Section 5.1. Payment or Reimbursement of Organization Costs and
Operating Costs.........................................................................14
Section 5.2. Management Fee............................................................................15
Section 5.3. Transaction, Break-up and Other Fees......................................................16
Section 5.4. Corporate Finance Fees....................................................................17
ARTICLE VI CERTAIN BANKING REGULATORY CONSIDERATIONS............................................................18
Section 6.1. Regulatory Limitations................................................................18
Section 6.2. Voting Power..........................................................................19
Section 6.3. Equity Ownership......................................................................19
Section 6.4. Disposition of Investment.............................................................19
Section 6.5. Information...........................................................................20
Section 6.6. Applicable Regulations and Other Definitions..........................................20
ARTICLE VII CERTAIN EVENTS CONCERNING PRINCIPALS................................................................20
ARTICLE VIII REPORTING; BANKING; AND CONFIDENTIALITY............................................................21
Section 8.1. Reports...................................................................................21
Section 8.2. Bank Accounts.............................................................................21
Section 8.3. Confidentiality...........................................................................22
Section 8.4. BOCP Reports..............................................................................23
ARTICLE IX TERM.................................................................................................23
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ARTICLE X RELATIONSHIP OF THE PARTIES............................................................................24
ARTICLE XI AMENDMENTS; MEETINGS..................................................................................24
Section 11.1 Amendments................................................................................24
Section 11.2 Meetings...................................................................................25
ARTICLE XII ADVISORY BOARD......................................................................................25
ARTICLE XIII MISCELLANEOUS......................................................................................27
Section 13.1. Notices..................................................................................27
Section 13.2. Entire Agreement.........................................................................27
Section 13.3. Severability.............................................................................27
Section 13.4. No Waiver................................................................................28
Section 13.5. Applicable Law...........................................................................28
Section 13.6. Successors and Assigns...................................................................28
Section 13.7. Attorneys' Fees..........................................................................28
Section 13.8. Related Agreements.......................................................................28
Section 13.9. No Third Party Beneficiaries............................................................28
Section 13.10. Counterparts............................................................................28
Section 13.11. Representations and Warranties of the Manager...........................................28
Section 13.12. Representations and Warranties of BOCP and the Partnership..............................30
Section 13.13. Survival of Representations and Warranties..............................................31
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MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "AGREEMENT") is made and entered into
as of the 21st day of August, 1997, by and among Banc One Capital Partners VIII,
Ltd., an Ohio limited liability company ("BOCP"), BOCP Energy Partners, L.P., a
Texas limited partnership (the "PARTNERSHIP"), and EnCap Investments L.C., a
Texas limited liability company ("ENCAP").
RECITALS:
A. BOCP is the sole general partner of the Partnership. As provided in
the Partnership Agreement (as defined herein), the Partnership has been formed
to make Target Energy-Related Assets (as defined herein).
B. BOCP and the Partnership desire to engage EnCap, and EnCap desires
to be engaged by BOCP and the Partnership, as manager of the Partnership on the
terms and conditions set forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing Recitals and the
mutual covenants and agreements contained herein, the parties hereto do hereby
agree as follows:
ARTICLE I
DEFINITIONS, REFERENCES AND CONSTRUCTION
SECTION 1.1. DEFINITIONS.
(a) When used in this Agreement, the following terms shall have the
respective meanings set forth below:
"ADVISORY BOARD" shall have the meaning assigned to it in Article XII.
"AFFILIATES" shall mean, when used with respect to another person, a
person controlling, controlled by or under common control with such other
person; provided, however, that the term "Affiliate" when used with respect to
the Manager shall include the Principals, the employees of the Manager and the
parents, spouses and descendants of the Principals and the employees of the
Manager, but such term shall not include (i) any partner of the Partnership,
(ii) the Partnership, or (iii) any general partner of a limited partnership in
which an Existing Fund is a limited partner only. As used in this definition of
"Affiliate", the term "CONTROL" shall mean the possession,
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directly or indirectly, of the power to direct or cause the direction of the
management and policies of a person, whether through ownership of voting
securities, by contract, or otherwise. As used in this Agreement, the term
"PERSON" shall include an individual, a corporation, a partnership, a limited
liability company, an association or other entity, an estate, a joint stock
company and a trust.
"BOCP" shall have the meaning assigned to it in the introductory
paragraph to this Agreement.
"BRIDGE LOAN" shall have the meaning assigned to it in Section
2.2(b)(vi).
"CORPORATE FINANCE FEE" shall have the meaning assigned to it in
Section 5.4.
"DESIGNATED PRINCIPALS" shall mean ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
D. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
"ECIC" shall have the meaning assigned to it in Section 3.3(c).
"ENCAP" shall have the meaning assigned to it in the introductory
paragraph to this Agreement.
"ENCAP FUND PARTNERSHIP" shall have the meaning assigned to it in
Section 3.3(c).
"EXISTING FUND" shall mean EnCap Equity 1994 Limited Partnership, a
Texas limited partnership, EnCap Equity 1996 Limited Partnership, a Texas
limited partnership, ECIC, or ECIC Corporation, a Texas corporation.
"MANAGEMENT FEE" shall have the meaning assigned to it in Section
5.2(a).
"MANAGER" shall have the meaning assigned to it in Section 2.1.
"OPERATING COSTS" shall mean all direct, out-of-pocket costs and
expenses reasonably incurred either by the Partnership or by the Manager or an
Affiliate thereof on behalf of the Partnership relating to the management,
conduct and operation of Partnership business, including (a) the fees and
expenses associated with the preparation of the Partnership's financial
statements and the reports and other information to investors under the
Partnership Agreement, tax returns and Forms K-1, printing expenses, mailing and
courier expenses, fees and expenses of establishing bank or custodial accounts
and insurance costs and expenses, (b) the fees, costs and expenses incurred in
connection with investigating, negotiating, acquiring, holding, selling or
exchanging of Investments (including fees and expenses of lawyers, accountants,
petroleum engineers and consultants, brokerage or finder's fees, investment
banker's fees, commitment fees, underwriting discounts or sales fees, but
excluding travel and entertainment expenses in connection therewith), (c) fees,
costs and expenses of the type described in clause (b) above incurred in
connection with
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potential or proposed but unconsummated transactions, (d) legal, audit and other
expenses incurred in connection with the registration of the offer and sale of
Securities owned by the Partnership under the Securities Act of 1933, as
amended, and any applicable state or foreign securities laws, (e) the costs and
other amounts attributable to the Partnership's obligations under Section 4.2,
(f) the costs and expenses attributable to the Advisory Board and the conduct of
its meetings or attributable to the annual meetings of as provided in Section
11.2, and (g) other extraordinary, nonrecurring expenses, including the costs
and expenses of prosecuting or defending a litigation claim; provided, however,
that Operating Costs shall not include any of the following costs and expenses
incurred by the Partnership or the Manager or any of its Affiliates: (i) the
salaries, wages and employee benefits of all officers, directors, and employees
of the Manager or an Affiliate thereof, (ii) office rent, utility charges and
equipment and furniture costs and expenses, and (iii) any other general,
administrative and overhead expense, including insurance premiums relating to
the matters described in this clause (iii) and the preceding clauses (i) and
(ii).
"PARALLEL INVESTMENT ENTITY" shall have the meaning assigned to it in
Section 3.3(c).
"PARTNERSHIP" shall have the meaning assigned to it in the introductory
paragraph to this Agreement.
"PARTNERSHIP AGREEMENT" shall mean that certain Agreement of Limited
Partnership of even date herewith, by and between BOCP, as general partner, and
EnCap, as limited partner, establishing the Partnership.
"PRINCIPALS" shall mean ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, D. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
"SUBSEQUENT FUND" shall have the meaning assigned to such term in
Section 3.3(b).
"TRIGGER EVENT" shall have the meaning assigned to such term in Article
VII.
"UNPAID COMMITMENT" shall mean, (a) with respect to the BOCP at a given
point in time, the sum of BOCP's Unpaid Debt Commitment and Unpaid Equity
Commitment, and (b) with respect to EnCap at a given point in time, EnCap's
Unpaid Equity Commitment.
(b) When used in this Agreement, the following terms shall have the
respective meanings assigned to them in the Partnership Agreement:
"ACT"
"ADVANCES"
"AVAILABLE CASH"
"BUSINESS DAY"
"CAPITAL CONTRIBUTION"
"CATCH-UP PAYOUT"
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"COMMITMENT PERIOD"
"EQUITY-LINKED COMPANY"
"EQUITY-LINKED INVESTMENTS"
"FOLLOW-ON INVESTMENTS
"INITIAL FUNDING DATE"
"INVESTMENTS"
"MARKET VALUE"
"MEZZANINE LOAN"
"NON-DEFAULTING PARTNER"
"PORTFOLIO COMPANY"
"PREFERRED RETURN PAYOUT"
"PRIMARY INVESTMENT PERIOD"
"PROJECT EQUITY COMPANY"
"SECURITIES"
"TARGET ENERGY-RELATED ASSETS"
"TOTAL COMMITMENTS"
"UNPAID DEBT COMMITMENT"
"UNPAID EQUITY COMMITMENT"
SECTION 1.2. REFERENCES AND CONSTRUCTION.
(a) All references in this Agreement to articles, sections, subsections
and other subdivisions refer to corresponding articles, sections, subsections
and other subdivisions of this Agreement unless expressly provided otherwise.
(b) Titles appearing at the beginning of any of such subdivisions are
for convenience only and shall not constitute part of such subdivisions and
shall be disregarded in construing the language contained in such subdivisions.
