Exhibit 10.2
Execution Version
Goldman Sachs Credit Partners L.P.
85 Broad Street
New York, New York 10004
COMMITMENT LETTER
PERSONAL AND CONFIDENTIAL
April 18, 2006
Pogo Producing Company
5 Greenway Plaza
P.O. Box 2504
Houston, Texas 77252-2504
Attention: James P. Ulm, II
Senior Vice President and Chief Financial Officer
Ladies and Gentlemen:
We are pleased to confirm the arrangements under which Goldman Sachs Credit Partners L.P. (“GSCP” or the “Administrative Agent”) is exclusively authorized by Pogo Producing Company (the “Company”) to act as sole lead arranger, sole bookrunner, sole syndication agent and administrative agent in connection with the bridge loans described herein, and, together with any other lenders set forth on Schedule I hereto and any entities that become lenders in accordance with the syndication arrangements set forth below (collectively with GSCP, the “Lenders”), commits to provide the bridge loans described herein, in each case, on the terms and subject to the conditions set forth in this letter, the attached Annex A and Annex B (collectively, the “Commitment Letter”) and the Fee Letter (as defined below).
You have informed GSCP that the Company, a Delaware corporation, intends to sign an agreement (the “Acquisition
Agreement”) to acquire by merger (the “Acquisition”) all of the capital stock of a private company code-named Lambada (the “Seller”), as specified in the Acquisition Agreement (the “Acquired Business”). You have also informed us that the total purchase price for the Acquisition (including the refinancing of certain debt of the Acquired Business, but excluding the payment of fees, commissions and expenses in connection with the Acquisition) will be approximately $750.0 million and that the Acquisition will be financed with (i) the issuance by the Company of up to $500.0 million in aggregate principal amount of debt, equity or equity-linked securities (the “Permanent Securities”) or, in the event the Permanent Securities are not issued at the time the Acquisition is consummated, borrowings by the Company of up to $500.0 million under senior unsecured increasing rate bridge loans (the “Bridge Loans”) having the terms of set forth in Annex B and (ii) borrowings by the Company of up to $375.0 million under its existing credit agreement, dated as of December 16, 2004, as amended on August 31, 2005, among the Company, as borrower, certain commercial lending institutions, as the lenders, and Bank of Montreal, acting through its Chicago, Illinois branch, as the administrative agent (the “Credit Facility”). On the Closing Date (as defined below), neither the Company nor any of its subsidiaries will have any debt for borrowed money or equity outstanding, except for (i) debt and equity outstanding as of the date hereof, (ii) borrowings not to exceed an amount to be agreed upon under the Credit Facility, (iii) equity issued to management and employees of the Company pursuant to existing equity compensation plans or (iv) as described in this paragraph. In addition, the Acquired Business will have permanently repaid all of its indebtedness on or before the Closing Date.
1. Commitment. GSCP is pleased to confirm its commitment to act as sole lead arranger and sole bookrunner to provide the Company with structuring advice in connection with the Bridge Loans, to act as sole syndication agent to provide the Company with syndication advice in connection with the Bridge Loans and to act as administrative agent for the Bridge Loans. Each of the Lenders is pleased to confirm its commitment (each, a “Commitment” and, collectively, the “Commitments”), severally and not jointly, to provide the Bridge Loans having the terms set forth on Annex B, in each case, on the terms and subject to the conditions contained in this Commitment Letter and the Fee Letter. The Commitment of each Lender individually is set forth opposite its name on Schedule 1 hereto; all of the Commitments together equal up to $500.0 million. The Company agrees that the Lenders will have the exclusive right during the term of this Commitment Letter to provide any bridge or interim financing utilized by the Company or any of its affiliates to finance any portion of the Acquisition.
