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EXHIBIT 10.12
ADVISORY SERVICES CONTRACT
This Advisory Services Contract, dated as of December 11, 1995 (this
"Contract") is between Titan Resources, L.P., a Texas limited partnership
("Company"), and ECT Securities Corp. ("ECT"), a Delaware corporation, and sets
forth the terms and conditions pursuant to which the Company will retain ECT to
act as its advisor. Capitalized terms used herein and not otherwise defined
shall have the meanings set forth for such terms in the Agreement of Limited
Partnership of the Company.
The Company and ECT agree as follows:
1. Retention of Advisor; Scope of Services.
(a) Subject to the terms and conditions set forth herein, the Company
hereby retains ECT to act as an advisor to the Company during the Contract
Period (as defined in paragraph 3 below).
(b) As advisor to the Company, ECT will, from time to time, as
requested by the Company, provide consultation, assistance and advice to the
Company with respect to its operations and properties, including, without
limitation, engineering reserve analysis and evaluations, analysis of potential
property acquisitions, advice regarding commodity pricing strategies and
assistance in developing marketing strategies.
(c) The parties hereto acknowledge that (i) ECT is not regularly
engaged in the business of providing advisory services and personnel and that
the services to be performed by ECT hereunder are provided as an incident to
ECT's relationship with Enron Capital Management Limited Partnership, the
General Partner to Joint Development Investments Limited Partnership ("JEDI")
and JEDI's activities as an owner of limited partnership interests of the
Company and common stock of Titan Resources I, Inc., the general partner of the
Company (the "General Partner"), (ii) the fees to be paid to ECT hereunder were
established at an amount which is believed to be approximately equal to the
amount of indirect costs and expenses ECT will incur in providing such
services, (iii) ECT is not an "investment advisor", within the meaning of the
Investment Advisors Act of 1940, as amended, or applicable state laws, or a
"broker" or "dealer" under the Securities Exchange Act of 1934, as amended, or
applicable state laws, (iv) the nature of the services to be provided by ECT
under this Contract do not include those of an "investment advisor" (i.e.
providing advice as to the value of securities or the advisability of investing
in, purchasing or selling securities), or those of a "broker" or "dealer" (i.e.
effecting transaction in securities for the account of the Company or others),
and (v) it is specifically intended by the parties hereto that ECT's activities
hereunder not subject ECT to any regulation or registration under federal or
state laws.
(d) The parties hereto acknowledge and agree that upon reasonable
request by the Company, ECT will, subject to the availability of such
personnel, make available such of its engineers and other employees, as ECT may
determine may reasonably be necessary for ECT's performance of its services
hereunder. The parties further acknowledge that unless and until ECT
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provides notice to the contrary, all decisions with respect to staffing,
scheduling and allocating ECT's resources for purposes of this Contract will be
coordinated on behalf of ECT by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and any request by the Company
for the performance of services hereunder shall be directed to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
2. Contract Period and Termination.
(a) Unless earlier terminated under subparagraph (b), ECT shall act
as the Company's advisor under this Contract, effective as of the date hereof
(the "Effective Date") and continuing until the first date on which the
Company, the General Partner or their successors complete an offering to the
public of equity securities pursuant to a registration statement on Form S-1
(or comparable form allowed to be used in connection with an initial public
offering of securities) under the Securities Act of 1933, as amended. This
Contract may be terminated effective as of the end of any fiscal quarter of the
Company on or after March 31, 1996 if ECT provides written notice of its
election to terminate the Contract to the Company not less than 30 days before
the date on which such termination is to be effective.
(b) Notwithstanding any other provision of this Contract, if, in
connection with any transfer by ECT or an Affiliate (including JEDI) of its
equity investment in the Company or the General Partner, JEDI or an Affiliate
conveys to any party who is not an Affiliate the right to designate a
representative on the board of directors pursuant to the voting and
shareholders agreement among the shareholders of the General Partner (the
"Board Rights") or otherwise agrees to exercise such Board Rights to designate
a representative who is not an employee of ECT or an Affiliate, then this
Contract and any right to fees provided for hereunder shall terminate.