(c) The words "this Agreement", "this instrument", "herein", "hereof",
"hereby", "hereunder" and words of similar import refer to this Agreement as a
whole and not to any particular subdivision unless expressly so limited.
(d) Words in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires. Pronouns in masculine,
feminine and neuter genders shall be construed to include any other gender.
(e) Examples shall not be construed to limit, expressly or by
implication, the matters they illustrate.
(f) The word "includes" and its derivatives means "includes, but is not
limited to" and corresponding derivative expressions.
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(g) All references herein to "$" or "dollars" shall refer to U.S.
Dollars.
(h) Exhibit 13.8 to this Agreement is attached hereto. Such Exhibit is
incorporated herein by reference for all purposes and references to this
Agreement shall also include such Exhibit unless the context in which used shall
otherwise require.
ARTICLE II
ENGAGEMENT AS MANAGER
SECTION 2.1. ENGAGEMENT. Subject to the terms and conditions hereof,
(a) BOCP and the Partnership hereby engage EnCap as manager of the Partnership
and (b) EnCap agrees to be engaged by BOCP and the Partnership as manager of the
Partnership. EnCap will sometimes be referred to herein as the "MANAGER".
SECTION 2.2. DELEGATION OF RIGHTS, POWER AND AUTHORITY.
(a) Subject to terms and conditions hereof (including the limitations
contained in this subsection (a) and in subsections (b) and (c) below), BOCP
hereby delegates to the Manager all of BOCP's management rights as general
partner under the Partnership Agreement, and the concomitant power and
authority, including the following:
(i) to cause the Partnership to make or purchase privately
negotiated Investments in, or with respect to, Target Energy-Related
Assets;
(ii) to monitor the Partnership's Investments and to vote,
take any action or exercise any right, directly or indirectly, required
of or accorded to the Partnership with respect to the Investments or
any other Partnership assets;
(iii) to sell, exchange, transfer or otherwise dispose of all
or any portion of the Investments or other Partnership assets;
(iv) to negotiate, make and to enter into such agreements and
contracts with such parties and to give such receipts, releases and
discharges with respect to any and all of the foregoing and any matters
incident thereto as the Manager may deem advisable or appropriate;
(v) to employ from time to time third parties to render
services to the Partnership, including but not limited to, attorneys,
independent certified public accountants, petroleum engineers,
consultants, brokers, agents and advisors (including attorneys,
accountants, petroleum engineers, consultants, brokers, agents and
advisors who also may act as attorneys, accountants, petroleum
engineers, consultants, brokers, agents and advisors for the Manager or
any of its Affiliates), to the extent that the service to be
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rendered to the Partnership by any such third party is generally
related to the business purpose or the day-to-day investment
activities of the Partnership;
(vi) to procure and maintain in force such insurance as the
Manager shall deem prudent to serve as protection against liability for
loss and damage which may be occasioned by the activities to be engaged
in by the Partnership;
(vii) to control any matters affecting the rights and
obligations of the Partnership, including the conduct of any litigation
or arbitration proceedings and the incurring of legal expenses and the
settlement of claims and litigation, to the extent that any such matter
is generally related to the business purpose or the day-to-day
investment activities of the Partnership;
(viii) to open, maintain and close bank accounts and custodial
accounts and to execute and deliver all checks, drafts, endorsements
and other orders for the payment of Partnership funds;
(ix) to appear and to represent the Partnership before any
governmental authority or regulatory agency and to make all necessary
or appropriate filings before such authority or agency, to the extent
that any such appearance, representation or filing is generally related
to the business purpose or the day-to-day investment activities of the
Partnership;
(x) to request payment of Advances and Capital Contributions
as provided in Article III of the Partnership Agreement;
(xi) to determine Available Cash;
(xii) to cause the Partnership to make payments in respect of
Advances and distributions of cash, Securities and other assets to the
Partners as provided in Article IV and Section 9.3 of the Partnership
Agreement;
(xiii) to determine the Market Value of Partnership assets
under the circumstances provided in the Partnership Agreement; and
(xiv) to take such other action, execute and deliver such
other documents and perform such other acts as may be deemed by the
Manager to be necessary or advisable to carry out the business and
affairs of the Partnership.
Without limiting anything herein, in connection with the exercise of the rights,
power and authority delegated to it hereunder by BOCP, the Manager shall be
subject to any limitations on such rights, power and authority set forth in the
Partnership Agreement.
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(b) Notwithstanding any other provisions of this Agreement or the
Partnership Agreement to the contrary, the Manager shall not have the right,
power or authority to, and shall not, do, perform or authorize any of the
following without having received the prior written consent of BOCP:
(i) guarantee in the name or on behalf of the Partnership the
payment of money or the performance of any contract or other obligation
of any person; provided that the Manager shall be permitted to cause
the Partnership to make a guarantee in connection with making an
Investment in or with respect to a Portfolio Company (A) so long as the
aggregate amount of such guarantees outstanding at any time plus the
aggregate Unpaid Debt Commitment and Unpaid Equity Commitments
outstanding at such time do not exceed the Total Commitments and (B)
provided that the amount of any such guarantee shall be considered to
be an outstanding Investment for the purposes of applying the
restrictions set forth below in this Section 2.2(b);
(ii) cause the Partnership to file a voluntary petition in
bankruptcy or take any other similar action;
(iii) merge or consolidate the Partnership with any
partnership or other entity, convert the Partnership into another type
of entity, or cause the Partnership to participate in an exchange of
interests or some other type of business combination with any
partnership or other entity;
(iv) cause the Partnership to engage in any transactions with
the Manager or any of its Affiliates except as expressly provided for
herein;
(v) except as provided in paragraph (vi) below, cause the
Partnership to expend more than 15% of the Total Commitments in any
single Investment hereunder; provided, however, that in connection with
a given Project Equity Company in which the Partnership acquires an
interest hereunder, the foregoing provisions of this paragraph (v)
shall not preclude the Manager from causing the Partnership to purchase
additional Securities in or contribute additional capital to such
Project Equity Company for the purpose of financing an additional
acquisition by such Project Equity Company of Target Energy-Related
Assets which are not significantly related geographically to the Target
Energy-Related Assets owned or held by such Project Equity Company, so
long as the purchase price of such additional Securities or the amount
of such additional capital does not exceed 15% of the Total
Commitments; provided, further, that the foregoing provisions of this
paragraph (v) shall not preclude the Manager from causing the
Partnership to form a new Project Equity Company and to make a new
Project Equity Investment with respect thereto, even though the person
with which the Partnership is making such Project Equity Investment is
an Equity-Linked Company or is a person with which or to which the
Partnership has previously made a Project Equity Investment or a
Mezzanine Loan (as applicable), so long as the amount of such new
Project Equity Investment does not exceed 15% of the Total
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Commitments; and, provided, further, that the foregoing provisions of
this paragraph (v) shall not preclude the Manager from causing the
Partnership to make a new Mezzanine Loan even though the person to
which the Mezzanine Loan is to be made is an Equity- Linked Company or
is a person with which the Partnership has previously made a Project
Equity Investment, so long as the amount of such new Mezzanine Loan
does not exceed 15% of the Total Commitments;
(vi) cause the Partnership to make a "bridge" or interim loan
(a "BRIDGE LOAN"), except to the extent the Manager determines in its
sole discretion that such Bridge Loan is required in order to
facilitate the making of a permanent Investment and provided that the
amount of such Bridge Loan, when added to the amount of such permanent
Investment, does not exceed 25% of the Total Commitments;
(vii) cause the Partnership to make Mezzanine Loans hereunder
which in the aggregate would exceed 25% of the Total Commitments or to
make Equity-Linked Investments hereunder which in the aggregate would
exceed 35% of the Total Commit ments;
(viii) cause the Partnership to have invested and unrepaid at
any time Investments made to or with respect to any Portfolio Company
and its Affiliates in an aggregate amount in excess of 20% of the Total
Commitments;
(ix) cause the Partnership to make an investment in any fund
or similar collective investment entity that provides for a carried
interest or management fee to be paid to any person, except that the
Manager shall have the power and authority to cause the Partnership to
invest in any partnership or other entity if such partnership or other
entity (A) is or will be primarily engaged in the energy business and
is not or will not be primarily engaged in the business of owning or
investing in entities managed by third parties (i.e., entities that are
not majority-owned subsidiaries), or (B) has been approved by
two-thirds or more of the members of the Advisory Board;
(x) cause the Partnership to borrow any money or pledge or
encumber Partnership assets;
(xi) cause the Partnership to reinvest the proceeds received
by the Partnership from the sale of any Investment;
(xii) cause the Partnership to extend the 10-year period
referenced in Section 9.1(a) of the Partnership Agreement;
(xiii) cause the Partnership to invest in any issuer where the
Manager or an Affiliate thereof has an equity or debt interest in such
issuer; provided, and without limiting clause (c) of the definition of
Affiliate, that nothing in this Agreement shall prohibit or
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restrict the Partnership from making an Investment in any Portfolio
Company (A) which is a limited partnership, the general partner of
which is also the general partner of a limited partnership in which an
Existing Fund is a limited partner, or (B) which is another entity, the
manager or operator of which is also the general partner, manager or
operator of a limited partnership or other entity in which an Existing
Fund is a limited partner and/or a debt or equity investor; provided,
further, that the preceding clauses (A) and (B) shall not authorize the
Partnership to make any Investment in a Portfolio Company and where the
Manager or any of its Affiliates is also a general partner, manager or
operator of any such limited partnership or other entity;
(xiv) select the Partnership's outside accountants in
connection with the preparation and maintenance of the Partnership's
books of account; or
(xv) exercise any of the rights, power and authority set forth
in either Section 2.2(a)(vii) or Section 2.2(a)(ix) to the extent any
such matter, appearance, representation or filing generally relates to
compliance, or a violation or potential violation, by BOCP or its
Affiliates with Applicable Regulations (as such term is defined in
Article VI).
