EXHIBIT 10.5
________________________________________________________________________________
Purchase Agreement
by and between
Aroc Inc.
and
EnCap Equity 1996 Limited Partnership
and
Energy Capital Investment Company PLC
and
El Paso Capital Investments, L.L.C.
May 1, 2000
________________________________________________________________________________
Page
ARTICLE I
DEFINITIONS........................................................................ 1
1.1 Certain Defined Terms.................................................... 1
1.2 Certain Additional Defined Terms......................................... 8
1.3 References and Construction.............................................. 9
ARTICLE II
TERMS OF THE TRANSACTION........................................................... 9
2.1 Agreement to Sell and to Purchase Notes and Warrants..................... 9
2.2. Payment................................................................. 10
2.3. Placement Fee............................................................ 10
ARTICLE III
CLOSING............................................................................ 10
3.1 Closing.................................................................. 10
3.2 Deliveries by the Company................................................ 11
3.3 Deliveries by Buyer...................................................... 11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER........................................... 12
4.1 Corporate Organization................................................... 12
4.2 Qualification............................................................ 12
4.3 Charter and Bylaws....................................................... 12
4.4 Capitalization of the Company............................................ 12
4.5 Authority Relative to This Agreement..................................... 13
4.6 No Conflict.............................................................. 13
4.7 Consents and Approvals, Licenses, Etc.................................... 14
4.8 Subsidiaries............................................................. 14
4.9 Warrants................................................................. 15
4.10 Financial Statements..................................................... 15
4.11 SEC Filings.............................................................. 16
4.12 Absence of Undisclosed Liabilities....................................... 16
4.13 Absence of Certain Changes............................................... 16
4.14 Tax Matters.............................................................. 17
4.15 Environmental and Other Laws............................................. 18
4.16 Legal Proceedings........................................................ 19
4.17 Title to Properties; Permits; Licenses; Condition of Assets.............. 19
4.18 ERISA.................................................................... 20
4.19 Agreements............................................................... 21
4.20 Labor Disputes and Acts of God........................................... 23
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4.21 Registration Rights...................................................... 23
4.22 Offering of Securities................................................... 23
4.23 Government Regulation.................................................... 23
4.24 Brokerage Fees........................................................... 24
4.25 Solvency................................................................. 24
4.26 Insurance................................................................ 24
4.27 Full Disclosure.......................................................... 24
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER............................................ 24
5.1 Organization............................................................. 24
5.2 Authority Relative to This Agreement..................................... 24
5.3 Investment Intent; Investment Experience;
Restricted Securities.................................................. 25
5.4 Brokerage Fees........................................................... 25
ARTICLE VI
CONDUCT OF COMPANY PENDING CLOSING................................................. 25
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE COMPANY........................................... 26
7.1 Representations and Warranties True...................................... 26
7.2 Covenants and Agreements Performed....................................... 26
7.3 HSR Act.................................................................. 26
7.4 Legal Proceedings........................................................ 26
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF BUYER................................................. 27
8.1 Representations and Warranties True...................................... 27
8.2 Covenants and Agreements Performed....................................... 27
8.3 HSR Act.................................................................. 27
8.4 Legal Proceedings........................................................ 27
8.5 Consents................................................................. 27
8.6 No Material Adverse Change............................................... 27
8.7 Subordination Agreement.................................................. 28
8.8 Registration Rights Agreement............................................ 28
8.9. Closing of the Senior Credit Facility.................................... 28
ARTICLE IX
PRE-CLOSING TERMINATION............................................................ 28
9.1 Termination.............................................................. 28
9.2 Effect of Termination.................................................... 28
ARTICLE X
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AFFIRMATIVE COVENANTS OF THE COMPANY............................................... 29
10.1 Payment and Performance.................................................. 29
10.2 Books, Financial Statements and Reports.................................. 29
10.3 Notice of Material Events and Change of Address.......................... 30
10.4 Maintenance of Properties................................................ 31
10.5 Maintenance of Existence and Qualifications.............................. 31
10.6 Payment of Trade Liabilities, Taxes, etc................................. 31
10.7 Insurance................................................................ 31
10.8 Compliance with Agreements and Law....................................... 32
10.9 Guaranties of Company's Subsidiaries..................................... 32
10.10 Inspection Rights........................................................ 32
10.11 Charter Amendment Approval............................................... 32
ARTICLE XI
NEGATIVE COVENANTS OF THE COMPANY.................................................. 32
11.1 Indebtedness............................................................. 32
11.2 Limitation on Liens...................................................... 33
11.3 Limitation on Mergers.................................................... 33
11.4 Limitation on Sales of Property.......................................... 33
11.5 Limitation on Investments and New Businesses............................. 34
11.6 Transactions with Affiliates............................................. 34
11.7 Restricted Payments...................................................... 34
ARTICLE XII
PREPAYMENT OF THE NOTES............................................................ 34
ARTICLE XIII
EVENTS OF DEFAULT AND REMEDIES..................................................... 35
13.1 Events of Default........................................................ 35
13.2 Remedies................................................................. 37
ARTICLE XIV
ADDITIONAL AGREEMENTS.............................................................. 37
14.1 Third Party Consents..................................................... 37
14.2 Access to Information.................................................... 37
14.3 Use of Proceeds.......................................................... 38
14.4 Public Announcements..................................................... 38
14.5 Fees and Expenses........................................................ 38
14.6 Costs of Enforcement..................................................... 38
14.7 Indemnification.......................................................... 38
ARTICLE XV
MISCELLANEOUS...................................................................... 38
15.1 Notices.................................................................. 38
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15.2 Waiver and Amendment..................................................... 40
15.3 Survival................................................................. 40
15.4 Entire Agreement......................................................... 40
15.5 Binding Effect; Assignment; No Third Party Benefit....................... 40
15.6 Severability............................................................. 41
15.7 GOVERNING LAW............................................................ 41
15.8 Remedies Not Exclusive................................................... 41
15.9 Further Assurances....................................................... 41
15.10 Counterparts............................................................. 41
15.11 Injunctive Relief........................................................ 41
15.12 Consent to Jurisdiction.................................................. 42
15.13 Payments................................................................. 42
15.14. Master Subordination Agreement........................................... 42
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement"), dated as of May 1, 2000, is
made by and between AROC Inc., a Delaware corporation (the "Company"), EnCap
Equity 1996 Limited Partnership, a Texas limited partnership ("EnCap LP"),
Energy Capital Investment Company PLC, an English investment company ("ECIC"),
and El Paso Capital Investments, L.L.C., a Delaware limited liability company
("El Paso") (with EnCap LP, ECIC and El Paso sometimes being herein collectively
called "Buyer").
WHEREAS, the Company desires to issue and sell to Buyer, and Buyer desires
to purchase from the Company, (i) the Company's 12% Subordinated Notes due 2007
in the aggregate principal amount of $17,000,000 (the "Notes") and (ii) warrants
to purchase the Company's Common Stock (as defined herein);
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
Company and Buyer hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. As used in this Agreement, each of the
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following terms has the meaning given it below:
"Affiliate" means, with respect to any Person, any other Person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with, such Person. For the
purposes of this definition, "control" when used with respect to any Person
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract, or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreement" means this Agreement, as hereafter changed, amended or
modified in accordance with the terms hereof.
"Alliance Group" means Alliance Resources Group, Inc., a Delaware
corporation.
"Alliance PLC" means Alliance Resources PLC, a public limited company
incorporated in England and Wales.
"Alliance USA" means Alliance Resources (USA), Inc., a Delaware
corporation.
"Ancillary Documents" means each agreement, certificate, document,
commitment and writing (other than this Agreement) executed or to be
executed by the Company or Buyer in connection with the transactions
contemplated herein or therein, including the Notes and the Subsidiary
Guarantees.
"Applicable Law" means any statute, law, rule or regulation, or any
judgment, order, writ, injunction or decree of, any Governmental Entity to
which a specified Person or property is subject.
"AROC (Texas)" means AROC (Texas), Inc., a Texas corporation.
"Change of Control" means the occurrence of any of the following
events: (a) any Person or two or more Persons, other than the Company or
any affiliate of the Company, acting as a group shall acquire beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Exchange Act, and including holding proxies to vote
for the election of directors other than proxies held by the Company's
management or their designees to be voted in favor of persons nominated by
the Company's Board of Directors) of 33% or more of the outstanding voting
securities of the Company, measured by voting power (including both
ordinary shares and any preferred stock or other equity securities
entitling the holders thereof to vote with the holders of common stock in
elections for directors of the Company), (b) the Company shall fail
beneficially to own, directly or indirectly, 100% of the outstanding shares
of voting capital stock of Alliance PLC, Alliance Group, Difco, Source,
AROC (Texas), Alliance USA, LPC or GOC on a fully-diluted basis, (c) one-
third or more of the directors of the Company shall consist of persons not
nominated by the Company's Board of Directors (not including as Board
nominees any directors which the Board is obligated to nominate pursuant to
shareholders agreements, voting trust arrangements or similar arrangements)
or (d) within three years of the Closing Date, the employment by the
Company of ▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇▇ terminates for any reason.
"Charter Amendment Approval" means approval of the Charter Matters in
accordance with the Articles of Incorporation of the Company and Applicable
Laws.
"Charter Matters" means an amendment to the Articles of Incorporation
of the Company to increase the number of authorized shares of Common Stock
to a level as shall permit the full and complete exercise of the Warrants
into Common Stock.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means common stock, $0.001 par value per share, of
Buyer and any securities issued or issuable with respect to such shares by
way of a stock dividend or stock split or in connection with a combination
of shares, recapitalization, merger, consolidation or other reorganization.
"Companies Act" means the Companies ▇▇▇ ▇▇▇▇ as amended.
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"Default" means an Event of Default and any default, event or
condition which would, with the giving of any requisite notices and the
passage of any requisite periods of time, constitute an Event of Default.
"Difco" means Difco Limited, a private limited company incorporated
under the laws of England and Wales
"Environmental Laws" means any and all laws relating to the
environment or to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment including ambient air, surface
water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as
amended.
"Fiscal Quarter" means a three-month period ending on July 31, October
31, January 31 or April 30 of any year.
"Fiscal Year" means the twelve-month period ending on April 30 of any
year.
"GOC" means Germany Oil Company, a Delaware corporation.
"Governmental Entity" means any court or tribunal in any jurisdiction
(domestic or foreign) or any federal, state, municipal or other
governmental body, agency, authority, department, commission, board, bureau
or instrumentality (domestic or foreign).
"Hazardous Materials" means any substance regulated under
Environmental Law, whether as pollutants, contaminants, or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended.
"Indebtedness" of any Person means Liabilities in any of the following
categories: (a) Liabilities for borrowed money; (b) Liabilities
constituting an obligation to pay the deferred purchase price of property
or services; (c) Liabilities evidenced by a bond, debenture, note or
similar instrument; (d) Liabilities which would under U.S. GAAP be shown
on such Person's balance sheet as a liability, and is payable more than
one year from the date of creation thereof (other than reserves for taxes
and reserves for contingent obligations); (e) Liabilities arising under
futures contracts, forward contracts, swap, cap or collar contracts, option
contracts, hedging contracts, other derivative contracts, or similar
agreements; (f)
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Liabilities constituting principal under leases capitalized in accordance
with U.S. GAAP; (g) Liabilities arising under conditional sales or other
title retention agreements; (h) Liabilities owing under direct or indirect
guaranties of Liabilities of any other Person or constituting obligations
to purchase or acquire or to otherwise protect or insure a creditor against
loss in respect of Liabilities of any other Person (such as obligations
under working capital maintenance agreements, agreements to keep-well, or
agreements to purchase Liabilities, assets, goods, securities or services),
but excluding endorsements in the ordinary course of business of negotiable
instruments in the course of collection; (i) Liabilities (for example,
repurchase agreements) consisting of an obligation to purchase securities
or other property, if such Liabilities arises out of or in connection with
the sale of the same or similar securities or property; (j) Liabilities
with respect to letters of credit or applications or reimbursement
agreements therefor; (k) Liabilities with respect to payments received in
consideration of oil, gas, or other minerals yet to be acquired or produced
at the time of payment (including obligations under "take-or-pay" contracts
to deliver gas in return for payments already received and the undischarged
balance of any production payment created by such Person or for the
creation of which such Person directly or indirectly received payment); or
(l) Liabilities with respect to other obligations to deliver goods or
services in consideration of advance payments therefor; provided, however,
that the "Indebtedness" of any Person shall not include Liabilities that
were incurred by such Person on ordinary trade terms to vendors, suppliers,
or other Persons providing goods and services for use by such Person in the
ordinary course of its business, unless and until such Liabilities are
outstanding more than 90 days past the original invoice or billing date
therefor.