Each Lender’s commitment is subject, in its discretion, to the conditions set forth in Annex B hereto and there not having occurred any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders’ equity or results of operations of the Company or the Acquired Business and their respective subsidiaries since December 31, 2005 (the date of the most recent audited financial statements for the Company and the Acquired Business, respectively, furnished by the Company to GSCP). Each Lender’s commitment is also subject, in its discretion, to the satisfactory negotiation, execution and delivery of appropriate definitive documentation relating to the Bridge Loans, including, without limitation, a bridge loan agreement (the “Bridge Loan Agreement”), to be based upon and substantially consistent with the terms set forth in this Commitment Letter. Our commitment is also conditioned upon and made subject to our not becoming aware after the date hereof of any new or inconsistent information or other matter not previously disclosed to us relating to the Company, the Acquired Business or the Acquisition or the transactions contemplated by this Commitment Letter, which GSCP, in its reasonable judgment, deems material and adverse relative to the information or other matters disclosed to us prior to the date hereof
2. Fees and Expenses. The fees for these services are set forth in a separate letter (the “Fee Letter”), dated as of the date hereof, entered into by the Lenders and the Company. In addition, pursuant to an engagement letter (the “Engagement Letter”), dated as of the date hereof, between the Company and Goldman, Sachs & Co. (“Goldman Sachs”), the Company has, among other things, offered Goldman Sachs the right to act (or to have one of its affiliates act) as the sole placement agent, sole purchaser or sole underwriter in connection with the sale of the Permanent Securities.
3. Syndication. GSCP intends and reserves the right to syndicate the Commitments and/or the Bridge Loans to other Lenders, commencing on the earlier of 30 days after the Closing Date and June 30, 2006 (or at any time during which the Company is not diligently pursuing the issuance of Permanent Securities or cooperating with GSCP in accordance with Section 4). GSCP will select the Lenders after consultation with the Company. GSCP will lead the syndication, including determining the timing of all offers to potential Lenders and the acceptance of Commitments, any title of agent or similar designations or roles awarded to Lenders, the amounts offered and the compensation provided to each Lender from the amounts to be paid to GSCP pursuant to the terms of this Commitment Letter and the Fee Letter. GSCP will determine the final Commitment allocations and will notify the Company of such determinations. The Company agrees to use all commercially reasonable efforts to ensure that
GSCP’s syndication efforts benefit from the existing lending relationships of the Company. To facilitate an orderly and successful syndication of the Bridge Loans, you agree that, until the later of the termination of the syndication as determined by GSCP and 120 days following the date of initial funding under the Bridge Loans (the “Closing Date”), the Company will not, and will use commercially reasonable efforts to cause the Acquired Business to agree that it will not, syndicate or issue, attempt to syndicate or issue, announce or authorize the announcement of the syndication or issuance of, or engage in discussions concerning the syndication or issuance of, any debt facility or debt or preferred equity security of the Company or any of its affiliates (other than the Bridge Loans, any Permanent Securities and other indebtedness contemplated hereby), including any renewals or refinancings of any existing debt facility or debt or preferred equity security, without the prior written consent of GSCP.
4. Cooperation. The Company agrees to cooperate with GSCP, and to cause the Acquired Business to cooperate with GSCP, in each case commencing promptly after the Closing Date, in connection with (i) the preparation of an information package regarding the business, operations, financial projections and prospects of the Company and the Acquired Business, including, without limitation, the delivery of all information relating to the transactions contemplated hereunder prepared by or on behalf of the Company or the Acquired Business deemed reasonably necessary by GSCP to complete the syndication of the Commitments and/or the Bridge Loans (including, without limitation, obtaining and maintaining a credit rating by Moody’s Investor Services, Inc. (“Moody’s”), and Standard & Poor’s Ratings Group, a division of The McGraw Hill Corporation (“S&P”)) and (ii) the presentation of an information package acceptable in format and content to GSCP in meetings and other communications with prospective Lenders in connection with the syndication of the Commitments and/or the Bridge Loans (including, without limitation, direct contact between senior management and representatives of the Company with prospective Lenders and participation of such persons in meetings). The Company will be solely responsible for the contents of any such information package and presentation and acknowledge that GSCP will be using and relying upon the information contained in such information package and presentation without independent verification thereof. The Company agrees that information regarding the Bridge Loans and information provided by the Company, the Acquired Business or their respective representatives to GSCP in connection with the Bridge Loans (including, without limitation, draft and execution versions of the Loan Documents, publicly filed financial statements, and draft or final offering materials relating to contemporaneous or prior securities issuances by the Company or the Acquired Business) may be disseminated to potential Lenders and other persons through one or more internet sites (including an IntraLinks workspace) created for purposes of syndicating the Bridge Loans or otherwise, in accordance with GSCP’s standard syndication practices (including hard copy and via electronic transmissions). Without limiting the foregoing, the Company authorizes the use of its logos in connection with any such dissemination,
At the request of GSCP, the Company agrees to prepare a version of the information package and presentation that does not contain material non-public information concerning the Company or the Acquired Business, their respective affiliates or their securities. In addition, the Company agrees that unless specifically labeled “Private—Contains Non-Public Information,” no information, documentation or other data disseminated to prospective Lenders in connection with the syndication of the Bridge Loans, whether through an internet site (including, without limitation, an IntraLinks workspace), electronically, in presentations at meetings or otherwise, will contain any material non-public information concerning the Company or the Acquired Business, their respective affiliates or their securities.