(c) Notwithstanding subsection (a) above or anything else in this
Article II or elsewhere herein to the contrary, BOCP expressly reserves to
itself, and does not delegate to Manager hereunder:
(i) all monetary or financial obligations or rights of BOCP
under the Partnership Agreement, including (A) the obligation of BOCP
to make Advances or Capital Contributions to the Partnership under
Article III of the Partnership Agreement and (B) the right of BOCP to
receive allocations and distributions under Article IV and Section 9.3
of the Partnership Agreement;
(ii) all rights and elections BOCP may have as a
"Non-Defaulting Partner" under Section 3.3 of the Partnership
Agreement; and
(iii) all rights BOCP may have under the Partnership Agreement
pertaining to matters requiring the vote, consent or agreement of, or
waiver by, BOCP, including the matters referenced in Sections 9.1(c),
10.1(a), 10.2 and 11.9 of the Partnership Agreement.
SECTION 2.3. REPRESENTATIVES OF BOCP. Upon request of the Manager, BOCP
shall provide to the Manager a list of each officer, attorney-in-fact, employee
and other person who is then authorized to act for or on behalf of BOCP with
respect to the matters provided for in this Agreement. The Manager shall be
entitled to fully rely on any vote, consent, election or other action given,
made or taken by such person on behalf of BOCP, and until the Manager is
notified in writing to the contrary, such person shall be authorized to take all
action on behalf of BOCP which BOCP is authorized to take hereunder.
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ARTICLE III
DUTIES AND OBLIGATIONS OF MANAGER
SECTION 3.1. INVESTMENTS.
(a) The Manager will use its best efforts to find investment
opportunities suitable for the Partnership.
(b) Notwithstanding anything herein to the contrary, Investments by the
Partnership in oil and gas properties, either through a Project Equity
Investment or a Mezzanine Loan, shall be supported by proved oil and gas
reserves. Further, the Manager agrees that prior to making such an Investment
hereunder, the proved oil and gas reserves will be confirmed for the Partnership
by any of the following independent petroleum engineers: ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ &
Associates, Inc.; ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇; ▇▇▇▇▇▇ and ▇▇▇▇▇; Netherland, ▇▇▇▇▇▇ &
Associates, Inc.; ▇▇▇▇▇ ▇▇▇▇▇ Company; ▇.▇. ▇▇▇▇▇ & Associates; or such other
firm of independent petroleum engineers as shall be designated by the Manager
and approved by the Advisory Board.
(c) The Manager in its sole discretion may offer co-investment
opportunities to BOCP and its designated Affiliates, on terms identical or
substantially similar to, and no more favorable than (in any material respect),
those offered to the Partnership. BOCP, to the extent it or its designated
Affiliate desires to participate in such opportunities, shall notify the Manager
in writing at any time of the types, amounts and other parameters of the
co-investments in which BOCP or such Affiliate has an interest. In this regard,
it is the intention of the Manager to so offer co- investment opportunities,
when practicable and feasible, and in any event prior to offering such
opportunities to a person other than ECIC, the Parallel Investment Entities, the
investors in the Parallel Investment Entities and BOCP and its designated
Affiliates; provided, that the Manager shall be under no obligation to do so.
The Manager shall not provide investment advice with respect to any such
co-investment opportunity, and should BOCP or a designated Affiliate participate
in such a co-investment opportunity, it shall be solely responsible for making
its own decision as to the merits of such opportunity.
(d) In the event in excess of 35% of the Total Commitments are to be
called by the Partnership under Section 3.2 of the Partnership Agreement in any
twelve-month period, the Manager shall give notice of such event to BOCP as soon
as is reasonably possible.
SECTION 3.2. TIME DEVOTED TO PARTNERSHIP BUSINESS. During the period
commencing as of the date hereof and ending on the first to occur of (a) the end
of the Commitment Period and (b) the point in time at which a Subsequent Fund
organized in accordance with the terms hereof makes its first investment, the
Manager and the Designated Principals (while active as employees of the
Manager), on a collective basis, shall devote a substantial majority of their
business time to the business and operations of the Partnership, ECIC and the
Parallel Investment Entities; provided, however, that it is specifically
understood and agreed that neither the Manager nor the
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Designated Principals, either individually or on a collective basis, shall be
required to devote full time to Partnership business. After such period, the
Manager and the Designated Principals (while active as employees of the Manager)
shall devote such amount of their business time as is reasonably necessary to
manage properly the affairs and activities of the Partnership.
SECTION 3.3. OTHER ACTIVITIES.
(a) During the Primary Investment Period, the Manager and its
Affiliates, either directly or indirectly, shall not purchase or make any
Investment in or with respect to Target Energy- Related Assets, except for the
following: (i) any investments, securities or other assets currently held by the
Manager or any Affiliate thereof, including the interest of the Manager in the
Existing Funds; (ii) any investments, securities or other assets acquired by or
in connection with (1) the Existing Funds to the extent they represent either an
investment which had been presented to the investors of an Existing Fund prior
to the date of this Agreement or an additional or "follow-on" investment in or
in connection with investments and/or limited partnerships in which an Existing
Fund held an interest prior to the date of this Agreement, or (2) (subject to
subsection (b) below) any new funds hereafter formed by the Manager or its
Affiliates; (iii) any investments, securities or other assets received in
exchange for, as a result of a merger, consolidation, conversion, exchange,
combination or other reorganization involving, or as distributions from
partnerships or other entities currently holding, investments, securities or
other assets referred to in clauses (i) and (ii) above; (iv) any personal
investments of the Principals and other Affiliates of the General Partner who
are natural persons hereafter made (A) other than the type described in the
following subclause (B), up to an aggregate amount of $500,000 per Principal and
other such Affiliate per year, or (B) in publicly traded securities, and
provided such personal investments are not (x) in an Equity- Linked Company in
which the Partnership has an Investment then outstanding hereunder, (y) a
Project Equity Company in which the Partnership has an Investment then
outstanding hereunder, an Affiliate of such Project Equity Company or assets
held by such Project Equity Company, or (z) any person to whom the Partnership
has a Mezzanine Loan then outstanding hereunder; (v) as provided in subsection
(c) below; and (vi) any investments approved by the Advisory Board. Without
limiting the foregoing, the determination as to whether an investment
opportunity appears to come within the scope of the Partnership's business shall
be made by the Manager in good faith; however, it is agreed that even if an
investment opportunity appears to come within the scope of the Partnership's
business, the Manager may make a good faith determination that it is not in the
best interests of the Partnership to place such investment opportunity with the
Partnership and, in such event, shall have the right and power to recommend such
investment opportunity to another party.
(b) During the Primary Investment Period, the Manager and its
Affiliates shall not form or acquire a new investment fund for the same or
similar purpose for which the Partnership has been formed and cause such fund to
commence investment activities (a "SUBSEQUENT FUND"), unless the Manager or such
Affiliate receives the prior written approval of BOCP. If, in accordance with
the immediately preceding sentence and prior to the expiration of the Commitment
Period, the Manager organizes a Subsequent Fund, the Manager shall in good faith
equitably apportion any
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prospective investment opportunities between the Partnership and the Subsequent
Fund, giving due consideration to the amount of the Unpaid Commitments, the
types of investments previously made by the Partnership, diversification
(geographic or otherwise) and other salient factors.
(c) BOCP recognizes that the Manager serves as an investment advisor to
Energy Capital Investment Company PLC ("ECIC") pursuant to that certain
Investment Advisory Agreement dated as of February 4, 1994, and, subject to the
last sentence of this subsection (c), agrees that unless the Board of Directors
of ECIC elects not to participate in any Investment in Target Energy-Related
Assets or unless the Board of Directors of ECIC, the Manager, the EnCap Fund
Partnership and BOCP otherwise agree, the Partnership and ECIC will co-invest in
each investment opportunity selected by the Manager for the Partnership. BOCP
further recognize that in conjunction with the activities contemplated
hereunder, the Manager or an Affiliate (i) will organize EnCap Energy Capital
Fund III, L.P., a Texas limited partnership (the "ENCAP FUND PARTNERSHIP") and
(ii) may also organize one or more parallel investment entities to facilitate
participation by foreign and certain other investors in investment opportunities
of the type contemplated by the Partnership Agreement and hereunder (the EnCap
Fund Partnership and such other investment entities being herein called the
"PARALLEL INVESTMENT ENTITIES"); and, subject to the last sentence of this
subsection (c), BOCP agrees that such Parallel Investment Entities (whether one
or more and if organized) will co-invest in each investment opportunity selected
by the Manager for the Partnership. Notwithstanding the foregoing or anything
else herein to the contrary, BOCP and the Manager agree that (A) any
co-investment by the Partnership with ECIC and the Parallel Investment Entities
shall be on the same proportionate terms and conditions (including price of
Securities or loan amount, as applicable) as the co-investment made by ECIC and
the Parallel Investment Entities, including maturity dates and other maturity,
liquidation and distribution features, (B) the percentage amount of any
Investment allocated to ECIC shall not exceed 15%, (C) the Partnership's
percentage share of each Investment shall be equal to the product of A times B,
where "A" is 100% minus that percentage of the Investment allocated to ECIC, and
where "B" is a fraction, the numerator of which is the Unpaid Commitments then
available for investment by the Partnership in such Investment and the
denominator of which is the aggregate capital then available for investment in
such Investment by the Partnership and the Parallel Investment Entities, and (D)
the General Partner shall not organize any Parallel Investment Entity other than
(1) the EnCap Fund Partnership and (2) EnCap Energy Capital Fund III-B, L.P., a
Texas limited partnership organized for certain non-taxable investors and with a
subsidiary to acquire Project Equity Investments.