"IRS" means the Internal Revenue Service.
"Key Employment Agreements" means (i) that certain Executive
Employment Agreement dated as of December 8, 1999 between the Company and
▇▇▇▇ ▇. ▇▇▇▇▇▇, and (ii) that certain Service Agreement dated September 20,
1996 between Alliance PLC and ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, as amended by
Supplemental Agreement dated September 20, 1996, Second Supplemental
Agreement dated December 1, 1998, and letter agreement dated as of December
8, 1999.
"Liabilities" means, as to any Person, all indebtedness, liabilities
and obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or absolute, fixed or
contingent, and whether or not required to be considered pursuant to U.S.
GAAP.
"Lien" means, with respect to any property or assets, any right or
interest therein of a creditor to secure Liabilities owed to such creditor
or any other arrangement with such creditor which provides for the payment
of such Liabilities out of such property or assets or which allows him to
have such Liabilities satisfied out of such property or assets prior to the
general creditors of any owner thereof, including any lien, mortgage,
security interest, pledge, deposit, production payment, rights of a vendor
under any title retention or conditional sale agreement or lease
substantially equivalent thereto, tax lien, mechanic's or materialman's
lien,
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or any other charge or encumbrance for security purposes, whether arising
by law or agreement or otherwise, but excluding any right of offset which
arises without agreement in the ordinary course of business. "Lien" also
means any filed financing statement, any registration of a pledge (such as
with an issuer of uncertificated securities), or any other arrangement or
action which would serve to perfect a Lien described in the preceding
sentence, regardless of whether such financing statement is filed, such
registration is made, or such arrangement or action is undertaken before or
after such Lien exists.
"Listing Rules" means the listing rules of the London Stock Exchange.
"London Stock Exchange" means the London Stock Exchange Limited.
"LPC" means LaTex Petroleum Corporation, an Oklahoma corporation.
"LRI" means LaTex Resources, Inc., a Delaware corporation.
"LRI Merger" means the merger of Alliance Resources (Delaware) Inc.
with and into LRI whereby the Company became the sole shareholder of LRI.
"Majority of the Noteholders" means those holder(s) of the Notes who
hold a majority in aggregate principal amount of the Notes at the time
outstanding, exclusive of any Notes held by the Company or any Subsidiary.
"Material Adverse Effect" means a material adverse change in, or a
material adverse effect upon (i) the business, assets, results of
operations, condition (financial or otherwise) or prospects of the Company
and its Subsidiaries on a consolidated basis, (ii) the Company's or any
Subsidiary Guarantor's ability to timely pay the Obligations or to perform
on a timely basis any material obligation of the Company under this
Agreement or any agreement, instrument, or document entered into or
delivered in connection herewith or (iii) the enforceability of the
material terms of this Agreement or any Ancillary Document.
"Obligations" means all Liabilities owing Buyer or, if different, the
holder(s) of the Notes, pursuant to the this Agreement, the Notes or any of
the other Ancillary Documents.
"Old LaTex Payables" means those current accounts payable of the
Company or its consolidated Subsidiaries that meet one or more of the
following tests and have been certified to Buyer by the Company and
applicable Subsidiary as being an Old LaTex Payable:
(a) accounts payable the collection of which is barred by the
applicable statute of limitations;
(b) accounts payable the collection of which has been compromised
or forgiven in part, in either case to the extent of the amount that
has been compromised or forgiven; or
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(c) accounts payable in respect of which the indebtedness was
incurred prior to the LRI Merger and where each of the following is
true: (i) no payment has been made on an individual amount of
indebtedness payable since the LRI Merger, (ii) no contact has been
received by the Company or applicable Subsidiary from the applicable
creditor since the LRI Merger pertaining to such account or if contact
has been received, such account is being diligently contested in good
faith, (iii) no promise to pay such account has been made by the
Company or applicable Subsidiary since the LRI Merger and (iv) no
judgment has been obtained by, or settlement agreement entered into
with, such creditor with respect to such indebtedness.
"Permits" means licenses, permits, franchises, consents, approvals,
variances, exemptions and other authorizations of or from Governmental
Entities.
"Permitted Investment" means any investment, loan, advance, guaranty
or capital contribution by the Company or any Subsidiary in any of the
following: (a) properties or assets to be used in the ordinary course of
business of the Company and its Subsidiaries; (b) current assets arising
from the sale of goods and services in the ordinary course of business of
the Company and its Subsidiaries; (c) investments in one or more of the
Company's Subsidiaries or in any Person that concurrently with such
investment becomes a Subsidiary; (d) any marketable obligation maturing not
later than one year after the date of acquisition therefor, issued or
guaranteed by the United States of America or by any agency of the United
States of America which has the full faith and credit of the United States
of America; (e) commercial paper which is given the highest rating by a
credit rating agency of recognized national standing and maturing not more
than 270 days from the date of creation thereof; and (f) any demand deposit
or time deposit (including certificates of deposit and money market or
sweep accounts) with a commercial bank or trust company organized and doing
business under the laws of the United States of America or any state
thereof which has capital, surplus and undivided profits of at least
$250,000,000, provided that such deposit must be either payable on demand
or mature not more than twelve months from the date of investment therein.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, enterprise,
unincorporated organization or Governmental Entity.
"Proceedings" means all proceedings, actions, claims, suits,
investigations and inquiries by or before any arbitrator or Governmental
Entity.
"reasonable best efforts" means a party's reasonable best efforts in
accordance with reasonable commercial practice and without the incurrence
of unreasonable expense.
"Restricted Payment" means any Distribution (as defined below) in
respect of the Company or any Subsidiary thereof (other than on account of
capital stock or other equity interests of a Subsidiary owned legally or
beneficially by the Company or another Subsidiary), including any
Distribution resulting in the acquisition by the Company of securities that
would
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constitute treasury stock. As used in this definition, "Distribution"
means, in respect of any corporation, partnership or other business entity
(a) dividends or other distributions or payments on capital stock or other
equity interest of such corporation, partnership or other business entity
(except distributions in such stock or other equity interest) and (b) the
redemption or acquisition of such stock or other equity interests or of
warrants, rights or other options to purchase such stock or other equity
interests (except when solely in exchange for such stock or other equity
interests).
"Securities" means the Notes and the Warrants issued pursuant to
Article II.
"Securities Act" means the U.S. Securities Act of 1933, as amended.
"Securities and Exchange Commission" means the U.S. Securities and
Exchange Commission.
"Senior Credit Facility" means that certain Credit Agreement dated as
of May 1, 2000, by and among the Company, Toronto-Dominion (Texas), Inc.,
as Agent, and the lenders signatory thereto.
"Source" means Source Petroleum, Inc., a Louisiana corporation.
"Subsidiary" means any corporation more than 50% of whose outstanding
voting securities, or any general partnership, joint venture or similar
entity more than 50% of whose total equity interests, is owned, directly or
indirectly, by the Company, or any limited partnership of which the Company
or any Subsidiary is a general partner.
"Subsidiary Guarantors" means Alliance PLC, Difco, Alliance Group,
Source, AROC (Texas), Alliance USA, LPC and GOC.
"Taxes" means any income taxes or similar assessments or any sales,
excise, occupation, use, ad valorem, property, production, severance,
transportation, employment, payroll, franchise, transfer, stamp,
withholding or other tax imposed by any United States federal, state or
local (or any foreign or provincial) taxing authority, including any
interest, penalties or additions attributable thereto.
"Tax Return" means any return or report (including but not limited to
any related or supporting information, any amended return or report or any
information return or report) with respect to Taxes.
"Treasury Regulations" means one or more treasury regulations
promulgated under the Code by the Treasury Department of the United States.
"U.S. GAAP" means generally accepted accounting principles in the
United States of America from time to time.
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"Warrant" means a warrant to purchase Common Stock issued pursuant to
the terms hereof.
1.2 Certain Additional Defined Terms. In addition to such terms as are
--------------------------------
defined in the opening paragraph of and the recitals to this Agreement and in
Section 1.1, the following terms are used in this Agreement as defined in the
Sections or Articles set forth opposite such terms:
Defined Term Section or Article Reference
------------ -----------------------------
agreements...................................... 4.19
Audited Financial Statements.................... 4.10
Closing......................................... 3.1
Closing Date.................................... 3.1
Event of Default................................ 13.1
Latest Balance Sheet............................ 4.10
Notes........................................... preamble
Organic Documents............................... 4.3
Permitted Liens................................. 11.2
Purchase Price.................................. II
Registration Rights Agreement................... 3.2(c)
SEC Filings..................................... 4.11
Subsidiary Guarantees........................... 3.2(c)
1.3 References and Construction.
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(a) All references in this Agreement to articles, sections, subsections
and other subdivisions refer to corresponding articles, sections, subsections
and other subdivisions of this Agreement unless expressly provided otherwise.
(b) Titles appearing at the beginning of any of such subdivisions are for
convenience only and shall not constitute part of such subdivisions and shall be
disregarded in construing the language contained in such subdivisions.
(c) The words "this Agreement", "this instrument", "herein", "hereof",
"hereby", "hereunder" and words of similar import refer to this Agreement as a
whole and not to any particular subdivision unless expressly so limited.
(d) Words in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires. Pronouns in masculine,
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feminine and neuter genders shall be construed to include any other gender.
(e) Unless the context otherwise requires or unless otherwise provided
herein, the terms defined in this Agreement which refer to a particular
agreement, instrument or document also refer to and include all renewals,
extensions, modifications, amendments or restatements of such
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agreement, instrument or document, provided that nothing contained in this
subsection shall be construed to authorize such renewal, extension,
modification, amendment or restatement.
(f) Examples shall not be construed to limit, expressly or by implication,
the matter they illustrate.
(g) The word "includes" and its derivatives means "includes, but is not
limited to" and corresponding derivative expressions.
(h) No consideration shall be given to the fact or presumption that one
party had a greater or lesser hand in drafting this Agreement.
(i) Unless otherwise indicated, all references herein to "$" or "dollars"
shall refer to U.S. Dollars.
ARTICLE II
TERMS OF THE TRANSACTION
2.1 Agreement to Sell and to Purchase Notes and Warrants. At the Closing,
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and on the terms and subject to the conditions set forth in this Agreement, the
Company shall issue, allot, sell and deliver to EnCap LP, ECIC and El Paso, and
EnCap LP, ECIC and El Paso shall severally purchase and accept from the Company,
the securities set forth opposite its name below:
EnCap LP (1) $9,000,000 principal amount of Notes; and
(2) Warrant to purchase 20,933,594 shares of
Common Stock
ECIC (1) $3,000,000 principal amount of Notes; and
(2) Warrant to purchase 6,977,865 shares of
Common Stock
El Paso (1) $5,000,000 principal amount of Notes; and
(2) Warrant to purchase 11,629,774 shares of
Common Stock
2.2. Payment. EnCap LP, ECIC and El Paso, respectively, shall severally pay
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to the Company at the Closing the aggregate amount set forth opposite its name
below (collectively, the "Purchase Price"):
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EnCap LP $ 9,000,000
ECIC $ 3,000,000
El Paso $ 5,000,000
2.3. Placement Fee. At the Closing, the Company shall pay to each of EnCap
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LP, ECIC and El Paso, respectively, a placement fee in cash equal to 2% of the
amount set forth opposite its name in Section 2.2.
ARTICLE III
CLOSING
3.1 Closing. The closing of the transactions contemplated hereby (the
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"Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ &
▇▇▇▇▇, LLP, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇, at 10 a.m., local time, on
May 1, 2000, or at such other time or place or on such other date as the parties
hereto shall agree. The date on which the Closing is required to take place is
herein referred to as the "Closing Date." All Closing transactions shall be
deemed to have occurred simultaneously.
3.2 Deliveries by the Company. At the Closing, the Company will deliver
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the following documents to Buyer:
(a) A certificate executed on behalf of the Company by an authorized
signatory of the Company, dated the Closing Date, representing and certifying,
in such detail as Buyer may reasonably request, that the conditions set forth in
Sections 8.1 and 8.2 have been fulfilled.