(c) Upon termination of this Contract, neither party will have any
further obligation under this Contract, except for (i) the Company's obligation
to pay to ECT the fees then due pursuant to Paragraph 3, which shall continue
after such termination until such amounts are paid in full, and (ii) the
Company's or ECT's obligation to provide the indemnities contained in Paragraph
4, which shall continue in effect for a period of three years after such
termination.
3. Advisement Fee.
(a) ECT shall be entitled to an annual fee for its services provided
during the period from the effective date of this Contract until the date of
its termination (the "Contract Period"). The fee for the first annual period
shall be $300,000, payable as follows: (1) $200,000 payable in advance on the
date hereof, and (2) the remaining $100,000 due and payable by the Company
quarterly in arrears, on the last day of each fiscal quarter of the Company
beginning on March 31, 1996; provided that, such fees shall be subject to
reduction or rebate as provided in subparagraph (b). Thereafter, the fee for
each subsequent annual period shall be $100,000 payable quarterly in arrears,
on the last day of each fiscal quarter of the Company (in each case pro-rated
for any portion of a year), subject to reduction as provided in subparagraph
(b).
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(b) If before the first anniversary of this Agreement, JEDI or an
Affiliate of JEDI transfers (other than a transfer to another Affiliate of
JEDI) the limited partnership interests in the Company acquired as of the date
of this Agreement, then concurrently with such sale or other disposition, ECT
shall rebate to Titan one-half of the $200,000 advance payment of the first
annual fee due hereunder and one-half of the remaining $100,000 of the first
annual fee due hereunder, but only to the extent actually paid to ECT before
the date of such sale or other disposition. If at any time JEDI or an
Affiliate of JEDI transfers any of its limited partnership interests in the
Company (other than a transfer to another Affiliate of JEDI), then the annual
fee shall be reduced by a proportion, the numerator of which is equal to the
immediate number of Units of limited partnership interests in the Company then
transferred by JEDI and its Affiliates and the denominator of which is equal to
the number of Units of limited partnership interests in the Company held by
JEDI and its Affiliates immediately prior to such transfer.
4. Indemnification. In consideration of the services performed and
to be performed by ECT for the Company, and for other good and valuable
consideration, the Company and ECT hereby agree as follows:
(a) The Company shall indemnify and hold harmless ECT its affiliates
and affiliated entities, each of its partners, officers, employees, agents and
each person, if any, who "controls" ECT (within the meaning of the federal
securities laws) (collectively the "Indemnified Parties" and individually, an
"Indemnified Party") from and against any and all actions or claims and any and
all losses, claims, damages, liabilities, costs or expenses (including, without
limitation, reasonable attorneys' fees and any legal or other expenses in
giving testimony or furnishing documents in response to a subpoena or otherwise
or the costs of investigating, preparing or defending any action or claim,
whether or not in connection with any action or litigation in which any
Indemnified Party is a party), joint or several, to which any Indemnified Party
may become subject under the Securities Act of 1933 or any other federal or
state securities law or otherwise as and when incurred, directly or indirectly,
caused by, relating to, based upon or arising out of any matter related to this
Contract, including, without limitation, any act or omission by ECT in
connection with its role as advisor and its acceptance of or the performance
or non-performance of its obligations under this Contract.
(b) The indemnity provided for in subparagraph (a) above shall cover
any loss, claim, damage, liability, cost or expense incurred by an Indemnified
Person REGARDLESS OF THE ORDINARY NEGLIGENCE OF SUCH INDEMNIFIED PERSON, but
shall not cover any loss, claim, damage, liability, cost or expense to the
extent it is found in a final judgment by a court of competent jurisdiction
(not subject to further appeal) to have resulted from an Indemnified Party's
gross negligence or willful misconduct.