(d) Subject to Section 3.2 and except as provided in subsections
(a),(b) and (c) above of this Section 3.3, the Manager or any Affiliate of the
Manager may engage or invest, directly or indirectly, in any business activity
or venture of any nature or description, including those that may be the same as
or similar to the Partnership's business and in direct competition therewith,
and the Manager or such Affiliate shall have no obligation to offer any such
business activity or venture to the Partnership. Except as otherwise expressly
provided in subsection (a) above and Sections 5.3 and 5.4, neither the
Partnership nor any partner thereof shall have any right, by virtue of this
Agreement or the relationship contemplated hereby, in such investments or such
other
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activities or ventures, and such investments, activities or ventures, even if
the same or directly competitive with the business of the Partnership, shall not
be deemed wrongful or improper or in violation of this Agreement.
ARTICLE IV
LIABILITY AND INDEMNIFICATION
SECTION 4.1. LIABILITY.
(a) Neither the Manager, its Affiliates, their respective partners,
members, officers, directors, employees or agents, shall be liable, responsible,
or accountable in damages or otherwise to the BOCP or the Partnership for any
action taken or failure to act (EVEN IF SUCH ACTION OR FAILURE TO ACT
CONSTITUTED THE SOLE, CONCURRENT OR COMPARATIVE NEGLIGENCE OF THE MANAGER,
AFFILIATE, PARTNER, MEMBER, OFFICER, DIRECTOR, EMPLOYEE OR AGENT) in connection
with the operations, business and affairs of the Partnership and the performance
by the Manager of its duties and obligations hereunder, unless such act or
failure to act was the result of bad faith, fraud, willful or intentional
misconduct or criminal wrongdoing, gross negligence or a breach of a material
term of this Agreement.
(b) The Manager may consult with legal counsel, accountants, petroleum
engineers, appraisers, investment bankers, and other consultants and advisers
selected by it with due care and any written opinion of any such person as to
matters which the Manager reasonably believes to be within such person's
professional or expert competence shall be full and complete authorization and
protection in respect of any action taken or omitted by the Manager hereunder in
good faith and in accordance with such opinion.
(c) Subject to Section 4.1(c), the Manager may rely and shall be
protected in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order, bond,
debenture, or other paper or document reasonably believed by it to be genuine
and to have been signed or presented by the proper party or parties.
SECTION 4.2. INDEMNIFICATION.
(a) THE PARTNERSHIP SHALL INDEMNIFY AND SAVE HARMLESS THE MANAGER, ITS
AFFILIATES, AND THEIR RESPECTIVE MEMBERS, PARTNERS, OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS (IN THIS SECTION SOMETIMES INDIVIDUALLY CALLED AN
"INDEMNITEE") FROM ALL CLAIMS, CAUSES OF ACTION, JUDGEMENTS, LIABILITIES,
DAMAGES, CHARGES, FEES AND EXPENSES OF ANY KIND ARISING FROM THE OPERATIONS,
BUSINESS AND AFFAIRS OF THE PARTNERSHIP OR THE PERFORMANCE BY THE MANAGER OF ITS
DUTIES AND OBLIGATIONS HEREUNDER; PROVIDED, HOWEVER, THAT NO INDEMNITEE SHALL BE
INDEMNIFIED BY THE PARTNERSHIP FOR ANY ACTS OR OMISSIONS
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BY THE INDEMNITEE THAT CONSTITUTE BAD FAITH, FRAUD, WILLFUL OR INTENTIONAL
MISCONDUCT OR CRIMINAL WRONGDOING, GROSS NEGLIGENCE OR A BREACH OF A MATERIAL
TERM OF THIS AGREEMENT. BOCP AND THE PARTNERSHIP RECOGNIZE THAT AN INDEMNITEE
MAY BE ENTITLED TO INDEMNIFICATION FROM ACTS OR OMISSIONS THAT MAY GIVE RISE TO
ORDINARY, CONCURRENT OR COMPARATIVE NEGLIGENCE.
(b) Without limiting subsection (a) above, the Partnership shall pay or
reimburse expenses incurred by an Indemnitee in connection with the Indemnitee's
appearance as a witness or other participation in a proceeding involving or
affecting the Partnership at a time when the Indemnitee is not a named defendant
or respondent in the proceeding.
(c) The indemnification provided by this Section shall be in addition
to any other rights to which each Indemnitee may be entitled under any agreement
or vote of the partners of the Partnership, as a matter of law or otherwise,
both as to action in the Indemnitee's capacity as the Manager or an officer,
director, member, employee or agent of the Manager or an Affiliate thereof or as
a person serving at the request of the Manager as set forth above and to action
in another capacity, and shall continue as to an Indemnitee who has ceased to
serve in such capacity and shall inure to the benefit of the heirs, successors,
assigns, administrators and personal representatives of the Indemnitees. Any
Indemnitee shall first seek recovery under any other indemnity or any insurance
policies by which such Indemnitee is indemnified or covered or from any issuer
in which the Partnership has an investment, as the case may be, prior to such
Indemnitee receiving any indemnification payment from BOCP or the Partnership.
(d) An Indemnitee shall not be denied indemnification in whole or in
part under this Section because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted and approved pursuant to the terms of this Agreement and
in the absence of fraud on behalf of the Indemnitee and its Affiliates.
ARTICLE V
REIMBURSEMENT; MANAGEMENT FEE
SECTION 5.1. PAYMENT OR REIMBURSEMENT OF ORGANIZATION COSTS AND
OPERATING COSTS.
(a) The Partnership shall pay, or shall reimburse the Manager or any
Affiliate thereof for its payment of, all out-of-pocket fees, costs and expenses
incurred by it in connection with the negotiation, execution and delivery of
this Agreement and all related documents.
(b) The Partnership shall pay, or shall reimburse the Manager or any
Affiliate thereof for its payment of, all Operating Costs.
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(c) To the extent any Operating Costs or other costs are attributable
to any of the Partnership, a Parallel Investment Entity and ECIC, such costs
shall be allocated among such entities based on their respective (i) interests
in an Investment if such costs are attributable to such Investment or (ii)
aggregate amounts of capital agreed to be contributed and/or loaned to them by
their respective partners and Affiliates if such costs are not attributable to
any Investment.
SECTION 5.2. MANAGEMENT FEE.
(a) During the period (in this Section 5.2(a) called the "INITIAL
PERIOD") commencing as of the date hereof and ending on the first to occur of
March 31, June 30, September 30 or December 31 following the earlier of (i) the
end of the Commitment Period, (ii) the point in time at which a Subsequent Fund
organized in accordance with the terms hereof makes its first investment, or
(iii) the occurrence of a Trigger Event (unless BOCP otherwise agrees in
writing), the Partnership shall pay to the Manager an annual fee equal to 2.0%
of the Total Commitments. After the expiration of the Initial Period, the
Partnership shall make quarterly payment to the Manager at a rate equal to 1.5%
per annum of the Base Amount (as defined below and, for any given payment,
determined as of the day immediately prior to the date such payment is due
hereunder). As used in this Section 5.2(a), the term "BASE AMOUNT" shall mean
(A) the sum of the aggregate Advances and Capital Contributions of the partners
under the Partnership Agreement as of the end of the Initial Period, increased
by (B) additional amounts advanced or contributed by the partners under the
Partnership Agreement to fund Follow-On Investments, and reduced by (but not
below zero) (C) amounts paid in respect of Advances or distributed to the
partners under the Partnership Agreement to the extent such amounts constitute a
return of capital and any writedown or writeoff of an Investment where the
Manager has determined that part or all of such Investment will not be repaid or
recouped by the Partnership. As used in this Section 5.2(a), "RETURN OF CAPITAL"
shall mean payments in respect of Advances or distributions that constitute
depletion, depreciation and amortization in the case of operating income from
Project Equity Investments and equity kickers related to Mezzanine Loans,
repayments of principal in the case of Mezzanine Loans, remaining cost basis in
the case of Investments sold or otherwise disposed of, and other applicable
customary returns of basis for any Investment, all as determined by the Manager
in good faith in accordance with (1) its customary accounting practices for
financial reporting purposes and (2) Section 7.1(a) of the Partnership
Agreement. The fee described in this Section 5.2(a) is herein called the
"MANAGEMENT FEE".
(b) Except as provided below, payments of the Management Fee shall be
made quarterly in advance on each fee payment date of each year. The first
payment (i) shall be due on the Initial Funding Date for the period from the
date hereof up to but not including the next fee payment date, whichever will
first occur after the Initial Funding Date, and (ii) shall be prorated based on
the number of days in such period. On that fee payment date (whichever has first
occurred after the Initial Funding Date) and on each fee payment date
thereafter, the Management Fee for the next three-month period shall be due. As
used in this Section 5.2(b), the term "FEE PAYMENT DATE" shall mean January 1,
April 1, July 1 and October 1 of each year.