(b) Opinion, in form, scope and content reasonably acceptable to Buyer, of
Jenkens & ▇▇▇▇▇▇▇▇▇, counsel to the Company, dated the Closing Date.
(c) The certificates, instruments and documents listed below:
(i) The Notes, substantially in the form of Exhibit 3.2(c)(i) in all
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material respects, duly executed by the Company.
(ii) Subsidiary guarantees substantially in the form of Exhibit
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3.2(c)(ii) in all material respects (the "Subsidiary Guarantees") of each
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of the Subsidiary Guarantors, duly executed by the Subsidiary Guarantors.
(iii) The Warrants, substantially in the form of Exhibit 3.2(c)(iii)
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in all material respects, duly executed by the Company.
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(iv) A counterpart of that certain Amended and Restated Registration
Rights Agreement substantially in the form of Exhibit 3.2(c)(iv) in all
------------------
material respects (the "Registration Rights Agreement") duly executed by
the Company.
(v) Certified copy of a written consent or resolutions of the Board
of Directors of the Company and the Subsidiary Guarantors authorizing the
execution, delivery and performance by the Company and the Subsidiary
Guarantors of this Agreement and the Ancillary Documents, as necessary.
(vi) Certificates of existence and, for non-U.K. entities, good
standing with respect to the Company and the Subsidiary Guarantors, dated
within a number of days prior to the Closing Date reasonably acceptable to
Buyer.
(vii) Such other certificates, instruments, and documents as may be
reasonably requested by Buyer prior to the Closing Date to carry out the
intent and purposes of this Agreement.
3.3 Deliveries by Buyer. At the Closing, Buyer will deliver the following
-------------------
to the Company:
(a) A certificate executed by an authorized signatory of Buyer, dated the
Closing Date, representing and certifying, in such detail as the Company may
reasonably request, that the conditions set forth in Sections 7.1 and 7.2 have
been fulfilled.
(b) The Purchase Price in immediately available funds by a confirmed wire
transfer to a bank account designated in writing by the Company to Buyer no
later than two business days prior to the Closing Date.
(c) The certificates, instruments, and documents listed below:
(i) A counterpart of the Registration Rights Agreement duly executed
by Buyer.
(ii) Such other certificates, instruments, and documents as may be
reasonably requested by the Company prior to the Closing Date to carry out
the intent and purposes of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
The Company represents and warrants to Buyer that:
4.1 Corporate Organization. The Company is a corporation duly organized
----------------------
and validly existing under the laws of the State of Delaware.
-11-
4.2 Qualification. Each of the Company and the Subsidiaries is duly
-------------
qualified or licensed to do business and, with respect to non-U.K. entities, in
good standing in each of the jurisdictions in which it owns, leases or operates
property or in which such qualification or licensing is required for the conduct
of its business.
4.3 Charter and Bylaws. The Company has made available to Buyer accurate
------------------
and complete copies of the Company's certificate of incorporation, bylaws,
memorandum and articles of association or equivalent organizational documents
("Organic Documents") as currently in effect, and stock records of the Company.
Neither the Company nor any Subsidiary is in violation of its Organic Documents
or its partnership agreement or similar governing document, as the case may be.
4.4 Capitalization of the Company. The authorized capital stock of the
-----------------------------
Company, the number of shares outstanding and the number of shares held in the
Company's treasury are set forth on Schedule 4.4 hereto. All outstanding shares
------------
of capital stock of the Company have been validly issued and are fully paid and
nonassessable, and no shares of capital stock of the Company are subject to, nor
have any been issued in violation of, preemptive or similar rights. Except as
set forth on Schedule 4.4 hereto, there are (and as of the Closing Date there
------------
will be) outstanding (i) no shares of capital stock or other voting securities
of the Company, (ii) no securities of the Company convertible into or
exchangeable for shares of capital stock or other voting securities of the
Company, (iii) no options or other rights to acquire from the Company, and no
obligation of the Company to issue or sell, any shares of capital stock or other
voting securities of the Company or any securities of the Company convertible
into or exchangeable for such capital stock or voting securities, and (iv) no
equity equivalents, interests in the ownership or earnings or other similar
rights of or with respect to the Company. Except as set forth on Schedule 4.4
------------
hereto, there are (and as of the Closing Date there will be) no outstanding
obligations of the Company or any Subsidiary to repurchase, redeem, or otherwise
acquire any of the foregoing shares, securities, options, equity equivalents,
interests, or rights. Except as set forth on Schedule 4.4, the Company is not a
------------
party to, and is not aware of, any voting agreement, voting trust, or similar
agreement or arrangement relating to any class or series of its capital stock.
4.5 Authority Relative to This Agreement. The Company has full power and
------------------------------------
authority to execute, deliver, and perform this Agreement and the Ancillary
Documents, including the Notes, to which it is a party and to consummate the
transactions contemplated hereby and thereby. The execution, delivery, and
performance by the Company of this Agreement and the Ancillary Documents,
including the Notes, to which it is a party, and the consummation by it of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary action of the Company. This Agreement has been duly executed and
delivered by the Company and constitutes, and each Ancillary Document, including
the Notes, executed or to be executed by the Company has been, or when executed
will be, duly executed and delivered by the Company and constitutes, or when
executed and delivered will constitute, a valid and legally binding obligation
of the Company, enforceable against the Company in accordance with their
respective terms, except that such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws
affecting creditors' rights generally and (ii) equitable principles which may
limit the availability of certain equitable remedies (such as specific
performance) in certain instances.
-12-
4.6 No Conflict. Assuming all consents, approvals, authorizations and
-----------
other actions described in Section 4.7 have been obtained and all filings and
notifications listed on Schedule 4.7 have been made, and except as described on
------------
Schedule 4.6, the execution, delivery and performance of this Agreement by the
------------
Company, the execution, delivery and performance by each Subsidiary of the
Ancillary Documents to which it is a party, and the consummation by them of the
transactions contemplated hereby and thereby do not and will not (a) violate or
conflict with the Organic Documents of the Company or any Subsidiary, (b)
conflict with or result in any violation of any provision of, or constitute
(with or without the giving of notice or the passage of time or both) a default
under, or give rise (with or without the giving of notice or the passage of time
or both) to any right of termination, cancellation, or acceleration under, or
require any consent, approval, authorization or waiver of, or notice to, any
party to, any bond, debenture, note, mortgage, indenture, lease, contract,
agreement, or other instrument or obligation to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any of their
respective properties may be bound or any Permit held by the Company or any
Subsidiary, (iii) result in the creation or imposition of any Lien upon the
properties of the Company or any Subsidiary (other than as provided in the
Senior Credit Facility) or (iv) violate any Applicable Law binding upon the
Company or any Subsidiary.
4.7 Consents and Approvals, Licenses, Etc. Except as set forth on
--------------------------------------
Schedule 4.7, no consent, approval, authorization, license, order or permit of,
------------
or declaration, filing or registration with, or notification to, any
Governmental Entity, or any other Person or entity, is required to be made or
obtained by the Company or any Subsidiary in connection with the execution,
delivery and performance of this Agreement or any Ancillary Document and the
consummation of the transactions contemplated hereby and thereby.
4.8 Subsidiaries.
------------
(a) The Company does not own, directly or indirectly, any capital stock or
equity securities of any corporation or have any direct or indirect equity or
ownership interest in any other Person, other than the Subsidiaries. Schedule
--------
4.8 lists each Subsidiary, the jurisdiction of incorporation or formation of
---
each Subsidiary and the authorized (in the case of capital stock) and
outstanding capital stock or other equity interests of each Subsidiary. Each
U.K. Subsidiary is a duly formed and validly existing under the laws of the
jurisdiction of its formation, and each other Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Each Subsidiary has all requisite corporate
or other, as applicable, power and authority to own, lease, and operate its
properties and to carry on its business as now being conducted. No actions or
proceedings to dissolve any Subsidiary are pending.
(b) Except as otherwise indicated on Schedule 4.8, all the outstanding
------------
capital stock or other equity interests of each Subsidiary are owned directly or
indirectly by the Company, free and clear of all Liens. All outstanding shares
of capital stock of each corporate Subsidiary have been validly issued and are
fully paid and nonassessable. All equity interests of each other Subsidiary
have been validly issued and are fully paid (to the extent required at such
time). No shares of capital stock
-13-
or other equity interests of any Subsidiary are subject to, nor have any been
issued in violation of, preemptive or similar rights.
(c) Except as set forth on Schedule 4.8, there are (and as of the Closing
------------
Date there will be) outstanding (i) no shares of capital stock or other voting
securities of any Subsidiary, (ii) no securities of the Company or any
Subsidiary convertible into or exchangeable for shares of capital stock or other
voting securities of any Subsidiary, (iii) no options or other rights to acquire
from the Company or any Subsidiary, and no obligation of the Company or any
Subsidiary to issue or sell, any shares of capital stock or other voting
securities of any Subsidiary or any securities convertible into or exchangeable
for such capital stock or voting securities and (iv) no equity equivalents,
interests in the ownership or earnings, or other similar rights of or with
respect to any Subsidiary. There are (and as of the Closing Date there will be)
no outstanding obligations of the Company or any Subsidiary to repurchase,
redeem or otherwise acquire any of the foregoing shares, securities, options,
equity equivalents, interests or rights.
(d) Each of the Subsidiary Guarantors has full power and authority to
execute, deliver, and perform the Subsidiary Guarantee and other Ancillary
Documents to which it is a party and to consummate the transactions contemplated
thereby. The execution, delivery, and performance by each of the Subsidiary
Guarantors of the Subsidiary Guarantee and other Ancillary Documents to which it
is a party, and the consummation by it of the transactions contemplated thereby,
have been duly authorized by all necessary action of such Subsidiary Guarantor.
The Subsidiary Guarantees and each Ancillary Document executed or to be executed
by the Subsidiary Guarantors has been, or when executed will be, duly executed
and delivered by the Subsidiary Guarantors and constitutes, or when executed and
delivered will constitute, a valid and legally binding obligation of the
Subsidiary Guarantors, enforceable against the Subsidiary Guarantors in
accordance with their respective terms, except that such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium,
and similar laws affecting creditors' rights generally and (ii) equitable
principles which may limit the availability of certain equitable remedies (such
as specific performance) in certain instances.
4.9 Warrants. The Warrants to be issued by the Company at the Closing
--------
have been duly authorized for issuance and, when issued and delivered by the
Company in accordance with the provisions of this Agreement, will be validly
issued and will constitute valid and legally binding obligations of the Company
enforceable against the Company, except that such enforceability may be limited
by (i) applicable bankruptcy, insolvency, reorganization, moratorium, and
similar laws affecting creditors' rights generally and (ii) equitable principles
which may limit the availability of certain equitable remedies (such as specific
performance) in certain instances. Upon Charter Amendment Approval, the shares
of Common Stock issuable upon exercise of the Warrants will have been duly
authorized for issuance and, when issued and delivered by the Company in
accordance with the provisions of the Warrants, will be validly issued, fully
paid and nonassessable.
4.10 Financial Statements. The Company has delivered to Buyer accurate and
--------------------
complete copies of (i) Alliance PLC's audited consolidated balance sheet as of
April 30, 1999, and the related audited consolidated statements of income,
stockholders' equity and cash flows for the year then
-14-
ended, and the notes and schedules thereto, together with the unqualified report
thereon of KPMG Audit Plc, independent public accountants (the "Audited
Financial Statements") and (ii) the Company's unaudited consolidated balance
sheet as of January 31, 2000 (the "Latest Balance Sheet"), and the related
unaudited consolidated statements of income, stockholders' equity, and cash
flows for the three-month period then ended (the "Unaudited Financial
Statements"), certified by the Company's chief financial officer (collectively,
the "Financial Statements"). The Financial Statements (i) represent actual bona
fide transactions, (ii) have been prepared from the books and records of
Alliance PLC and the Company and their respective consolidated Subsidiaries in
conformity with U.S. GAAP accounting principles applied on a basis consistent
with preceding years throughout the periods involved and (iii) fairly present
Alliance PLC's and the Company's (as applicable) consolidated financial position
as of the respective dates thereof and Alliance PLC's and the Company's (as
applicable) consolidated results of operations and cash flows for the periods
then ended. The statements of income included in the Financial Statements do not
contain any items of special or nonrecurring income except as identified in the
notes thereto, and the balance sheets included in the Financial Statements do
not reflect any write-up or revaluation increasing the book value of any assets,
nor have there been any transactions since the date of the Latest Balance Sheet
giving rise to special or nonrecurring income or any such write-up or
revaluation.