(c) The indemnity provided for in subparagraph (a) shall be in
addition to any liability that the Company may otherwise have to the
Indemnified Parties and shall be subject to the following:
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(i) Promptly after receipt by an Indemnified Party under
subparagraph (a) above of notice of the commencement of any action,
proceeding, investigation or other event with respect to which any
Indemnified Party demands indemnification hereunder, such Indemnified
Party shall, if a claim in respect thereof is to be made against the
Company, notify the Company in writing of the commencement thereof,
provided that the failure to so notify the Company shall not relieve it
from any liability that it may have to any Indemnified Party, except to
the extent the Company is prejudiced by such failure.
(ii) Notwithstanding anything expressed or implied herein to the
contrary, the indemnity provided for herein shall cover the amount of
any settlements entered into in connection with any claim for which an
Indemnified Party may be indemnified hereunder, if and only if such
settlement is consented to by the Company.
(iii) No settlement binding on an Indemnified Party may be made
without the consent of such Indemnified Party (which consent shall not
be unreasonably withheld).
(iv) If the claim for indemnification arises out of a claim for
damages by a person other than an Indemnified Party, the Company, after
giving notice to the Indemnified Party, may undertake to defend or
settle such claim for damages and may employ counsel for such purpose.
The Indemnified Party, at its own expense, shall have the right to
employ separate counsel with respect to such claim and to participate
in, but not control, such settlement or defense; provided that, if the
Company is also a defendant in respect of any such claim and a potential
conflict exists between the interests of the Company and those of an
Indemnified Party or if the Company does not elect to undertake the
settlement or defense of such claim, the Indemnified Parties shall, at
the expense of the Company, have the right to employ not more than one
counsel to represent the Indemnified Parties with respect to such claim
and the Indemnified Parties may control any settlement or defense
applicable to the claims brought against such Indemnified Parties.
(v) Expenses and other costs incurred by an Indemnified Party in
connection with any suit, action or other proceeding relating to this
Contract shall be advanced by the Company to such Indemnified Party
prior to any final determination of whether an Indemnified Party is
entitled to be indemnified for such costs and expenses hereunder, if the
Indemnified Party provides to the Company an undertaking to return any
amounts so received to the extent that it is ultimately determined that
he was not entitled to be indemnified for such costs and expenses
hereunder.
(vi) In order to provide for just and equitable contribution,
if a claim for indemnification is made hereunder but a court of
competent jurisdiction finds in a final judgment (not subject to appeal)
that such indemnification may not be enforced in such case, even though
the express provisions hereof provide for indemnification, then in such
case, the Company on the one hand, and the Indemnified Parties on the
other hand, shall contribute to the losses, claims, damages, liabilities
or costs so that the Indemnified Parties
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are responsible in the aggregate for a percentage of the losses, claims,
damages, liabilities or costs equal to a fraction, the numerator of
which is the fees (but not expenses) previously received by ECT pursuant
to Paragraph 3 of this Contract, and the denominator of which is the sum
of total aggregate amount of all consideration received by the Company
in respect of transactions giving rise to such claim for
indemnification, or, if no such transaction exists or has not been
completed, the fair market value of the outstanding units of the
Company's partnership interests on the date hereof, and the Company
shall be responsible for the remainder of such losses, claims, damages,
liabilities or costs; provided, however, that if such allocation is not
permitted by applicable law then the relative fault of the Company, on
the one hand, and the Indemnified Parties, on the other hand, in
connection with the statements, acts or omissions that resulted in such
losses, claims, damages, liabilities or costs and relevant equitable
considerations shall also be considered. No person found liable for a
fraudulent misrepresentation shall be entitled to contribution from any
person who is not also found liable for such fraudulent
misrepresentation. Notwithstanding the foregoing, the Indemnified
Parties, in the aggregate, shall not be obligated to contribute any
amount hereunder that exceeds the amount of fees (but not expenses) ECT
received previously pursuant to this Contract.