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SECTION 5.3. TRANSACTION, BREAK-UP AND OTHER FEES.
(a) The Manager or an Affiliate thereof shall be permitted to charge
and receive a transaction or similar fee (a "TRANSACTION FEE") in connection
with any Investment made by the Partnership hereunder, which Transaction Fee
shall be payable by the Portfolio Company (or, in the instance of a Project
Equity Company, the person with whom the Partnership has formed such Project
Equity Company); provided, however, that 50% of any Transaction Fee paid to and
received by the Manager or its Affiliates (as to the Partnership's proportionate
interest in such Investment) shall reduce on a dollar-for-dollar basis any
future payment of the Management Fee due and payable under Section 5.2;
provided, further, that if the Transaction Fee paid to and received by the
Manager or its Affiliate (as to the Partnership's proportionate interest in such
Investment) exceeds 2% of the funds committed by the Partnership with respect to
such Investment, such excess amount (to the extent it has not been used to
reduce the Management Fee pursuant to the preceding proviso) shall further
reduce on a dollar-for-dollar basis any future payment of the Management Fee due
and payable under Section 5.2.
(b) Any fee, reimbursement, or other form of compensation in the nature
of a commitment or break-up or other arrangement payable to the Manager, an
Affiliate thereof or the Partnership (with respect to the Partnership's
proportionate interest in a proposed Investment) as a result of the failure to
consummate such investment by the Partnership hereunder (a "BREAK-UP FEE") shall
be paid or disbursed as follows: (i) first, to reimburse the Partnership or the
Manager for Operating Costs incurred in connection with the proposed
transaction; and (ii) second, any portion of the Break-up Fee remaining after
the reimbursement provided in clause (i) above shall be paid to the Manager or
its Affiliate; provided, however, that 50% of the amount paid to and received by
the Manager or its Affiliate (as to the Partnership's proportionate interest in
such Investment) shall reduce on a dollar-for-dollar basis any future payment of
the Management Fee due and payable under Section 5.2.
(c) The Manager and its Affiliates shall be permitted to receive and
retain fees from any Portfolio Company in which the Partnership then has an
Investment (or otherwise paid by any Portfolio Company or any other person in
connection with an Investment in which the Partnership has an interest) for
providing advisory, investment banking, monitoring or directors' services
("CONSULTING FEES"); provided, however, that 100% of the amount of any such
Consulting Fees paid to and received by the Manager and its Affiliates (with
respect to the Partnership's proportionate interest in such Investment) shall
reduce on a dollar-for-dollar basis any future payment of the Management Fee due
and payable under Section 5.2.
(d) All of the foregoing calculations relating to any Transaction Fee,
Break-up Fee or Consulting Fee shall be limited to the proportionate interest
that the Partnership has in any related Investment or proposed Investment, and
the foregoing provisions of this Section 5.3 shall not apply in any respect to
the proportionate interests that ECIC and the Parallel Investment Entities may
have in such Investment.
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SECTION 5.4. CORPORATE FINANCE FEES.
(a) The Management Fees payable to the Manager shall be reduced by an
amount (the "CORPORATE FINANCE FEE") for each CF Year equal to the product of A
times B times C, where "A" is 50%, where "B" is the Partnership Percentage, and
where "C" is the remainder of the Corporate Finance Profit for such CF Year
minus $2.5 million (or, with respect to the final CF Year, $2.5 million
multiplied by a fraction, the numerator of which is the number of days in the
final CF Year and the denominator of which is 365). The Manager and its
Affiliates shall be permitted to receive and retain the Corporate Finance Fee,
and the amounts so retained shall reduce on a dollar-for-dollar basis any future
payment of the Management Fee due and payable under Section 5.2.
(b) As used in this Section 5.4, the following terms shall have the
respective meaning set forth below:
(i) "CF YEAR" shall mean each twelve-month period commencing
on October 1 of each year and ending on September 30 of the following
year that occurs during the period beginning October 1, 1997, and
ending upon termination of the Commitment Period, provided that the
final CF Year shall end upon termination of the Commitment Period.
(ii) "CORPORATE FINANCE ACTIVITIES" shall mean all advisory,
consulting and other services rendered by the Manager and its
Affiliates to third parties for a fee except those services where the
Manager or its Affiliates are managing the investment of a fund or
monies of a third party or are advising or consulting in connection
therewith. Without limiting the foregoing, the Corporate Finance
Activities shall not include (1) the activities or services of the
Manager or its Affiliates relating to or in connection with any
Existing Fund, the Partnership, any Parallel Investment Entity, any
Subsequent Fund or any other fund or investment activity that is a
successor (in terms of activities) to any of the foregoing, (2) any
services or activities which were rendered or which occurred prior to
the date of this Agreement, (3) any services or activities as to which
the Manager or its Affiliates were engaged, or can reasonably
demonstrate were in the process of being engaged, as of the date of
this Agreement, (4) any investments made by the Manager or any of its
Affiliates prior to the date of this Agreement, or (5) any investments
made after the date of this Agreement by the Manager or any of its
Affiliates for cash, exchange of property or other value except
services.
(iii) "CORPORATE FINANCE PROFIT" shall mean for any CF Year
the remainder of D minus E, where "D" is equal to all cash and non-cash
revenues received by the Manager and its Affiliates during such CF Year
from or as a direct consequence of their Corporate Finance Activities,
and where "E" is equal to the General and Administrative Expenses paid
by the Manager and its Affiliates during such CF Year with respect to
their Corporate Finance Activities. In determining when revenues are
received by the Manager and its Affiliates for the purposes of
calculating the Corporate Finance Profit for any CF Year
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pursuant to this Section 5.4, (1) fees that are payable on a monthly or
other periodic basis for services rendered for such month or period
shall be considered to be received as of the end of the month to which
they relate and (2) contingent, success, incentive and other fees that
are payable on a contingent basis such as the closing of a transaction
or financing or the occurrence of another event relating to the
Manager's client or customer shall be considered to be received as of
the date of such closing or occurrence of such event, in each case
regardless of when such revenues or fees are actually received by the
Manager or its Affiliate, but provided that no reduction in the
Management Fee shall occur pursuant to Section 5.4(a) unless and until
such fees are actually received by the Manager or its Affiliate.
(iv) "GENERAL AND ADMINISTRATIVE EXPENSES" shall mean (1) all
direct costs and expenses paid by the Manager or its Affiliates with
respect to their Corporate Finance Activities and (2) the portion of
the in-house tax, accounting bookkeeping, engineering and similar types
of costs and expenses, telephone, communications, secretarial,
clerical, travel and entertainment expenses, office rent and other
office expenses, depreciation, amortization, rental and repair expense
of office and business equipment, salaries, benefits and other
compensation expenses of consultants and employees (except the
Principals), other direct and indirect administrative expenses and
other costs and expenses that are necessary or appropriate to the
conduct of the Corporate Finance Activities which are paid by the
Manager or its Affiliates and are allocated to the Corporate Finance
Activities by the Manager in a manner which is fair and reasonable and
consistent with applicable generally accepted accounting principles and
industry practices.
(v) "PARTNERSHIP PERCENTAGE" shall mean 85% of a fraction
expressed as a percentage, the numerator of which is the Total
Commitments and the denominator of which is the sum of the Total
Commitments and the commitments of all partners of the Parallel
Investment Entities to contribute capital and loan funds to the
Parallel Investment Entities.
ARTICLE VI
CERTAIN BANKING REGULATORY CONSIDERATIONS
SECTION 6.1. REGULATORY LIMITATIONS. Notwithstanding Article II or
Article III or anything else herein to the contrary, the Manager shall not cause
the Partnership to participate in any Investment or exercise any right, duty or
election provided for in this Agreement or under the terms of any Investment, to
the extent that such participation or exercise would, or might be reasonably be
foreseen to, cause or result in a Regulatory Limitation with respect to a Banc
One Entity. As used in this Section 6.1, the term "REGULATORY LIMITATION" shall
mean any set of facts or circumstances wherein or whereby (a) it has been
asserted (or BOCP reasonably believes that there is a risk of assertion) by any
governmental authority that the Partnership is not entitled to participate in an
Investment or exercise any such right, duty or election with respect to all or
any portion of such Investment, or that any such participation or exercise by
the Partnership with
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respect to all or any portion of such Investment would cause or result in a
violation by or imposition of a material cost upon a Banc One Entity under any
Applicable Regulation (as defined in Section 6.6); (b) the Banc One Entities are
deemed, individually or in the aggregate, to own, hold, control or have power
(including voting power) over a greater quantity of Securities than are
permitted under the Applicable Regulations; or (c) the Manager reasonably
believes that any such participation or exercise by a Banc One Entity could
result in the imposition of a material cost or expense, or expose a Banc One
Entity to review or inquiry by any governmental authority, under the Applicable
Regulations.
SECTION 6.2. VOTING POWER. Notwithstanding Article II or Article III or
anything else herein to the contrary, the Manager shall not, without the prior
written consent of BOCP, cause the Partnership to participate in any Investment
or exercise any right, duty or election provided for in this Agreement or under
the terms of any Investment, to the extent that such participation or exercise
would, or might be reasonably be foreseen to, cause or result in the Partnership
(together with the Banc One Entities) to have (or be deemed to have) more than
4.99% of the voting power to elect the board of directors or similar management
board of any entity related to such Investment.