4.11 SEC Filings. The Company and its Subsidiaries have filed with the
-----------
Securities and Exchange Commission, the London Stock Exchange and the Registrar
of Companies all forms, reports, schedules, statements and other documents
required to be filed by it since May 1, 1997 under the Companies Act and the
Listing Rules and since April 30, 1997 under the Securities Act, the Exchange
Act and all other federal securities laws. All final forms, reports, schedules,
statements and other documents (including all amendments thereto) filed by the
Company and its Subsidiaries with the Securities and Exchange Commission and the
London Stock Exchange since such date are herein collectively referred to as the
"SEC Filings". The Company has delivered to Buyer accurate and complete copies
of all the SEC Filings in the form filed by the Company and its Subsidiaries
with the Securities and Exchange Commission and the London Stock Exchange. The
SEC Filings, at the time filed, complied in all material respects with all
applicable requirements of federal securities laws. None of the SEC Filings,
including any financial statements or schedules included therein, at the time
filed, contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. All material contracts of the Company and the
Subsidiaries have been included in the SEC Filings, except for those contracts
not required to be filed pursuant to the rules and regulations of the Securities
and Exchange Commission and the London Stock Exchange. The Company shall deliver
to Buyer as soon as they become available accurate and complete copies of all
forms, reports, and other documents furnished by it to its shareholders
generally or filed by it with the Securities and Exchange Commission and the
London Stock Exchange subsequent to the date hereof and prior to the Closing
Date.
4.12 Absence of Undisclosed Liabilities. Neither the Company nor any
----------------------------------
Subsidiary has any liability or obligation (whether accrued, absolute,
contingent, unliquidated, or otherwise, whether or not known to the Company or
any Subsidiary, and whether due or to become due), except (i) liabilities
reflected on the Latest Balance Sheet, (ii) liabilities which have arisen since
the date of the
-15-
Latest Balance Sheet in the ordinary course of business (none of which is a
material liability for breach of contract, breach of warranty, tort, or
infringement), (iii) liabilities arising under executory contracts entered into
in the ordinary course of business (none of which is a material liability for
breach of contract) and (iv) liabilities specifically set forth on Schedule
--------
4.12.
----
4.13 Absence of Certain Changes. Except as disclosed on Schedule 4.13,
-------------------------- -------------
since the date of the Latest Balance Sheet, (i) there has not been any material
adverse change in, or any event or condition that might reasonably be expected
to result in a material adverse change in, the business assets, results of
operations, condition (financial or otherwise) or prospects of the Company and
the Subsidiaries considered as a whole; (ii) the businesses of the Company and
the Subsidiaries have been conducted only in the ordinary course consistent with
past practice; (iii) neither the Company nor any Subsidiary has incurred any
material liability, engaged in any material transaction or entered into any
material agreement outside the ordinary course of business consistent with past
practice; (iv) neither the Company nor any Subsidiary has suffered any material
loss, damage, destruction, or other casualty to any of its assets (whether or
not covered by insurance); and (v) neither the Company nor any Subsidiary has
taken any of the actions set forth in Article VI except as permitted thereunder.
4.14 Tax Matters. Except as disclosed on Schedule 4.14:
----------- -------------
(a) The Company and each Subsidiary has filed, or has had filed on its
behalf, in a timely manner (within any applicable extension periods) with the
appropriate taxing authority all Tax Returns with respect to Taxes of the
Company and of each of the Subsidiaries, all of which Tax Returns are true,
correct and complete in all material respects;
(b) All Taxes due and payable (whether or not reflected in Tax Returns as
filed) with respect to all taxable periods of the Company and the Subsidiaries
have been paid in full or adequate reserves have been provided for on the
Financial Statements;
(c) There are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any federal, state, local or
foreign income or other material Tax Returns required to be filed by or with
respect to the Company or any of the Subsidiaries;
(d) None of the Tax Returns of or with respect to the Company or any of
the Subsidiaries is currently being audited or examined by any taxing authority;
(e) No material deficiency for any Taxes has been assessed with respect
the Company or to any of the Subsidiaries that has not either (i) been abated or
(ii) paid in full or for which adequate reserves have been provided;
(f) No Tax litigation is currently pending;
(g) No waiver or extension of any statute of limitations to any federal,
state, local or foreign Tax matter has been given by or requested from the
Company or any Subsidiary; and
-16-
(h) Neither the Company nor any Subsidiary has filed a consent under
Section 341(f) of the Code.
(i) The Company and the Subsidiaries have complied with all Applicable
Laws relating to the withholding of Taxes and the payment thereof (including
withholding of Taxes under Sections 1441 and 1442 of the Code, or similar
provisions under foreign laws), and has timely and properly withheld from the
appropriate party and paid over to the proper Governmental Entity all amounts
required to be withheld and be paid over under Applicable Law.
(j) Neither the Company nor any Subsidiary is required to include in
income any adjustment under Section 481(a) of the Code by reason of a change in
accounting method, and neither the Company nor any Subsidiary, nor the Internal
Revenue Service, has proposed any such adjustment or change in accounting
method. The Company and the Subsidiaries do not have pending any private letter
ruling with the IRS.
(k) Other than as a result of this transaction, none of the Company's or
any Subsidiary's tax attributes is subject to the limitations of Section 382,
383 or 384 of the Code or Temporary Treasury Regulation Sections 1.1502-15T or
1.1502-21T(c).
(l) There are no liens for Taxes upon any assets of the Company or any
Subsidiary, except liens for Taxes not yet due and payable.
(m) The tax basis of each of the assets of the Company and the
Subsidiaries as set forth on the books, accounts and records of the Company and
the Subsidiaries is true, correct and complete in all material respects.
4.15 Environmental and Other Laws. Except as disclosed on Schedule 4.15
---------------------------- -------------
or in the SEC Filings filed prior to the date hereof, (a) the Company and the
Subsidiaries are conducting their businesses in compliance in all material
respects with all Applicable Laws, including all Environmental Laws, and are in
material compliance with all licenses and permits required under any such laws;
(b) to the best of the Company's knowledge, none of the operations or properties
of the Company or any Subsidiary is the subject of foreign, federal, state or
local investigation evaluating whether any material remedial action is needed to
respond to a release of any Hazardous Materials into the environment or to the
improper storage or disposal (including storage or disposal at offsite
locations) of any Hazardous Materials; (c) neither the Company nor any
Subsidiary has filed any notice under any Applicable Law indicating that it is
responsible for the improper release into the environment, or the improper
storage or disposal, of any material amount of any Hazardous Materials or that
any Hazardous Materials have been improperly released, or are improperly stored
or disposed of, upon any property of the Company or any Subsidiary; (d) neither
the Company nor any Subsidiary has transported or arranged for the
transportation of any Hazardous Material to any location which is (i) listed on
the National Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, listed for possible
inclusion on such National Priorities List by the Environmental Protection
Agency in its Comprehensive Environmental Response, Compensation and Liability
Information System List, or listed on any similar state list or
-17-
foreign jurisdiction list or (ii) the subject of foreign, federal, state or
local enforcement actions or other investigations which may lead to material
claims against the Company or any Subsidiary for clean-up costs, remedial work,
damages to natural resources or for personal injury claims (whether under
Environmental Laws or otherwise); and (e) to the best of the Company's
knowledge, neither the Company or any Subsidiary has any material contingent
liability under any Environmental Laws or in connection with the release into
the environment, or the storage or disposal, of any Hazardous Materials.
4.16 Legal Proceedings. Except as disclosed on Schedule 4.16, there are
----------------- -------------
no Proceedings pending or, to the best knowledge of the Company, threatened
against or involving the Company or any Subsidiary (or any of their respective
directors or officers in connection with the business or affairs of the Company
or any Subsidiary) or any properties or rights of the Company or any Subsidiary
which, individually or in the aggregate, might reasonably be expected to have a
Material Adverse Effect. Neither the Company nor any Subsidiary is subject to
any judgment, order, writ, injunction, or decree of any Governmental Entity
which has had or is reasonably likely to have a Material Adverse Effect. There
are no Proceedings pending or, to the best knowledge of the Company, threatened
seeking to restrain, prohibit, or obtain damages or other relief in connection
with, or questioning the legality or validity of, this Agreement or any
Ancillary Document or the transactions contemplated hereby or thereby.
4.17 Title to Properties; Permits; Licenses; Condition of Assets.
-----------------------------------------------------------
(a) Each of the Company and the Subsidiaries has good and defensible
title to all of its material properties and assets, free and clear of all Liens
other than Permitted Liens and of all material impediments to the use of such
properties and assets in the businesses of the Company and the Subsidiaries.
(b) Each of the Company and the Subsidiaries holds all material Permits
necessary or required for the conduct of its business. Each of such Permits is
in full force and effect, the Company and the Subsidiaries are in compliance
with all of its material obligations with respect thereto, and, to the best
knowledge of the Company, no event has occurred which allows, or with or without
the giving of notice or the passage of time or both would allow, the revocation
or termination of any thereof. No notice has been issued by any Governmental
Entity and no proceeding is pending or, to the best knowledge of the Company,
threatened with respect to any alleged failure by the Company or any Subsidiary
to have any material Permit.
(c) The Company and the Subsidiaries possess all licenses, permits,
franchises, patents, copyrights, trademarks and trade names, and other
intellectual property (or otherwise possesses the right to use such intellectual
property without violation of the rights of any other Person) which are
necessary to carry out their businesses as presently conducted and as presently
proposed to be conducted hereafter, and neither the Company nor any Subsidiaries
is in violation in any material respect of the terms under which it possesses
such intellectual property or the right to use such intellectual property.
-18-
(d) The equipment and other tangible assets of the Company and the
Subsidiaries are in good operating condition (except for reasonable wear and
tear), and have been reasonably maintained.
4.18 ERISA.
-----
(a) Set forth on Schedule 4.18 is a list identifying each "employee
-------------
benefit plan", as defined in Section 3(3) of ERISA, (i) which is subject to any
provision of ERISA, (ii) which is maintained, administered, or contributed to by
the Company or any affiliate of the Company, and (iii) which covers any employee
or former employee of the Company or any affiliate of the Company or under which
the Company or any affiliate of the Company has any liability. The Company has
delivered or made available to Buyer accurate and complete copies of such plans
(and, if applicable, the related trust agreements) and all amendments thereto
and written interpretations thereof, together with (i) the three most recent
annual reports (Form 5500 including, if applicable, Schedule B thereto) prepared
in connection with any such plan and (ii) the most recent actuarial valuation
report prepared in connection with any such plan. Such plans are referred to in
this Section as the "Employee Plans". For purposes of this Section only, an
"affiliate" of any person means any other person which, together with such
person, would be treated as a single employer under Section 414 of the Code.
The only Employee Plans which individually or collectively would constitute an
"employee pension benefit plan" as defined in Section 3(2) of ERISA are
identified as such on Schedule 4.18.
-------------
(b) Except as otherwise identified on Schedule 4.18, (i) no Employee Plan
-------------
constitutes a "multiemployer plan", as defined in Section 3(37) of ERISA (for
purposes of this Section, a "Multiemployer Plan"), (ii) no Employee Plan is
maintained in connection with any trust described in Section 501(c)(9) of the
Code, (iii) no Employee Plan is subject to Title IV of ERISA or to the minimum
funding standards of ERISA and the Code, and (iv) during the past five years,
neither the Company nor any of its affiliates have made or been required to make
contributions to any Multiemployer Plan. There are no accumulated funding
deficiencies as defined in Section 412 of the Code (whether or not waived) with
respect to any Employee Plan. The fair market value of the assets held with
respect to each Employee Plan which is an employee pension benefit plan, as
defined in Section 3(2) of ERISA, exceeds the actuarially determined present
value of all benefit liabilities accrued under such Employee Plan (whether or
not vested) determined using reasonable actuarial assumptions. Neither the
Company nor any affiliate of the Company has incurred any material liability
under Title IV of ERISA arising in connection with the termination of, or
complete or partial withdrawal from, any plan covered or previously covered by
Title IV of ERISA. The Company and all of the affiliates of the Company have
paid and discharged promptly when due all liabilities and obligations arising
under ERISA or the Code of a character which if unpaid or unperformed might
result in the imposition of a lien against any of the assets of the Company or
any Subsidiary. Nothing done or omitted to be done and no transaction or
holding of any asset under or in connection with any Employee Plan has or will
make the Company or any Subsidiary or any director or officer of the Company or
any Subsidiary subject to any liability under Title I of ERISA or liable for any
Tax pursuant to Section 4975 of the Code that could have a Material Adverse
Effect. There are no threatened or pending claims by or on behalf of the
Employee Plans, or by any participant therein, alleging a breach or breaches of
fiduciary duties or violations of Applicable Laws which could result
-19-
in liability on the part of the Company, its officers or directors, or such
Employee Plans, under ERISA or any other Applicable Law and there is no basis
for any such claim.