The Company represents and covenants that (i) all information (other than forward-looking statements and data, including projections) provided directly or indirectly by the Company to GSCP or the Lenders in connection with the transactions contemplated hereunder is and will be, when taken as a whole, complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they were made, not misleading and (ii) the projections that have been or will be made available to GSCP or the Lenders by the Acquired Business or the Company have been and will be prepared in good faith based upon assumptions that are believed by the preparer thereof to be reasonable at the time made. You agree that if at any time prior to the Closing Date, any of the representations in the preceding sentence would be incorrect in any material respect if the information and projections were being furnished, and such representations were being made, at such time, then you will promptly supplement, or cause to be supplemented, the information and projections so that such representations will be correct in all material respects under those circumstances.
5. Annex A. In connection with arrangements such as this, it is our firm’s policy to receive indemnification. The Company agrees to the provisions with respect to our indemnity and other matters set forth in Annex A, which is incorporated by reference into this Commitment Letter,
This Commitment Letter may not be assigned by you without the prior written consent of GSCP (and any purported assignment without such consent will be null and void), is intended to be solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto. GSCP may assign its Commitment hereunder, in whole or in part, to any of its affiliates or to any Lender, and upon such assignment, GSCP will be released from the portion of its Commitment hereunder that has been assigned. This Commitment Letter (including the Annexes hereto) may not be amended or any term or provision hereof or thereof waived or modified, except by an instrument in writing signed by each of the parties hereto, and any term or provision hereof or thereof may be amended or waived only by a written agreement executed and delivered by all parties hereto.
GSCP hereby notifies the Company and the Acquired Business that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”) it and each Lender may be required to obtain, verify and record information that identifies the Company and the Acquired Business, which information includes the name and address of the Company and the Acquired Business and other information that will allow GSCP and each Lender to identify the Company and the Acquired Business in accordance with the Act. This notice is given in accordance with the requirements of the Act and is effective for GSCP and each Lender.
6. Confidentiality. Please note that this Commitment Letter, the Fee Letter and any written or oral advice provided by GSCP in connection with this arrangement are exclusively for the information of the Company and may not be disclosed to any third party or circulated or referred to publicly without our prior written consent, except, after providing written notice to GSCP, pursuant to a subpoena or order issued by a court of competent jurisdiction or by a judicial, administrative or legislative body or committee. In addition, we hereby consent to your disclosure of (i) this Commitment Letter, the Fee Letter and such advice to the Company’s officers, directors, agents and advisors who are directly involved in the consideration of the Bridge Loans to the extent such persons agree to hold the same in confidence, (ii) this Commitment Letter or the information contained herein (but not the Fee Letter or the information
contained therein) to the Acquired Business and the Seller to the extent you notify such persons of their obligations to keep such material confidential, and to the Acquired Business’s and the Seller’s respective officers, directors, agents and advisors who are directly involved in the consideration of the Bridge Loans; provided that you use commercially reasonable efforts to cause such persons to agree to hold the same in confidence, (iii) this Commitment Letter and the Fee Letter as required by applicable law (including regulations promulgated by the Securities and Exchange Commission and rules of the New York Stock Exchange) or compulsory legal process (in which case you agree to inform us promptly thereof) and (iv) the information contained in this Commitment Letter in any prospectus or other offering memorandum relating to the Permanent Securities, The provisions of this paragraph shall survive any termination or completion of the arrangement provided by this Commitment Letter.
7. Additional Matters. As you know, GSCP may from time to time effect transactions, for its own account or the account of customers, and hold positions in loans or options on loans of the Company, the Acquired Business and other companies that may be the subject of this arrangement. In addition, Goldman Sachs is a full service securities firm and as such may from time to time effect transactions, for its own account or the account of customers, and hold positions in securities or options on securities of the Company, the Acquired Business and other companies that may be the subject of this arrangement. Each of GSCP and Goldman Sachs may have economic interests that conflict with those of the Company. You acknowledge that the transactions contemplated by this Commitment Letter and the Fee Letter are arms-length commercial transactions and that each of GSCP and Goldman Sachs is acting as principal and in its own best interests. The Company is relying on its own experts and advisors to determine whether the transactions contemplated by this Commitment Letter and the Fee Letter are in the Company’s best interests. You agree that each of GSCP and Goldman Sachs will act under this Commitment Letter and the Fee Letter as an independent contractor and that nothing in this Commitment Letter, the Fee Letter, the nature of our services, or in any prior relationship will be deemed to create an advisory, fiduciary or agency relationship between GSCP or Goldman Sachs, on the one hand, and the Company, its stockholders or its affiliates, on the other hand. In addition, GSCP may employ the services of its affiliates in providing certain services hereunder and may exchange with such affiliates information concerning the Company, the Acquired Business and other companies that may be the subject of this arrangement, and such affiliates shall be entitled to the benefits afforded to GSCP hereunder.