SECTION 6.3. EQUITY OWNERSHIP. Notwithstanding Article II or Article
III or anything else herein to the contrary, the Manager shall not cause the
Partnership to participate in any Investment or exercise any right, duty or
election provided for in this Agreement or under the terms of any Investment, to
the extent that such participation or exercise would, or might be reasonably be
foreseen to, cause or result in the Partnership (together with the Banc One
Entities) to beneficially own (or be deemed to beneficially own) more than
24.99% of the aggregate equity or capital of any entity related to such
Investment.
SECTION 6.4. DISPOSITION OF INVESTMENT. Notwithstanding anything in
this Agreement to the contrary, if any time BOCP determines (and delivers to the
Manager an opinion of legal counsel, which may be a reasoned opinion expressed
on the basis of a "more likely than not" standard to the effect) that the
ownership or control of an Investment previously acquired by the Partnership
under this Agreement is or is reasonably likely to cause or result in (a) a
violation by or an imposition of a material cost upon a Banc One Entity under
any Applicable Regulation or (b) the Banc One Entities are deemed, individually
or in the aggregate, to own, hold, control or have power (including voting
power) over a greater quantity of Securities than are permitted under the
Applicable Regulations, BOCP shall have the right to give written notice thereof
to the Manager requesting that the Manager cause the Partnership to make a full
or partial disposition of such Investment to the extent necessary to enable the
Banc One Entities to comply with such Applicable Regulations. If any such notice
from BOCP is given to the Manager, the Manager shall have a period of 90 days
following receipt of such notice and legal opinion to use its reasonable best
efforts to (i) eliminate the necessity for such disposition by correction of the
condition giving rise to the violation of the Regulatory Limitation (to the
extent such correction is reasonably within the control of the Manager), (ii)
obtain a ruling or exemption from the appropriate regulatory authority
eliminating the necessity for such disposition, (iii) arrange for the
disposition of the required
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portion of the Investment at a price equal to the fair market value thereof
(including a disposition to the Manager or an Affiliate thereof), or (iv)
arrange for another method to eliminate the necessity of the disposition that is
reasonably satisfactory to BOCP. If the event that the necessity to dispose all
or a part of an Investment is not eliminated within such 90-day period or such
longer period as BOCP and the Manager shall agree, the Manager shall reasonably
cooperate with BOCP to assist it in effecting such disposition.
SECTION 6.5. INFORMATION. The Manager shall, upon written request
therefor, furnish to BOCP or its designated representative all information
concerning any Investment reasonably necessary in order to enable the Banc One
Entities to assess compliance with the Applicable Regulations or to prepare or
furnish any information requested or required by the FRB, OCC, SEC or the NASD
in connection with the Partnership's participation in such Investment.
SECTION 6.6. APPLICABLE REGULATIONS AND OTHER DEFINITIONS. As used in
this Article VI, (a) "APPLICABLE REGULATIONS" shall mean the Bank Holding
Company Act and the regulations promulgated thereunder by the Board of Governors
of the FRB, the National Bank Act and the regulations promulgated thereunder by
the OCC, the Securities and Exchange Act of 1934 and the regulations promulgated
thereunder by the SEC with respect to broker-dealers, and the By-Laws and Rules
of Fair Practice promulgated by the NASD, (b) the "FRB" shall mean the Board of
Governors of the Federal Reserve System, (c) the "OCC" shall mean the Office of
the Comptroller of the Currency, (d) the "SEC" shall mean the Securities and
Exchange Commission, (e) the "NASD" shall mean the National Association of
Securities Dealers, Inc. and (f) the "BANC ONE ENTITIES" shall mean Banc One
Corporation, Banc One Capital Corporation, the Partnership or any of their
respective Affiliates.
ARTICLE VII
CERTAIN EVENTS CONCERNING PRINCIPALS
Upon the occurrence of a Trigger Event (as defined below), and for the
remainder of the Commitment Period (in this Section called the "TRIGGER EVENT
PERIOD"), without the written consent of BOCP, the Manager shall not cause the
Partnership to make or purchase any Investments other than (a) Investments with
respect to which the Partnership was, at the time of the Trigger Event,
contractually obligated to make, (b) acquiring any Securities issued as a
dividend on, in a reclassification with respect to, or in exchange for
Securities that the Partnership owns at such time, or (c) acquiring or receiving
any equity kicker or similar consideration in connection with a Mezzanine Loan
previously made by the Partnership. During the Trigger Event Period and
thereafter and except as provided above in this Article VII, the Manager shall
continue to manage the Investments and other assets owned by the Partnership at
that time and shall continue to have all of the rights and powers that it would
have otherwise had with respect to such Investments or other assets as if a
Trigger Event had not occurred. As used in this Article VII, the term "TRIGGER
EVENT" shall mean either (i) two or more of the Designated Principals cease to
be involved in the day-to-day operation of the Manager because of retirement,
termination, death, disability or any
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other reason, or (ii) the sale or other transfer of voting securities or equity
interests in the Manager such that immediately after the last such sale or
transfer Principals who are employees of the Manager no longer own, either
directly or indirectly, 50% or more of the voting securities or equity interests
in the Manager.
ARTICLE VIII
REPORTING; BANKING; AND CONFIDENTIALITY
SECTION 8.1. REPORTS. The Manager shall furnish to BOCP the
following reports and other information at the respective times indicated:
(a) within 60 days after the end of each quarter, a report or reports
which (i) sets forth a description of each Investment made by the Partnership
during such quarter, (ii) contains a list of each Investment of the Partnership
as of the end of such quarter and the cost or fair market value of such
Investment as of such date as estimated by the Manager based on the most recent
engineering information in the possession of the Manager with respect to such
Investment, (iii) summarizes the performance of each Investment of the
Partnership for such quarter and identifies any material variances from any
projections or plans previously furnished to BOCP for such Investment and (iv)
contains a current valuation of BOCP's allocable share of Partnership assets, as
estimated by the Manager based on the most recent engineering information in the
possession of the Manager with respect to each Investment of the Partnership;
(b) within 60 days after the end of each quarter, detail of any items
that occurred during such quarter which offset the Management Fee pursuant to
Sections 5.3 and 5.4;
(c) within 120 days after the end of each fiscal year of the
Partnership, (i) a report or reports which shall discuss and review the status
of each Investment and its performance for such year and (ii) a schedule showing
the calculation of the Corporate Finance Fee for most recent CF Year (as defined
in Section 5.4);
(d) promptly upon the request of BOCP (and subject to Section 8.3),
such information concerning the Partnership or any of its Investments as BOCP
may reasonably request and which the Manager can provide without unreasonable
effort; and
(e) such other reports and information as the Manager may determine
from time to time.
SECTION 8.2. BANK ACCOUNTS. Notwithstanding anything in the Partnership
Agreement to the contrary, the Manager shall cause one or more accounts to be
maintained in a bank or banks, each having capital and surplus accounts totaling
not less than $500,000,000, which accounts shall be used for the payment of the
expenditures incurred by the Partnership in connection with the business of the
Partnership, and in which shall be deposited any and all receipts of the
Partnership. The Manager shall determine the number of and the persons who will
be authorized as signatories
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on each such bank account. There shall not be deposited in any of such accounts
any funds other than the funds belonging to the Partnership, and no other funds
shall in any way be commingled with such funds, except the Manager may use one
bank account for the Partnership, the Parallel Investment Entities and ECIC for
the purpose of paying money to, and receiving payments of money from, Portfolio
Companies. All funds of the Partnership in excess of $1,000,000 on hand at any
time and not invested in any Portfolio Companies (and not pending anticipated
investment within 30 days) shall be invested only in United States government
securities having a remaining maturity of one year or less, repurchase
agreements secured by such government securities or government guaranteed
securities of like remaining maturity, commercial paper rated A-1 or better by
Standard and Poor's Corporation, or other time deposits or bankers acceptances
with any bank meeting the minimum capital and surplus requirements stated above.
SECTION 8.3. CONFIDENTIALITY. Except as may be required by applicable
law or valid subpoena or other lawful process or by the rules of any applicable
stock exchange or other self-regulatory body or other regulatory requirements,
BOCP agrees that it will (consistent with its reasonable practices and
procedures adopted in good faith for handling confidential information) keep
confidential all written information furnished to it by the Manager which the
Manager reasonably believes should be kept confidential and which the Manager
clearly designates thereon as "confidential" and will not disclose any such
information to any person whatsoever (other than BOCP's officers, directors,
employees, beneficial owners, attorneys, accountants, advisors or potential
transferees (provided each of such persons is informed of the confidential
nature of such information) or the Manager or an investor in ECIC or a Parallel
Investment Entity); provided, however, that the foregoing covenant of BOCP shall
not apply to any information that (a) was or becomes generally available to the
public other than as a result of disclosure by BOCP, (b) becomes available to
BOCP from a source other than the Manager or an Affiliate thereof, provided that
such source is not (to the knowledge of BOCP) bound by a confidentiality
agreement with the Manager or such Affiliate or (c) BOCP can establish was
within it's possession prior to it being furnished to BOCP by or on behalf of
the Manager or an Affiliate thereof, provided that the source of such
information was not (to the knowledge of BOCP) bound by a confidentiality
agreement with the Manager or any of its Affiliates in respect thereof (the
information described above which BOCP is required to maintain as confidential
hereunder being called in this Article VIII "CONFIDENTIAL INFORMATION"). If BOCP
is compelled by law, subpoena, legal process, rules of any stock exchange or any
other self-regulatory body, or regulatory requirements to disclose any
Confidential Information with which BOCP reasonably believes it is legally
obligated to comply, BOCP shall use its reasonable best efforts to give prompt
notice of such fact to the Manager so that the Manager may, if it so desires,
seek a protective order or other governmental or judicial relief at Partnership
expense to prevent disclosure of such Confidential Information; provided,
however, that no such notice shall be required in connection with any routine or
periodic examination or similar process by any regulatory or self-regulatory
body or authority. BOCP acknowledges and agrees that instances may arise when
the Manager or an Affiliate thereof is subject to and may comply with a valid
and effective agreement with a third party prohibiting the Manager or such
Affiliate from distributing or otherwise disseminating to another party (e.g.,
BOCP) certain information, such as geological, geophysical or other data
pertaining to Target Energy-Related Assets with respect
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to which the Manager desires for the Partnership to make an Investment hereunder
or the Partnership has made an Investment hereunder. If requested by BOCP, the
Manager shall use its reasonable best efforts to obtain an amendment or waiver
of any such agreement to permit any such data to be provided to BOCP upon the
execution by BOCP of a similar agreement and in any event shall attempt in
advance of such execution of any such agreement to obtain permission for BOCP to
receive such information.