(c) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified since the date of
its adoption, and each trust forming a part thereof is exempt from Tax pursuant
to Section 501(a) of the Code. Set forth on Schedule 4.18 is a list of the most
-------------
recent IRS determination letters with respect to any such Plans, accurate and
complete copies of which letters have been delivered or made available to Buyer.
Each Employee Plan has been maintained in compliance with its terms and with the
requirements prescribed by all Applicable Laws, including but not limited to
ERISA and the Code, which are applicable to such Employee Plans.
(d) Set forth on Schedule 4.18 is a list of each employment, severance,
-------------
or other similar contract, arrangement, or policy and each plan or arrangement
(written or oral) providing for insurance coverage (including any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits, deferred
compensation, profit-sharing, bonuses, stock options, stock appreciation rights,
or other forms of incentive compensation or post-retirement insurance,
compensation, or benefits which (i) is not an Employee Plan, (ii) is entered
into, maintained, or contributed to, as the case may be, by the Company or any
affiliate of the Company, and (iii) covers any employee or former employee of
the Company or any affiliate of the Company or under which the Company or any
affiliate of the Company has any liability. Such contracts, plans, and
arrangements as are described in the preceding sentence are referred to for
purposes of this Section as the "Benefit Arrangements". Each Benefit Arrangement
has been maintained in substantial compliance with its terms and with the
requirements prescribed by Applicable Laws.
(e) Neither the Company nor any affiliate of the Company has performed
any act or failed to perform any act, and there is no contract, agreement, plan,
or arrangement covering any employee or former employee of the Company or any
affiliate of the Company, that, individually or collectively, could give rise to
the payment of any amount that would not be deductible pursuant to the terms of
Section 162(a)(1) or 280G of the Code, or could give rise to any penalty or
excise Tax pursuant to Section 4980B or 4999 of the Code.
4.19 Agreements.
----------
(a) Set forth on Schedule 4.19 is a list of all the following agreements,
-------------
arrangements, and understandings (written or oral, formal or informal)
(collectively, for purposes of this Section, "agreements") to which the Company
or any Subsidiary is a party or by which the Company or any Subsidiary or any of
their respective properties is otherwise bound:
(i) collective bargaining agreements and similar agreements with
employees as a group;
-20-
(ii) agreements with any current or former shareholder who owns or
owned 1% or more of the issued and outstanding shares of capital stock of
such Person or any director, officer, employee, consultant or advisor or
any affiliate of any such Person;
(iii) agreements between or among the Company and any of the
Subsidiaries;
(iv) exclusive of those relating to the Senior Credit Facility,
indentures, mortgages, security agreements, notes, loan or credit
agreements, or other agreements relating to the borrowing of money by the
Company or any Subsidiary or to the direct or indirect guarantee or
assumption by the Company or any Subsidiary of any obligation of others,
including any agreement that has the economic effect although not the legal
form of any of the foregoing;
(v) agreements relating to the acquisition or disposition of
assets, other than those entered into in the ordinary course of business
consistent with past practice;
(vi) agreements relating to the acquisition or disposition of any
interest in any business enterprise;
(vii) exclusive of oil, gas and mineral leases, agreements with
respect to the lease of real or personal property;
(viii) exclusive of oil and gas operating or similar agreements,
agreements concerning the management or operation of any real property;
(ix) partnership, joint venture, and profit sharing agreements;
(x) agreements with any Governmental Entity;
(xi) agreements relating to the release or disposal of Hazardous
Material;
(xii) agreements containing any covenant limiting the freedom of the
Company or any Subsidiary to engage in any line of business or compete with
any other Person in any geographic area or during any period of time, other
than those that would not have a Material Adverse Effect;
(xiii) agreements not made in the ordinary course of business; and
(xiv) other agreements, whether or not made in the ordinary course
of business, that are material to the business, assets, results of
operations, condition (financial or otherwise), or prospects of the Company
and the Subsidiaries considered as a whole.
(b) The Company has delivered or made available to Buyer accurate and
complete copies of the agreements listed in Schedule 4.19. Each of such
-------------
agreements is a valid and binding agreement of the Company and the Subsidiaries
(to the extent each is a party thereto) and (to the best knowledge
-21-
of the Company) the other party or parties thereto, enforceable against the
Company and the Subsidiaries (to the extent each is a party thereto) and (to the
best knowledge of the Company) such other party or parties in accordance with
its terms. Neither the Company nor any Subsidiary is in breach of or in default
under, nor has any event occurred which (with or without the giving of notice or
the passage of time or both) would constitute a default by the Company or any
Subsidiary under, any of such agreements, and neither the Company nor any
Subsidiary has received any notice from, or given any notice to, any other party
indicating that the Company or any Subsidiary is in breach of or in default
under any of such agreements. To the best knowledge of the Company, no other
party to any of such agreements is in breach of or in default under such
agreements, nor has any assertion been made by the Company or any Subsidiary of
any such breach or default.
(c) Neither the Company nor any Subsidiary has received notice of any
plan or intention of any other party to any agreement to exercise any right of
offset with respect to, or any right to cancel or terminate, any agreement, and
neither the Company nor any Subsidiary knows of any fact or circumstance that
would justify the exercise by any such other party of such a right other than
the automatic termination of such agreement in accordance with its terms.
Neither the Company nor any Subsidiary currently contemplates, or has reason to
believe any other Person currently contemplates, any amendment or change to any
agreement, which amendment or change could have a Material Adverse Effect.
(d) Without limiting the generality of the other provisions in this
Section 4.19, the Key Employment Agreements are in full force and effect, and
each of ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇ is currently employed by the Company
pursuant to a renewal term under such agreements.
4.20 Labor Disputes and Acts of God. Neither the business nor the
------------------------------
properties of the Company nor any Subsidiary has been affected by any fire,
explosion, accident, strike, lockout or other labor dispute, drought, storm,
hail, earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance), which, individually or in the aggregate,
could cause a Material Adverse Effect.
4.21 Registration Rights. Except as set forth on Schedule 4.21, the
------------------- -------------
Company has no obligation to register any of its securities under the Securities
Act, the Listing Rules or applicable similar foreign laws or regulations.
4.22 Offering of Securities. All securities which have been offered or
----------------------
or sold by the Company have been registered pursuant to the Securities Act and
applicable foreign and state securities laws or were offered and sold pursuant
to valid exemptions therefrom.
4.23 Government Regulation. The Company is not subject to regulation
---------------------
under the Public Utility Holding Company Act of 1935. The Company is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or an "investment
advisor" within the meaning of the Investment Advisers Act of 1940, as amended.
-22-
4.24 Brokerage Fees. Neither the Company nor any of its affiliates
--------------
has retained any financial advisor, broker, agent or finder or paid or agreed to
pay any financial advisor, broker, agent or finder on account of this Agreement
or any transaction contemplated hereby, which action would subject Buyer or any
of its affiliates to any liability. The Company shall indemnify and hold
harmless Buyer from and against any and all losses, claims, damages and
liabilities (including legal and other expenses reasonably incurred in
connection with investigating or defending any claims or actions) with respect
to any finder's fee, brokerage commission or similar payment in connection with
any transaction contemplated hereby asserted by any Person on the basis of any
act or statement made or alleged to have been made by the Company or any of its
affiliates.
4.25 Solvency. There are no bankruptcy, reorganization or arrangement
--------
proceedings pending, being contemplated by, or to the knowledge of Seller,
threatened against Seller.
4.26 Insurance. The Company and each Subsidiary carries insurance
---------
covering its properties and business adequate and customary for the type and
scope of its properties and business.
4.27 Full Disclosure. No representation or warranty made by the Company
---------------
Company in this Agreement, and no statement of the Company contained in any
document, certificate or other writing furnished or to be furnished by the
Company or its representatives to Buyer pursuant hereto or in connection
herewith taken as a whole, contains or will contain, at the time of delivery,
any untrue statement of a material fact or omits or will omit, at the time of
delivery, to state any material fact (other than industry-wide risks normally
associated with the type of business conducted by the Company) necessary to make
the statements contained therein, in light of the circumstances in which they
are made, not misleading. There is no fact known to the Company (other than
industry-wide risks normally associated with the type of business conducted by
the Company) that has not been disclosed to Buyer in writing which the Company
reasonably anticipates would result in a Material Adverse Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Each of EnCap LP, ECIC and El Paso hereby severally and as to itself
represents and warrants to the Company that (as used in this Article V the term
"Buyer" shall be deemed to mean only the person making such representation):
5.1 Organization. Buyer is duly organized and validly existing under the
------------
laws of the jurisdiction of its formation.
5.2 Authority Relative to This Agreement. Buyer has full power and
------------------------------------
authority to execute, deliver, and perform this Agreement and the Ancillary
Documents to which it is a party and to consummate the transactions contemplated
hereby and thereby. The execution, delivery, and performance by Buyer of this
Agreement and the Ancillary Documents to which it is a party, and the
-23-
consummation by it of the transactions contemplated hereby and thereby, have
been duly authorized by all necessary action of Buyer. This Agreement has been
duly executed and delivered by Buyer and constitutes, and each Ancillary
Document executed or to be executed by Buyer has been, or when executed will be,
duly executed and delivered by Buyer and constitutes, or when executed and
delivered will constitute, a valid and legally binding obligation of Buyer,
enforceable against Buyer in accordance with their respective terms, except that
such enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws affecting creditors' rights
generally and (ii) equitable principles which may limit the availability of
certain equitable remedies (such as specific performance) in certain instances.
5.3 Investment Intent; Investment Experience; Restricted Securities.
---------------------------------------------------------------
Buyer is acquiring the Securities for its own account for investment and not
with a view to, or for sale or other disposition in connection with, any
distribution of all or any part thereof. In acquiring the Securities, Buyer is
not offering or selling, and will not offer or sell, for the Company in
connection with any distribution of the Securities, and Buyer does not have a
participation and will not participate in any such undertaking or in any
underwriting of such an undertaking except in compliance with applicable federal
and state securities laws. Buyer acknowledges that it is able to fend for
itself, can bear the economic risk of its investment in the Securities, and has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of an investment in the Securities.
Buyer understands that the Securities will not have been registered pursuant to
the Securities Act or any applicable state securities laws, that the Securities
will be characterized as a "restricted security" under federal securities laws
and that under such laws and applicable regulations the Securities cannot be
sold or otherwise disposed of without registration under the Securities Act or
an exemption therefrom.
5.4 Brokerage Fees. Neither Buyer nor any of its affiliates has retained
--------------
any financial advisor, broker, agent or finder or paid or agreed to pay any
financial advisor, broker, agent or finder on account of this Agreement or any
transaction contemplated hereby, which action would subject the Company or any
of its affiliates to any liability. Buyer shall indemnify and hold harmless the
Company from and against any and all losses, claims, damages and liabilities
(including legal and other expenses reasonably incurred in connection with
investigating or defending any claims or actions) with respect to any finder's
fee, brokerage commission or similar payment in connection with any transaction
contemplated hereby asserted by any Person on the basis of any act or statement
made or alleged to have been made by Buyer or any of its affiliates.