(vii) The Company agrees that the Indemnified Parties shall not
have any liability (whether direct or indirect, in contract, tort or
otherwise) to the Company for or in connection with any matter related
to this Contract, except for liabilities or expenses that are found in a
final judgment by a court of competent jurisdiction (not subject to
further appeal) to have resulted primarily and directly from ECT or such
other Indemnified Party's gross negligence or willful misconduct.
(d) If it is found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) in a proceeding in which a claim
for indemnification has been made by an Indemnified Party, that the Company has
sustained any loss, claim, damage, liability, cost or expense resulting
directly and exclusively from ECT's gross negligence or willful misconduct in
connection with the performance or non-performance by ECT of its obligations
under this Contract, then ECT shall indemnify and hold harmless the Company for
the amount of any such loss, claim, damage, liability, costs or expense so
determined to have been sustained by the Company.
5. GOVERNING LAW. THE VALIDITY AND INTERPRETATION OF THIS CONTRACT
SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF TEXAS APPLICABLE TO
CONTRACTS MADE AND TO BE FULLY PERFORMED THEREIN.
6. Successors and Assigns. The benefits of this Contract shall
inure to the parties hereto, their respective successors and permitted assigns,
and to the indemnified parties hereunder and their successors and
representatives, and the obligations and liabilities assumed in this Contract
by the parties hereto shall be binding upon their respective successors and
assigns. This
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Contract may not be assigned by any party to an unaffiliated party without the
express written consent of the other party hereto.
7. Notices. All communications under this Contract shall be in
writing and shall be delivered personally or sent by personal delivery,
expedited delivery, certified mail, return receipt requested or by telecopy as
follows:
If to ECT:
ECT Securities Corp.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
If to the Company:
Titan Resources, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Either party may change its address or telecopy number set forth above
by giving the other party notice of such change in accordance with the
provisions of this Paragraph 7. A notice shall be deemed given, if by personal
delivery or expedited delivery service, on the date of such delivery to such
address, if by certified mail, on the date shown on the applicable return
receipt, or if by telecopy, on the date of receipt of the transmission of such
notice at such telecopy number.
8. Nature of Relationship. The parties hereto intend that ECT's
relationship to the Company and the relationship of each employee or agent of
ECT to the Company shall be that of an independent contractor. Nothing
contained in this Contract shall constitute or be construed to be or create a
partnership or joint venture between ECT and the Company or their respective
successors or assigns. Neither ECT nor any partner, employee or agent of ECT
shall ever be considered to be an employee of the Company.
9. Captions. The Paragraph titles herein are for reference purposes
only and do not control or affect the meaning or interpretation of any term or
provision hereof.
10. Amendments. No alteration, amendment, change or addition hereto
shall be binding or effective unless the same is set forth in writing signed by
a duly authorized representative of each party.
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11. Partial Invalidity. If the final determination of a court of
competent jurisdiction declares, after the expiration of the time within which
judicial review (if permitted) of such determination may be perfected, that any
term or provision hereof is invalid or unenforceable, (i) the remaining terms
and provisions hereof shall be unimpaired and (ii) the invalid or unenforceable
term or provision shall be replaced by a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid
or unenforceable term or provision.
12. Survival. All representations, warranties and agreements
contained herein, or contained in certificates submitted pursuant to this
Contract, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any party hereto, and shall survive the
execution and delivery hereof.
13. Entire Contract. This Contract and the exhibits hereto embody
the entire agreement and understanding of the parties and supersede any and all
prior agreements, arrangements and understandings relating to matters provided
for herein.
14. Counterparts. This Contract may be executed in one or more
counterparts, each of which shall be an original, but all of which together
shall be considered one and the same agreement.
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This Contract is executed as of the date first written above by a duly
authorized representative of each of the Company and ECT.
COMPANY
TITAN RESOURCES, L.P.
By: Titan Resources I, Inc.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Title: President
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ECT
ECT SECURITIES CORP.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇.
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇.
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Title: Vice President
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