SECTION 8.4. BOCP REPORTS. The Manager agrees to use its reasonable
best efforts to provide to BOCP such information as BOCP shall reasonably and
timely request in order for BOCP to timely fulfill its reporting
responsibilities under its limited liability company governing documents.
ARTICLE IX
TERM
This Agreement shall commence as of the date hereof and shall continue
until the termination of the Partnership for state law purposes, unless sooner
terminated upon the occurrence of any of the following events:
(a) The consent in writing of the parties hereto.
(b) The Manager:
(i) makes a general assignment for the benefit of
creditors;
(ii) files a voluntary bankruptcy petition;
(iii) becomes the subject of an order for relief or is
declared insolvent in any federal or state bankruptcy or insolvency
proceeding;
(iv) files a petition or answer seeking for the Manager a
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any law;
(v) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against the
Manager in a proceeding of the type described in subsection (i) through
(iv) above;
(vi) seeks, consents to, or acquiesces in the appointment of a
trustee, receiver, or liquidator of the Manager or of all or any
substantial part of the Manager's properties; or
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(vii) 120 days expire after the date of the commencement of a
proceeding against the Manager seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief
under any law if the proceeding has not been previously dismissed, or
90 days expire after the date of the appointment, without the Manager's
consent or acquiescence, of a trustee, receiver, or liquidator of the
Manager or of all or any substantial part of the Manager's properties
if the appointment has not been vacated or stayed, or 90 days expire
after the date of expiration of a stay, if the appointment has not
previously been vacated.
(c) BOCP terminates this Agreement for cause. As used in this Article
IX, the term "FOR CAUSE" shall mean (i) the commission of criminal misconduct,
fraud, willful or intentional misconduct, gross negligence or a material
violation of applicable securities laws by the Manager or any officer, director
or member thereof, or (ii) a material breach by the Manager of any of its duties
or obligations hereunder, or any of its material representations made herein,
which breach is not cured within 60 days after receipt by the Manager of a
written notice from BOCP (provided, that if such breach is not reasonably
susceptible to cure within such 60-day period and if the Manager is diligently
and in good faith taking action to cure such breach, such 60-day period shall be
extended for the period of time reasonably necessary for the Manager to cure
such breach, not to exceed 120 days).
ARTICLE X
RELATIONSHIP OF THE PARTIES
Notwithstanding anything in this Agreement to the contrary, (a) the
relationship of the Manager to BOCP and the Partnership shall be and remain that
of an independent contractor; (b) neither the Manager nor any member, officer,
employee or agent thereof shall be deemed to be an employee of BOCP or the
Partnership by virtue of this Agreement; (c) nothing contained herein shall be
deemed or construed to create a partnership between BOCP or the Partnership, on
the one hand, and the Manager, on the other hand, or to cause any party hereto
to be responsible in any way for the debts or obligations of any other party
hereto; and (d) nothing contained herein shall be deemed or construed (i) to
constitute an assignment of BOCP's interest as a general partner in the
Partnership to the Manager or (ii) to cause the Manager to be a general partner
of the Partnership or have the liabilities of a general partner in a limited
partnership.
ARTICLE XI
AMENDMENTS; MEETINGS
SECTION 11.1. AMENDMENTS. This Agreement may be changed,
modified, or amended only by an instrument in writing duly executed by BOCP, the
Partnership and the Manager.
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SECTION 11.2. MEETINGS.
(a) Commencing with calendar year 1998 and in each calendar year
thereafter until the termination of the Partnership, an annual meeting among the
Manager, BOCP and the investors in the Parallel Investment Entities shall be
held. Such annual meetings shall be at such time and place as the Manager shall
determine, except that the first annual meeting shall be held within one year
following the date of this Agreement. Notice of each annual meeting, setting
forth the time and the place thereof, shall be delivered to BOCP not less than
30 days prior to the meeting date. At each such annual meeting, the Manager
shall discuss with BOCP and the investors in the Parallel Investment Entities
the operations, business and affairs of the Partnership and the Parallel
Investment Entities. The costs and expenses incurred by BOCP of traveling to and
attending the annual meeting shall be the responsibility of BOCP (and shall not
be the obligation of the Partnership or the Manager), except that the
Partnership and the Parallel Investment Entities shall provide at their expense
suitable meeting facilities (which expense shall be deemed an Operating Cost).
(b) The Manager shall cause the Designated Principals shall make
themselves available to respond to BOCP's requests for information.
ARTICLE XII
ADVISORY BOARD
(a) The Manager shall, promptly following the last of the dates
provided in the respective agreements governing the Parallel Investment Entities
as of which additional investors can no longer be admitted to any such entity,
select and form an "ADVISORY BOARD" (as herein called), which shall consist of
at least three but not more than five individuals who are representatives of
BOCP and of investors (excluding the General Partner or an Affiliate thereof) in
any Parallel Investment Entity; provided, however, that no single Eligible
Investor shall have more than one representative serving on the Advisory Board
at any one time; and provided, further, that one member of the Advisory Board
shall at all times be a limited partner of the EnCap Fund Partnership and a
second member of the Advisory Board shall at all times be a limited partner of
EnCap Energy Capital Fund III-B, L.P. The initial members of the Advisory Board
shall serve until December 31, 1998. As of January 1 of each year thereafter,
the Manager shall nominate a new Advisory Board which must be approved in
writing by a majority in interest of BOCP and the investors in each Parallel
Investment Entity voting as a single group (based on the amounts of their
respective agreements to contribute and/or loan capital to the Partnership or a
Parallel Investment Entity and excluding any vote by the General Partner) and
which shall serve for the remainder of such calendar year and until the
successor board has been so approved. Any vacancy arising on the Advisory Board
shall be filled by the Manager. Any member of the Advisory Board may be removed
at any time, with or without cause, by written consent signed by the 66 2/3% in
interest of BOCP and the investors in each Parallel Investment Entity as a
single group (based on the amounts of their respective agreements to contribute
and/or loan capital to the Partnership or
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a Parallel Investment Entity and excluding any vote by the General Partner). Any
member of the Advisory Board may, by written notice to the Manager, appoint an
alternate to act for such member in his or her absence and/or at any meeting of
the Advisory Board.
(b) The functions of the Advisory Board shall be (i) to resolve any
questions relating to a conflict of interest or a potential conflict of interest
between the Manager or any of its Affiliates, on one hand, and the Partnership,
BOCP, a Parallel Investment Entity, or the investors therein, on the other hand,
and to approve any contract or other transaction between the Partnership and a
Parallel Investment Entity, on the one hand, and the Manager or an Affiliate
thereof, on the other hand; (ii) to consult with and advise the Manager on such
other matters, including investment strategy, about which the Manager may from
time to time, in its sole discretion, determine to consult with the Advisory
Board; (iii) to review with the Manager the annual operating budgets of the
Partnership and the Parallel Investment Entities; (iv) to approve each
determination of Market Value which is used in the calculation of Preferred
Return Payout or Catch-Up Payout; and (v) to approve such other matters and
perform such other functions as are provided for in this Agreement and/or in any
agreements governing a Parallel Investment Entity; provided, that the functions
and activities of the Advisory Board and each member thereof acting in such
capacity shall be limited to those permitted under Section 3.03(b) of the Act
for limited partners who are deemed not to participate in the control of the
business of a partnership. The approval of the Advisory Board of any conflict,
potential conflict or transaction pursuant to subsection (i) above in this
Section shall constitute the approval thereof or the consent thereto by BOCP as
required pursuant to, or for purposes of, Section 2.2 or elsewhere in this
Agreement.
(c) The Advisory Board shall have the authority to adopt rules and
procedures, not inconsistent with this Agreement or the agreement governing each
Parallel Investment Entity, relating to the conduct of its affairs; provided,
however, that (i) in any event such rules and procedures shall include the
requirement that each member shall be required to recuse himself from voting on
any matter being considered by the Advisory Board for which such member (or the
investor represented by such member) has a conflict of interest, (ii) except
when a greater number is required elsewhere in this Agreement, all approvals,
disapprovals, and other actions taken by the Advisory Board shall be authorized
by a majority in number of the members of the Advisory Board then holding office
and eligible to vote on the matter being considered, and (iii) except as
provided in subsection (b) above, in no event shall the Advisory Board (or any
member thereof) have the power to bind the Partnership, BOCP, the Parallel
Investment Entities, or the investors in each Parallel Investment Entity, or the
authority to act for or on behalf of any of them. Without expanding the terms of
subsection (b) above, the Manager shall, if requested by the Advisory Board,
meet with or otherwise make itself reasonably available to, the Advisory Board
on a quarterly basis and at a mutually convenient time.