ARTICLE VI
CONDUCT OF COMPANY PENDING CLOSING
The Company hereby covenants and agrees with Buyer that except as expressly
provided in this Agreement, during the period from the date hereof to the
Closing, the Company and the Subsidiaries (a) shall each conduct its operations
according to its ordinary course of business consistent with past practice and
in compliance with all Applicable Laws; (b) shall each use its
-24-
reasonable best efforts to preserve, maintain and protect its properties; and
(c) shall each use its reasonable best efforts to preserve intact its business
organization, to keep available the services of its officers and employees, and
to maintain existing relationships with licensors, licensees, suppliers,
contractors, distributors, customers and others having business relationships
with it.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to consummate the transactions contemplated
by this Agreement shall be subject to the fulfillment on or prior to the Closing
Date of each of the following conditions:
7.1 Representations and Warranties True. All the representations and
-----------------------------------
warranties of Buyer contained in this Agreement, and in any agreement,
instrument or document delivered pursuant hereto or in connection herewith on or
prior to the Closing Date, shall be true and correct in all material respects on
and as of the Closing Date as if made on and as of such date, except as affected
by transactions permitted by this Agreement, and except to the extent that any
such representation or warranty is made as of a specified date, in which case
such representation or warranty shall have been true and correct in all material
respects as of such specified date. For the sole purpose of determining whether
or not any of such representations and warranties are true and correct as
aforesaid on and as of the Closing Date, no effect shall be given to any
materiality qualification contained in such representation or warranty.
7.2 Covenants and Agreements Performed. Buyer shall have performed and
----------------------------------
complied with in all material respects all covenants and agreements required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date, and all deliveries contemplated by Section 3.3 shall have been made.
7.3 HSR Act. All waiting periods (and any extensions thereof) applicable
-------
to this Agreement and the transactions contemplated hereby under the HSR Act
shall have expired or been terminated.
7.4 Legal Proceedings. No preliminary or permanent injunction or other
-----------------
order, decree or ruling issued by a Governmental Entity or any securities
exchange, and no statute, rule, regulation or executive order promulgated,
enacted or issued by a Governmental Entity or any securities exchange, shall be
in effect which restrains, enjoins, prohibits or otherwise makes illegal or
improper the consummation of the transactions contemplated hereby.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF BUYER
-25-
The obligations of Buyer to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment on or prior to the Closing
Date of each of the following conditions:
8.1 Representations and Warranties True. All the representations and
-----------------------------------
warranties of the Company contained in this Agreement, and in any agreement,
instrument or document delivered pursuant hereto or in connection herewith on or
prior to the Closing Date, shall be true and correct in all material respects on
and as of the Closing Date as if made on and as of such date, and except to the
extent that any such representation or warranty is made as of a specified date,
in which case such representation or warranty shall have been true and correct
in all material respects as of such specified date. For the sole purpose of
determining whether or not any of such representations and warranties are true
and correct as aforesaid on and as of the Closing Date, no effect shall be given
to any materiality qualification contained in such representation or warranty.
8.2 Covenants and Agreements Performed. The Company shall have performed
----------------------------------
and complied with in all material respects all covenants and agreements required
by this Agreement to be performed or complied with by it on or prior to the
Closing Date, and all deliveries contemplated by Section 3.2 shall have been
made.
8.3 HSR Act. All waiting periods (and any extensions thereof) applicable
-------
to this Agreement and the transactions contemplated hereby under the HSR Act
shall have expired or been terminated.
8.4 Legal Proceedings. No preliminary or permanent injunction or other
-----------------
order, decree or ruling issued by a Governmental Entity or any securities
exchange, and no statute, rule, regulation or executive order promulgated,
enacted or issued by a Governmental Entity or any securities exchange, shall be
in effect which restrains, enjoins, prohibits or otherwise makes illegal the
consummation of the transactions contemplated hereby.
8.5 Consents. There shall have been obtained any and all consents,
--------
approvals, authorizations, licenses, orders or permits set forth on Schedule
--------
4.7; and no other consent, approval, authorization, license, order or permit of,
---
or declaration, filing or registration with, or notification to, any
Governmental Entity, or any other Person or entity, the failure to comply with
which would have a Material Adverse Effect, shall be required to be made or
obtained by the Company or any Subsidiary in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby.
8.6 No Material Adverse Change. Since the date of this Agreement, there
--------------------------
shall not have been any material adverse change in the business, assets, results
of operations, condition (financial or otherwise) or prospects of the Company
and the Subsidiaries considered as a whole.
8.7 Subordination Agreement. Buyer and the lender under the Senior Credit
-----------------------
Facility shall have executed and delivered a mutually acceptable subordination
agreement.
-26-
8.8 Registration Rights Agreement. The Company and the other parties to
-----------------------------
the Registration Rights Agreement shall have executed and delivered such
agreement.
8.9. Closing of the Senior Credit Facility. All conditions precedent to
-------------------------------------
the closing of the Senior Credit Facility (other than transactions with respect
to the consummation, simultaneously with such closing, of the transactions
contemplated hereby) shall have been satisfied at or prior to the Closing, and
such closings shall have occurred prior to or be occurring simultaneously with
the Closing.
ARTICLE IX
PRE-CLOSING TERMINATION
9.1 Termination. This Agreement may be terminated and the transactions
-----------
contemplated hereby abandoned at any time prior to the Closing in the following
manner:
(a) by mutual written consent of the Company and Buyer; or
(b) by either the Company or Buyer, if any Governmental Entity with
jurisdiction over such matters shall have issued an order or injunction
restraining, enjoining or otherwise prohibiting the issuance of the Notes
hereunder and such order, decree, ruling or other action shall have become
final and unappealable;
(c) by either Company or Buyer, if the Closing shall not have
occurred on or before May 30, 2000; provided, however, that the right to
terminate this Agreement under this Section 9.1(c) shall not be available
to any party whose failure to fulfill any obligation under this Agreement
shall have been the cause of, or shall have resulted in, the failure of
the Closing to occur prior to such date.
9.2 Effect of Termination. In the event of the termination of this
---------------------
Agreement pursuant to Section 9.1 by the Company, on the one hand, or Buyer, on
the other, written notice thereof shall forthwith be given to the other party
specifying the provision hereof pursuant to which such termination is made, and
this Agreement shall become void and have no effect, except that the agreements
contained in this Section, in Sections 14.4 and 14.5 and in Article XV shall
survive the termination hereof. Nothing contained in this Section shall relieve
any party from liability for damages actually incurred as a result of any breach
of this Agreement.
ARTICLE X
AFFIRMATIVE COVENANTS OF THE COMPANY
-27-
To induce Buyer to enter into this Agreement, the Company warrants,
covenants and agrees that until the full and final payment of the Obligations:
10.1 Payment and Performance. The Company will pay all amounts due under
-----------------------
the Notes in accordance with the terms thereof and will observe, perform and
comply with every covenant, term and condition expressed or implied in this
Agreement. The Company will cause each of its Subsidiaries to observe, perform
and comply with every such term, covenant and condition to the extent applicable
to such Subsidiary.
10.2 Books, Financial Statements and Reports. The Company and each of
---------------------------------------
its Subsidiaries will at all times maintain full and accurate books of account
and records. The Company will maintain and will cause its Subsidiaries to
maintain a standard system of accounting, will maintain its Fiscal Year, and
will furnish the following statements and reports to Buyer at the Company's
expense:
(a) As soon as available, and in any event within one hundred five (105)
days after the end of each Fiscal Year, complete consolidated financial
statements of the Company together with all notes thereto, prepared in
reasonable detail in accordance with U.S. GAAP, together with an unqualified
opinion, based on an audit using generally accepted auditing standards, by
independent certified public accountants selected by the Company and reasonably
acceptable to Buyer, stating that such consolidated financial statements have
been so prepared. These financial statements shall contain a consolidated
balance sheet as of the end of such Fiscal Year and consolidated statements of
earnings, of cash flows, and of changes in owners' equity for such Fiscal Year,
each setting forth in comparative form the corresponding figures for the
preceding Fiscal Year.
(b) As soon as available, and in any event within fifty (50) days after
the end of each Fiscal Quarter, the Company's consolidated balance sheet as of
the end of such Fiscal Quarter and consolidated statements of the Company's
earnings and cash flows for the period from the beginning of the then current
Fiscal Year to the end of such Fiscal Quarter, all in reasonable detail and
prepared in accordance with U.S. GAAP, subject to changes resulting from normal
year-end adjustments. In addition the Company will, together with each such set
of financial statements and each set of financial statements furnished under
subsection (a) of this section, furnish a certificate in a form reasonably
acceptable to Buyer signed by the chief financial officer of the Company stating
that such financial statements are accurate and complete (subject to normal
year-end adjustments) and stating that no Default exists at the end of such
Fiscal Quarter or at the time of such certificate or specifying the nature and
period of existence of any such Default.
(c) Promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent by the Company to its
stockholders and all registration statements, periodic reports and other
statements and schedules filed by the Company with any securities exchange, the
Securities and Exchange Commission or any similar Governmental Entity.
(d) Annually within 60 days after the end of each Fiscal Year beginning
with the Fiscal Year ending April 30, 2000, a report containing (i) an
estimation of the oil and gas reserves, classified by appropriate categories, as
of the end of the preceding fiscal year attributable to the interest of the
-28-
Company therein, (ii) a projection of the rate of production of and net income
from such reserves with respect to each such interest, (iii) a calculation of
the present worth of such net income discounted at a rate of 10% and at any
other rates designated from time to time by a Majority of the Noteholders and
(iv) a schedule or complete description of all assumptions, estimates and
projections made or used in the preparation of such report. Each such report
shall be prepared in accordance with customary and generally accepted standards
and practices for petroleum engineers, and shall be based on (1) prices
determined by a Majority of the Noteholders, (2) lease operating expenses and
production taxes derived from and consistent with those actually incurred by the
Company, escalated at the same rate, if any, being applied to prices and (3)
such other assumptions as shall be designated by a Majority of the Noteholders.
In addition to the foregoing, a Majority of the Noteholders shall have the right
from time to time to cause the independent petroleum engineer referenced below
to prepare an additional report of the type described above, not to exceed one
additional report in any one calendar year, in which event all fees and expenses
incurred in connection with obtaining such additional report shall be paid by
the Company. Each report under this subsection shall be prepared by an
independent petroleum engineer designated by the Company and approved by a
Majority of the Noteholders Each annual report referenced above shall also
include an estimate of the Company's proved oil and gas reserves (as defined in
Regulation S-X promulgated by the Securities and Exchange Commission) and a
calculation of the "present value of estimated future net revenues" from such
proved oil and gas reserves, with such present worth calculation to be made in
accordance with Regulation S-X, as promulgated by the Securities and Exchange
Commission.
(e) Promptly, such other information with respect to the business and
operations of the Company and its Subsidiaries, as Buyer may reasonably request.
10.3 Notice of Material Events and Change of Address. The Company
-----------------------------------------------
will promptly notify Buyer in writing, stating that such notice is being given
pursuant to this Agreement, of:
(a) the occurrence of any Material Adverse Effect,
(b) the occurrence of any Default,
(c) the acceleration of the maturity of any indebtedness owed by
the Company or any Subsidiary thereof or of any default by any the Company
or any such Subsidiary under any indenture, mortgage, agreement, contract
or other instrument to which any of them is a party or by which any of
them or any of their properties is bound, if such acceleration or default
could reasonably be expected to have a Material Adverse Effect,
(d) any claim of $250,000 or more, any notice of potential
liability under any Environmental Laws which might exceed such amount, or
any other material adverse claim asserted against the Company or any
Subsidiary thereof or with respect to the Company or any of such
Subsidiary's properties, and
(e) the filing of any suit or proceeding against the Company or any
Subsidiary thereof in which an adverse decision could cause a Material
Adverse Effect.
-29-
Upon the occurrence of any of the foregoing the Company and any Subsidiary
thereof will take all necessary or appropriate steps to remedy promptly any such
Material Adverse Effect, Default, acceleration or default, to protect against
any such adverse claim, to defend any such suit or proceeding, and to resolve
all controversies on account of any of the foregoing.
10.4 Maintenance of Properties. The Company and each of its Subsidiaries
-------------------------
will maintain, preserve, protect, and keep all property used or useful in the
conduct of its business in good condition and in compliance with all Applicable
Laws, and will from time to time make all repairs, renewals and replacements
needed to enable the business and operations carried on in connection therewith
to be promptly and advantageously conducted at all times.
10.5 Maintenance of Existence and Qualifications. The Company and each
-------------------------------------------
of its Subsidiaries will maintain and preserve its existence and its rights and
franchises in full force and effect and will qualify to do business in all
states or jurisdictions where required by Applicable Law, except where the
failure so to qualify will not cause a Material Adverse Effect.
10.6 Payment of Trade Liabilities, Taxes, etc. The Company and each of
-----------------------------------------
its Subsidiaries will (a) timely file all required Tax Returns; (b) timely pay
all Taxes, assessments, and other governmental charges or levies imposed upon it
or upon its income, profits or property; (c) timely withhold and pay over to the
proper Governmental Entity all amounts required to be withheld and paid over
under Applicable Laws; (d) pay when due all Liabilities owed by it on ordinary
trade terms to vendors, suppliers and other Persons providing goods and services
used by it in the ordinary course of its business; (e) pay and discharge when
due all other Liabilities now or hereafter owed by it; and (f) maintain
appropriate accruals and reserves for all of the foregoing in accordance with
U.S. GAAP. The Company and each of its Subsidiaries may, however, delay paying
or discharging any of the foregoing so long as it is in good faith contesting
the validity thereof by appropriate proceedings and has set aside on its books
adequate reserves therefor.
10.7 Insurance. The Company and each of its Subsidiaries will keep or
---------
cause to be kept insured by financially sound and reputable insurers its
properties in such forms and amounts and against such risks as are customary for
Persons engaged in the same or similar business of owning and operating similar
properties.
10.8 Compliance with Agreements and Law. The Company and each of its
----------------------------------
Subsidiaries will perform all material obligations it is required to perform
under the terms of each indenture, mortgage, deed of trust, security agreement,
lease, franchise, agreement, contract or other instrument or obligation to which
it is a party or by which it or any of its properties is bound. The Company and
each of its Subsidiaries will conduct its business and affairs in compliance
with all Applicable Law.
10.9 Guaranties of Company's Subsidiaries. Each Subsidiary (other than
------------------------------------
the Subsidiary Guarantors) of the Company now existing or created, acquired or
coming into existence after the date hereof shall, promptly upon request by
Buyer, execute and deliver to Buyer an absolute and unconditional guaranty of
the timely repayment of the Notes and the due and punctual performance of the
obligations of the Company hereunder, which guaranty shall be satisfactory to
Buyer in form
-30-
and substance. The Company will cause each of its Subsidiaries to deliver to
Buyer, simultaneously with its delivery of such a guaranty, written evidence
satisfactory to Buyer and its counsel that such Subsidiary has taken all
corporate or partnership action necessary to duly approve and authorize its
execution, delivery and performance of such guaranty and any other documents
which it is required to execute.
10.10 Inspection Rights. At any reasonable time and from time to time
-----------------
upon reasonable notice, the Company will permit Buyer or its agents or
representatives to examine and make copies of and extracts from the records and
books of account of, and visit and inspect the properties of the Company and any
Subsidiary, and to discuss the affairs, finances and accounts of the Company and
any Subsidiary with any of their officers or directors and independent
accountants.
10.11 Charter Amendment Approval. The Company shall cause the Charter
--------------------------
Amendment Approval by September 30,2000.
ARTICLE XI
NEGATIVE COVENANTS OF THE COMPANY
To induce Buyer to enter into this Agreement, the Company warrants,
covenants and agrees that until the full and final payment of the Obligations:
11.1 Indebtedness. Neither the Company nor any Subsidiary thereof will
------------
in any manner owe or be liable for Indebtedness except:
(a) the Obligations;
(b) the Senior Credit Facility;
(c) Indebtedness owed by the Company or any Subsidiary thereof which is
subordinated to the Obligations upon terms and conditions satisfactory to the
holder(s) of the Notes in its (or their) sole and absolute discretion;
(d) purchase money Indebtedness and Indebtedness under leases of the
Company or such Subsidiary as lessee which are capitalized in accordance with
U.S. GAAP, in an aggregate principal amount not to exceed $250,000 at any time,
provided that such purchase money Indebtedness and Indebtedness under capital
leases do not in the aggregate exceed $500,000;
(e) gas overproduction or liabilities arising under futures contracts,
forward contracts, swap, cap or collar contracts, option contracts, hedging
contracts, other derivative contracts or similiar contracts, to the extent
permitted by the Senior Credit Facility; and
-31-
(f) Old Latex Payables.
11.2 Limitation on Liens. Neither the Company nor any Subsidiary thereof
-------------------
will create, assume or permit to exist any Lien upon any of the properties or
assets which it now owns or hereafter acquires, except the following ("Permitted
Liens"):
(a) Liens which secure Obligations only;
(b) Liens which secure the Senior Credit Facility; and
(c) Statutory Liens for taxes, statutory mechanics' and materialmen's
Liens incurred in the ordinary course of business, and other similar Liens
incurred in the ordinary course of business, provided such Liens do not secure
Indebtedness or secure only Indebtedness which is not delinquent or for which
adequate reserves have been set aside.
11.3 Limitation on Mergers. Except as expressly provided in this
---------------------
Section, neither the Company nor any Subsidiary thereof will merge or
consolidate with or into any other business entity. Any Subsidiary of the
Company may, however, be merged into or consolidated with either the Company or
another Subsidiary which is wholly-owned by the Company, so long as the Company
or the Subsidiary wholly-owned by the Company is the surviving business entity.
The Company will not issue any securities other than (i) Common Stock or (ii)
any options or warrants giving the holders thereof only the right to acquire
such shares. No Subsidiary of the Company will issue any additional shares of
its capital stock or other securities or any options, warrants or other rights
to acquire such additional shares or other securities except to the Company or
to another Subsidiary. No Subsidiary of the Company which is a partnership will
allow any diminution of the Company's interest (direct or indirect) therein.
11.4 Limitation on Sales of Property. Neither the Company nor any
-------------------------------
Subsidiary thereof will sell, transfer, lease, exchange, alienate or dispose of
any of its assets or properties except:
(a) equipment which is worthless or obsolete or which is replaced by
equipment of equal suitability and value;
(b) inventory (including oil and gas sold as produced and seismic data)
which is sold in the ordinary course of business on ordinary trade terms; or
(c) other property which is sold for fair consideration not in the
aggregate in excess of $500,000 in any Fiscal Year (commencing with Fiscal Year
1999).
11.5 Limitation on Investments and New Businesses. Neither the Company
--------------------------------------------
nor any Subsidiary thereof will make any expenditure or commitment or incur any
obligation or enter into or engage in any transaction except in the ordinary
course of business (which ordinary course of business includes the acquisition,
directly or indirectly, of oil and gas properties), engage directly or
indirectly
-32-
in any business or conduct any operations except in connection with or
incidental to its present businesses and operations, make any acquisitions of or
capital contributions to or other investments in any Person, other than
Permitted Investments, or make any significant acquisitions or investments in
any properties other than oil and gas properties.
11.6 Transactions with Affiliates. Neither the Company nor any of its
----------------------------
Subsidiaries will engage in any material transaction with any of its affiliates
on terms which are less favorable to it than those which would have been
obtainable at the time in arm's-length dealing with Persons other than such
affiliates.
11.7 Restricted Payments. The Company will not, and will not permit
-------------------
any of its Subsidiaries to, declare or make, or incur any liability to declare
or make, any Restricted Payment.
ARTICLE XII
PREPAYMENT OF THE NOTES
At any time on or after January 1, 2001, the Company may, upon not less
than thirty days' notice to the holders of the Notes, from time to time and
without premium or penalty prepay the Notes in cash, in whole or in part, so
long as the aggregate amount of each partial prepayment of principal on the
Notes equals at least $1,000,000 or any higher integral multiple of $1,000,000.
Each prepayment of principal under this Section 12.1 shall be accompanied by all
interest then accrued and unpaid on the principal so prepaid. All principal and
interest prepaid pursuant to this Section 12.1 shall be in addition to, but not
in lieu of, all payments otherwise required to be paid under the Agreement or
the Ancillary Documents at the time of such prepayment. Any prepayments made
under this Article XII shall be applied against each Note outstanding pro rata,
based upon the ratio that the then outstanding principal amount of a Note bears
to the then total outstanding principal amount of all of the Notes.
ARTICLE XIII
EVENTS OF DEFAULT AND REMEDIES
13.1 Events of Default. Each of the following constitutes an "Event of
-----------------
Default" for purposes of the Notes and this Agreement:
(a) a default in the payment of principal of any Note when and as the
same shall become due and payable;
(b) a default in the payment of any interest upon any Note when such
interest becomes due and payable;
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(c) a default in the performance or observation of any covenant,
agreement or condition contained in either Article X or Article XI, which
--------- ----------
default is not remedied within 30 days after the earlier of (i) the day on which
the Company first obtains knowledge of such default or (ii) the day on which
written notice thereof is given to the Company by the holder of any Note;
(d) any "default" or "event of default" occurs under any this Agreement
or any Ancillary Document which defines either such term, and the same is not
remedied within the applicable period of grace (if any) provided in this
Agreement or such Ancillary Document;
(e) any representation or warranty previously, presently or hereafter
made in writing by or on behalf of the Company or any Subsidiary thereof in
connection with this Agreement or any Ancillary Document shall prove to have
been false or incorrect in any material respect on any date on or as of which
made, which default is not remedied within 30 days after the earlier of (i) the
day on which the Company first obtains knowledge of such default or (ii) the day
on which written notice thereof is given to the Company by the holder of any
Note;
(f) the Company or any Subsidiary fails to duly observe, perform or
comply with any agreement with any Person or any term or condition of any loan
document relating to the Senior Credit Facility or any other agreement or
instrument, if such agreement or instrument is materially significant to the
Company or such Subsidiary, and such failure is not remedied within the
applicable period of grace (if any) provided in such agreement or instrument;
(g) the Company or any Subsidiary thereof fails to pay any portion, when
such portion is due, of any of its Indebtedness in excess of $250,000 (exclusive
of the Old Latex Payables), or breaches or defaults in the performance of any
Agreement or instrument by which any such Indebtedness is issued, evidenced,
governed, or secured, and any such failure, breach or default continues beyond
any applicable period of grace provided therefor;
(h) the Company or any Subsidiary thereof:
(i) suffers the entry against it of a judgment, decree or order for
relief by a tribunal of competent jurisdiction in an involuntary
proceeding commenced under any applicable bankruptcy, insolvency or other
similar Applicable Law of any jurisdiction now or hereafter in effect,
including the United States federal Bankruptcy Code or similar foreign
law, as from time to time amended, or has any such proceeding commenced
against it which remains undismissed for a period of thirty days; or
(ii) commences a voluntary case under any applicable bankruptcy,
insolvency or similar Applicable Law now or hereafter in effect, including
the United States federal Bankruptcy Code or similar foreign law, as from
time to time amended; or applies for or consents to the entry of an order
for relief in an involuntary case under any such Applicable Law; or makes
a general assignment for the benefit of creditors; or fails
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generally to pay (or admits in writing its inability to pay) its debts as
such debts become due; or takes corporate or other action to authorize any
of the foregoing; or
(iii) suffers the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of all or a substantial part of its assets in a
proceeding brought against or initiated by it, and such appointment or
taking possession is neither made ineffective nor discharged within thirty
days after the making thereof, or such appointment or taking possession is
at any time consented to, requested by, or acquiesced to by it; or
(iv) suffers the entry against it of a final judgment for the
payment of money in excess of $250,000 (not covered by insurance
satisfactory to the holder of the Notes in their sole discretion), unless
the same is discharged within thirty days after the date of entry thereof
or an appeal or appropriate proceeding for review thereof is taken within
such period and a stay of execution pending such appeal is obtained; or
(v) suffers a writ or warrant of attachment or any similar
process to be issued by any tribunal against all or any substantial part
of its assets, and such writ or warrant of attachment or any similar
process is not stayed or released within thirty days after the entry or
levy thereof or after any stay is vacated or set aside;
(i) Any Change in Control occurs; and
(j) Any Material Adverse Effect occurs.