(d) The members of the Advisory Board shall exercise their best
judgment in carrying out their functions. Each member of the Advisory Board,
BOCP and each investor in a Parallel Investment Entity associated with a member
of the Advisory Board and their respective Affiliates shall be indemnified to
the extent set forth in the respective agreements governing the Partnership
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and the Parallel Investment Entities, except that the expense of such indemnity
shall be borne in the manner provided in Section 5.1(c).
(e) The Advisory Board will serve without compensation. The
Partnership, however, will reimburse all reasonable out-of-pocket expenses of
any member representing the Partnership incurred in attending meetings and
otherwise as a result of their service on the Advisory Board. Such reimbursement
shall be borne in the manner provided in Section 5.1(c).
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. NOTICES. All notices, demands, requests, or other
communications required or permitted to be given pursuant to this Agreement
shall be in writing and shall be given either (a) by hand delivery, (b) by
United States mail, certified or registered, return receipt requested, postage
prepaid, (c) by electronic facsimile or (d) by overnight courier service
(charges prepaid) with proof of delivery. Each party's address for notices and
other communications hereunder shall be that set forth below such party's
signature hereto. Each party hereto may change its address for notices and
communications by giving notice in writing to the other party, stating its new
address for notices, in accordance with this Section 13.1. Notices sent by hand
delivery shall be deemed to have been given when received; notices mailed in
accordance with the foregoing shall be deemed to have been given five Business
Days following the date mailed; notice sent by electronic facsimile shall be
deemed given on the first Business Day after electronically confirmed; and
notices sent by overnight courier service shall be deemed to have been given on
the next Business Day following the date so sent.
SECTION 13.2. ENTIRE AGREEMENT. This Agreement, the Subscription
Agreement pursuant to which the General Partner subscribes for its interest as a
general partner of the Partnership, the Partnership Agreement and the Assignment
Agreements (as described in Exhibit 13.8) constitute the full and complete
agreement of the parties hereto with respect to the subject matter hereof and
supersede and replace any description or summary of terms contained in the
offering materials or other writings provided to prospective investors in the
Encap Fund Partnership or any discussions concerning the subject matter hereof.
SECTION 13.3. SEVERABILITY. If any provision of this Agreement is held
to be unenforceable, this Agreement shall be considered divisible and such
provision shall be deemed inoperative to the extent it is deemed unenforceable,
and in all other respects this Agreement shall remain in full force and effect;
provided, however, that if any such provision may be made enforceable by
limitation thereof, then such provision shall be deemed to be so limited and
shall be enforceable to the maximum extent permitted by applicable law.
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SECTION 13.4. 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 be 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.
SECTION 13.5. 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.
SECTION 13.6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and assigns; provided, however, that no party
hereto may assign, transfer or otherwise dispose of all or any part of its
rights, duties or obligations hereunder without the consent of the other party.
SECTION 13.7. ATTORNEYS' FEES. Subject to Section 5.1(a), each party
agrees to pay any attorneys' fees or expenses incurred by it in connection with
the negotiation, execution and delivery of this Agreement.
SECTION 13.8. RELATED AGREEMENTS. Except for the documents and other
instruments listed in Exhibit 13.8, the Manager shall not enter into any side
letter or similar written agreement with any existing or future investor in any
Parallel Investment Entity that has the effect of establishing rights in or with
respect to such Parallel Investment Entity or otherwise benefitting such
investor in a manner in or with respect to such Parallel Investment Entity more
favorable in any material respect to such investor than the rights and benefits
established in or with respect to the Partnership in favor of BOCP by the
Partnership Agreement and this Agreement unless, in any such case, BOCP has been
offered the opportunity to receive such rights and benefits of such side letter
or similar written agreement.
SECTION 13.9. NO THIRD PARTY BENEFICIARIES. Except as expressly and
specifically provided in Section 4.2, nothing in this Agreement, either express
or implied, is intended to or shall confer upon any person other than the
parties hereto, and their respective successors and permitted assigns, any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 13.10. COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be an original and all of which shall
constitute but one and the same document.
SECTION 13.11. REPRESENTATIONS AND WARRANTIES OF THE MANAGER. The
Manager represents, warrants and covenants to BOCP and the Partnership as
follows:
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(a) The Manager is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Texas.
(b) The Manager has the requisite power and authority to execute and
deliver this Agreement and the Partnership Agreement and to perform its
respective obligations hereunder and thereunder.
(c) The execution, delivery and performance by the Manager of this
Agreement and the Partnership Agreement have been duly and validly authorized,
and no other action is required to be taken to authorize such execution,
delivery and performance.
(d) The execution, delivery and performance by the Manager of this
Agreement and the Partnership Agreement are within the powers of the Manager and
will not be in contravention of or result in any breach or constitute a default
under any applicable law, rule or regulation or any loan, note or other
agreement or instrument to which the Manager is a party or by which it or any of
its properties are bound.
(e) This Agreement and the Partnership Agreement have been duly and
validly executed and are binding and enforceable as against the Manager.
(f) Except for a change of law over which the Manager has no control
(and the Manager shall immediately notify BOCP when the Manager learns of such
occurrence), the foregoing representations, warranties and covenants shall
remain true and accurate during the term of this Agreement, and the Manager will
neither take action nor permit action to be taken which would cause any of the
foregoing representations to become untrue or inaccurate.
(g) No consent, approval, authorization or order of any court or
governmental agency or authority or of any third party which has not been
obtained is required in connection with the execution, delivery and performance
by the Manager of this Agreement or the Partnership Agreement.
(h) To the best knowledge of the Manager, the Manager and its
Affiliates and persons acting on their behalf have not taken any action, or
failed to take any action, which has caused the organization of the Partnership
and the issuance of the interests in the Partnership to come within the
registration requirements of the Securities Act of 1933, as amended, or any
applicable state blue sky laws. The offer and sale by the Manager of partnership
interests in the Partnership and in the Parallel Investment Entities has been
and will be made only to investors who represent to the Manager that they were
or are, as applicable, "accredited investors" within the meaning of Regulation D
of the Securities Act of 1933, as amended. Neither the Manager, directly or
indirectly, nor any agent acting on its behalf has offered or will offer such
interests or any similar security to any person so as to bring the issuance and
sale of such interests within the registration requirements of such Act.
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(i) To the best of the Manager's knowledge, the private placement
memorandum, prepared with respect to the Partnership and the Parallel Investment
Entities and distributed to BOCP and the investors in the Parallel Investment
Entities by the Manager and/or ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities
Corporation, did not, as of the date it was prepared, contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein not misleading (other than facts which are recognized to
be industry risks normally associated with the oil and gas business); provided,
however, that the terms and provisions of this Agreement, the Partnership
Agreement and the agreements governing the Parallel Investment Entities
supersede in all respects the terms described in such memorandum for the
Partnership and the Parallel Investment Entities.
SECTION 13.12. REPRESENTATIONS AND WARRANTIES OF BOCP AND THE
PARTNERSHIP. Each of BOCP and the Partnership severally represent, warrant and
covenant to the Manager as follows:
(a) It is an entity duly organized, validly existing and in good
standing under the laws of the State of its formation.
(b) It has the requisite power and authority to execute and deliver
this Agreement and to perform its respective obligations hereunder.
(c) The execution, delivery and performance by it of this Agreement
have been duly and validly authorized, and no other action is required to be
taken to authorize such execution, delivery and performance.
(d) The execution, delivery and performance by it of this Agreement are
within its powers and will not be in contravention of or result in any breach or
constitute a default under any applicable law, rule or regulation or any loan,
note or other agreement or instrument to which it is a party or by which it or
any of its properties are bound.
(e) This Agreement has been duly and validly executed and is binding
and enforceable against it.
(f) Except for a change of law over which it has no control (and it
shall immediately notify the Manager when it learns of such occurrence), the
foregoing representations, warranties and covenants shall remain true and
accurate during the term of this Agreement, and it will neither take action nor
permit action to be taken which would cause any of the foregoing representations
to become untrue or inaccurate.
(g) No consent, approval, authorization or order of any court or
governmental agency or authority or of any third party which has not been
obtained is required in connection with the execution, delivery and performance
by it of this Agreement.
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SECTION 13.13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations, warranties and covenants made by the parties hereto in this
Agreement or any other document contemplated hereby shall be considered to have
been relied upon by the other parties hereto and shall survive the execution and
delivery of this Agreement, or such other document, regardless of any
investigation made by or on behalf of any such party.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
BANC ONE CAPITAL PARTNERS VIII, LTD.
By:
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Name:
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Title:
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ADDRESS FOR NOTICE PURPOSES:
Banc One Capital Partners VIII, Ltd.
▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇)▇▇▇-▇▇▇▇
Attention:
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36
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BOCP ENERGY PARTNERS, L.P.
By: BANC ONE CAPITAL PARTNERS VIII,
LTD., General Partner
By:
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Name:
-------------------------------------
Title:
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ADDRESS FOR NOTICE PURPOSES:
BOCP Energy Partners, L.P.
▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
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Fax No.: (▇▇▇)▇▇▇-▇▇▇▇
Attention:
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37
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ENCAP INVESTMENTS L.C.
By:
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
ADDRESS FOR NOTICE PURPOSES:
EnCap Investments L.C.
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▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇)▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
SIGNATURE PAGE--MANAGEMENT AGREEMENT