Upon the occurrence of an Event of Default described in subsection (h)(i),
(h)(ii) or (h)(iii) of this section with respect to the Company or a Subsidiary
thereof, all of the Obligations shall thereupon be immediately due and payable,
without demand, presentment, notice of demand or of dishonor and nonpayment,
protest, notice of protest, notice of intention to accelerate, declaration or
notice of acceleration, or any other notice or declaration of any kind, all of
which are hereby expressly waived by the Company and each such Subsidiary. Upon
the occurrence of an Event of Default described in subsection (a) or subsection
(b) of this section, any holder of a Note may during its continuance, by written
notice to the Company, declare the Note held by it to be due and payable,
whereupon such Note shall forthwith mature and become due and payable. Upon the
occurrence of any other Event of Default, the Majority of the Noteholders may at
any time during its continuance, declare all of the Notes to be due and payable,
whereupon all of the Notes shall forthwith mature and become due and payable.
13.2 Remedies. If any Default shall occur and be continuing, the
--------
holder of any Note may protect and enforce its rights under the this Agreement
and the Ancillary Documents by any appropriate proceedings, including
proceedings for specific performance of any covenant or agreement contained in
this Agreement or any Ancillary Document, and the holder of any Note may enforce
the payment of any Obligations due it or enforce any other legal or equitable
right
-35-
which it may have. All rights, remedies and powers conferred upon the holder of
the Notes under this Agreement and the Ancillary Documents shall be deemed
cumulative and not exclusive of any other rights, remedies or powers available
under this Agreement or the Ancillary Documents or at law or in equity.
ARTICLE XIV
ADDITIONAL AGREEMENTS
14.1 Third Party Consents. The Company shall use its reasonable best
--------------------
efforts to obtain all consents, approvals, orders, authorizations, and waivers
of, and to effect all declarations, filings, and registrations with, all third
parties (including Governmental Entities) that are necessary, required, or
deemed by Buyer to be desirable to enable the Company to issue the Notes to
Buyer as contemplated by this Agreement and to otherwise consummate the
transactions contemplated hereby. All costs and expenses of obtaining or
effecting any and all of the consents, approvals, orders, authorizations,
waivers, declarations, filings, and registrations referred to in this Section
shall be borne by the Company.
14.2 Access to Information. Between the date hereof and the Closing,
---------------------
the Company (i) shall give Buyer and its authorized representatives reasonable
access, during regular business hours, to all employees, all plants, offices,
warehouses, and other facilities, and all books and records, including work
papers and other materials prepared by the Company's independent public
accountants, of the Company and the Subsidiaries, (ii) shall permit Buyer and
its authorized representatives to make such inspections as they may reasonably
require and (iii) shall cause the Company's officers and those of the
Subsidiaries to furnish Buyer and its authorized representatives with such
financial and operating data and other information with respect to the Company
and the Subsidiaries as Buyer may from time to time reasonably request;
provided, however, that the Company shall have the right to have a
representative present at all times of any such inspections, interviews and
examinations conducted at or on the offices or other facilities or properties of
the Company or its affiliates or representatives.
14.3 Use of Proceeds. The Company will use the Purchase Price for
---------------
general corporate purposes.
14.4 Public Announcements. Except as may be required by Applicable
--------------------
Law, neither Buyer, on the one hand, nor the Company, on the other, shall issue
any press release or otherwise make any public statement with respect to this
Agreement or the transactions contemplated hereby without the prior written
consent of the other party (which consent shall not be unreasonably withheld).
Any such press release or public statement required by Applicable Law shall only
be made after reasonable notice to the other party, and in such case the party
proposing to make such a press release or public statement shall consult with
the other party.
-36-
14.5 Fees and Expenses. The Company shall bear its costs and expenses
-----------------
in connection with the negotiation, preparation, execution and delivery of this
Agreement and the Ancillary Documents and the other documents and instruments
contemplated hereby and thereby, as well as the consummation of the transactions
contemplated hereby and thereby. The Company shall promptly (and in any event
within 30 days after any invoice or other statement or notice) pay the
reasonable costs and expenses incurred by or on behalf of Buyer, including
attorneys' fees, consultants' fees and engineering fees, travel costs and
miscellaneous expenses in connection with the negotiation, preparation,
execution and delivery of this Agreement and the Ancillary Documents and the
other documents and instruments contemplated hereby and thereby, as well as the
related due diligence and consummation of the transactions contemplated hereby
and thereby.
14.6 Costs of Enforcement. If any party hereto is required to take
--------------------
action to enforce its rights under this Agreement, the prevailing party shall be
entitled to its reasonable expenses, including attorneys' fees and expenses, in
connection with any such action.
14.7 Indemnification. The Company shall indemnify, defend and hold
---------------
harmless Buyer from and against any and all claims, actions, causes of action,
demands, assessments, losses, damages, liabilities, judgments, settlements,
penalties, costs and expenses (including reasonable attorneys' fees and
expenses), of any nature whatsoever, asserted against, resulting to, imposed
upon, or incurred by Buyer, directly or indirectly, by reason of or resulting
from any breach by the Company of any of its representations, warranties,
covenants or agreements contained in this Agreement or in any certificate,
instrument or document delivered pursuant hereto.
ARTICLE XV
MISCELLANEOUS
15.1 Notices. All notices, requests, demands, and other communications
-------
required or permitted to be given or made hereunder by any party hereto shall be
in writing and shall be deemed to have been duly given or made if (a) delivered
personally, (b) transmitted by first class registered or certified mail, postage
prepaid, return receipt requested, (c) sent by prepaid overnight courier
service, or (d) sent by telecopy or facsimile transmission, answer back
requested, to the parties at the following addresses (or at such other addresses
as shall be specified by the parties by like notice):
-37-
If to EnCap LP or ECIC:
c/o EnCap Investments L.L.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
If to El Paso:
c/o El Paso Energy Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telefax: ▇▇▇-▇▇▇-▇▇▇▇
If to the Company or any Subsidiary:
AROC Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Telefax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Jenkens & ▇▇▇▇▇▇▇▇▇, a Professional Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: W. ▇▇▇▇ ▇▇▇▇▇▇
Telefax: ▇▇▇-▇▇▇-▇▇▇▇
Such notices, requests, demands, and other communications shall be effective (i)
if delivered personally or sent by courier service, upon actual receipt by the
intended recipient, (ii) if mailed, upon the earlier of five days after deposit
in the mail or the date of delivery as shown by the return receipt
-38-
therefor or (iii) if sent by telecopy or facsimile transmission, when the answer
back is received.
15.2 Waiver and Amendment. No failure or delay (whether by course of
--------------------
conduct or otherwise) by any party hereto in exercising any right, power or
remedy which such holder may have under the Agreement or any of the Ancillary
Documents shall operate as a waiver thereof or of any other right, power or
remedy, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or of any other right, power or remedy. No waiver of
any provision of this Agreement or any Ancillary Document and no consent to any
departure therefrom shall ever be effective unless it is in writing and signed
as provided below in this section, and then such waiver or consent shall be
effective only in the specific instances and for the purposes for which given
and to the extent specified in such writing. No waiver, consent, release,
modification or amendment of or supplement to this Agreement or any of the
Ancillary Documents shall be valid or effective against any party hereto unless
the same is in writing and signed by such party.
15.3 Survival. The representations and warranties of the parties hereto
--------
contained in this Agreement or in any certificate, instrument or document
delivered pursuant hereto shall survive the Closing, regardless of any
investigation made by or on behalf of any party without contractual limitation.
Except as otherwise provided herein or therein, all agreements and/or covenants
of the Company contained in this Agreement or in any of the Ancillary Documents
shall survive the execution and delivery of this Agreement and the Ancillary
Documents and the performance hereof and thereof, and shall further survive
until all of the Obligations are paid in full and all of Buyer's obligations to
the Company are terminated.
15.4 Entire Agreement. This Agreement, together with the Schedules and
----------------
other writings referred to herein or delivered pursuant hereto, constitute the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.
15.5 Binding Effect; Assignment; No Third Party Benefit. This Agreement
--------------------------------------------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that prior to Closing,
neither party may assign its rights or delegate any of its duties and
obligations under this Agreement or the Ancillary Documents without the prior
written consent of the other; provided, further, that after the Closing, the
Company may not assign its rights or delegate any of its duties and obligations
under this Agreement and the Ancillary Documents without the prior written
consent of the holder of the Notes. Except as expressly provided herein, nothing
in this Agreement, express or implied, is intended to or shall confer upon any
Person other than the parties hereto, and their respective successors and
permitted assigns, any rights, benefits, or remedies of any nature whatsoever
under or by reason of this Agreement.
15.6 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
-39-
permitted by Applicable Law.
15.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
15.8 Remedies Not Exclusive. The rights and remedies herein provided
----------------------
shall be cumulative and not exclusive of any rights or remedies provided by law.
The rights and remedies of any party based upon, arising out of, or otherwise in
respect of any inaccuracy in or breach of any representation, warranty,
covenant, or agreement contained in this Agreement shall in no way be limited by
the fact that the act, omission, occurrence, or other state of facts upon which
any claim of any such inaccuracy or breach is based may also be the subject
matter of any other representation, warranty, covenant, or agreement contained
in this Agreement (or in any other agreement between the parties) as to which
there is no inaccuracy or breach.
15.9 Further Assurances. From time to time following the Closing, at
------------------
the request of any party hereto and without further consideration, the other
party or parties hereto shall execute and deliver to such requesting party such
instruments and documents and take such other action (but without incurring any
material financial obligation) as such requesting party may reasonably request
in order to consummate more fully and effectively the transactions contemplated
hereby.
15.10 Counterparts. This Agreement may be executed by the parties
------------
hereto in any number of counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same agreement. Each counterpart
may consist of a number of copies hereof each signed by less than all, but
together signed by all, the parties hereto.
15.11 Injunctive Relief. The parties hereto acknowledge and agree that
-----------------
irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement, and shall be entitled to enforce specifically the provisions of this
Agreement, in any court of the United States or any state thereof having
jurisdiction, in addition to any other remedy to which the parties may be
entitled under this Agreement or at law or in equity.
15.12 Consent to Jurisdiction. The parties hereto hereby irrevocably
-----------------------
submit to the jurisdiction of the courts of the State of Texas and the federal
courts of the United States of America located in ▇▇▇▇▇▇ County, Texas, and
appropriate appellate courts therefrom, over any dispute arising out of or
relating to this Agreement or any of the transactions contemplated hereby, and
each party hereby irrevocably agrees that all claims in respect of such dispute
or proceeding shall be heard and determined in such courts. The parties hereby
irrevocably waive, to the fullest extent permitted by Applicable Law, any
objection which they may now or hereafter have to the laying of venue of any
dispute arising out of or relating to this Agreement or any of the transactions
contemplated hereby brought in such court or any defense of inconvenient forum
for the maintenance of such dispute.
-40-
Each of the parties hereto agrees that a judgment in any such dispute may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. This consent to jurisdiction is being given solely for purposes
of this Agreement and is not intended to, and shall not, confer consent to
jurisdiction with respect to any other dispute in which a party to this
Agreement may become involved.
15.13. Payments. All payments to be made hereunder shall be in lawful
--------
money of the United States of America.
15.14. Master Subordination Agreement. The terms of this Agreement are
------------------------------
subject to the terms of that certain Master Subordination Agreement, dated as of
May 1, 2000, made by and between the "Junior Creditor" therein (including
Buyers) and AROC Inc., a Delaware corporation, Alliance Resources Group, Inc., a
Delaware corporation, LaTex Petroleum Corporation, an Oklahoma corporation, AROC
(Texas), Inc., a Texas corporation, Germany Oil Company, a Delaware corporation,
Alliance Resources (USA), Inc., a Delaware corporation, Source Petroleum, Inc.,
a Louisiana corporation, Alliance Resources PLC, a public limited company
incorporated under the laws of England and Wales (collectively, the "Aroc
Parties"), in favor of Toronto Dominion (Texas), Inc., as Agent, for the lenders
("Lenders") parties to the credit agreement among the Aroc Parties, the Agent
and the Lenders.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-41-
IN WITNESS WHEREOF, the parties have executed this Agreement, or caused
this Agreement to be executed by their duly authorized representatives, all as
of the day and year first above written.
AROC INC.
By: _________________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Vice President
ENCAP EQUITY 1996 LIMITED PARTNERSHIP
By: ENCAP INVESTMENTS L.L.C.
By: _________________________________________
Name: __________________________________
Title: Managing Director
ENERGY CAPITAL INVESTMENT COMPANY PLC
By: _________________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Director
EL PASO CAPITAL INVESTMENTS, L.L.C.
By: _________________________________________
Name: __________________________________
Title: __________________________________