The Commitments hereunder will terminate upon the first to occur of (i) the consummation of the Acquisition, (ii) the abandonment or termination of the Acquisition Agreement, (iii) a material breach by the Company under this Commitment Letter, the Fee Letter or the Engagement Letter and (iv) June 30, 2006, unless the closing of the Bridge Loans, on the terms and subject to the conditions contained herein, shall have been consummated prior to such date. In addition, the Commitment hereunder will terminate upon the closing of the sale of the Permanent Securities,
In addition, please note that GSCP, Goldman Sachs and their affiliates do not provide accounting, tax or legal advice. Notwithstanding anything herein to the contrary, the Company (and each employee, representative or other agent of the Company) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the offering and all materials of any kind (including opinions or other tax analyses) that are provided to the Company relating to such tax treatment and tax structure. However, any information relating to the tax treatment or tax structure shall remain subject to the confidentiality provisions hereof (and the foregoing sentence shall not apply) to the extent reasonably necessary to enable the
parties hereto, their respective affiliates, and their and their respective affiliates’ directors and employees to comply with applicable securities laws. For this purpose, “tax treatment” means US federal or state income tax treatment, and “tax structure” is limited to any facts relevant to the US federal income tax treatment of the transactions contemplated by this Commitment Letter but does not include information relating to the identity of the parties hereto or any of their respective affiliates.
All payments under this Commitment Letter (including Annex A and Annex B) and the Fee Letter will be made in U.S. dollars and without withholding or deduction of any tax, assessment or other governmental charge (collectively, “Tax”) unless required by law; and if the Company will be required to deduct or withhold any Tax, or if any Tax is required to be paid by any Lender solely on account of services performed hereunder or under the Fee Letter, the Company will pay to such Lender such additional amounts as will be required so that the net amount received by such Lender from the Company after such deduction, withholding or payment will equal the amounts otherwise due to such Lender hereunder or under the Fee Letter, as applicable.
This Commitment Letter may be executed in any number of counterparts, each of which when executed will be an original, and all of which, when taken together, will constitute one agreement. Delivery of an executed counterpart of a signature page of this Commitment Letter by facsimile transmission will be effective as delivery of a manually executed counterpart hereof. This Commitment Letter, the Fee Letter and the Engagement Letter are the only agreements that have been entered into among the parties hereto with respect to the Bridge Loans and set forth the entire understanding of the parties with respect thereto and supersede any prior written or oral agreements among the parties hereto with respect to the Bridge Loans.
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Please confirm that the foregoing is in accordance with your understanding by signing and returning to GSCP the enclosed copies of this Commitment Letter, together, if not previously executed and delivered, with the Fee Letter and the Engagement Letter on or before the close of business on the date hereof, whereupon this Commitment Letter, the Fee Letter and the Engagement Letter shall become binding agreements between us. If not signed and returned by that time, this offer will terminate at that time. We look forward to working with you on this transaction.
Very truly yours,
GOLDMAN SACHS CREDIT PARTNERS L.P. |
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By: | /s/ William W. Archer | |
| Authorized Signatory | |
| Confirmed as of the date above: |
| |
| POGO PRODUCING COMPANY |
| |
| By: | /s/ James P. Ulm, II |
| | Name: | James P. Ulm, II |
| | Title: | SVP & CFO |
SCHEDULE 1
(in millions)
Lender | | Commitment | |
Goldman Sachs Credit Partners L.P. | | $ | 500.0 | |
Total | | $ | 500.0 | |
Annex A
In the event that any of the Lenders or the Administrative Agent (each, an “Indemnified Party”) becomes involved in any capacity in any action, proceeding or investigation brought by or against any person, including stockholders, partners or other equity holders of the Company or the Acquired Business, in connection with or as a result of either this arrangement or any matter referred to in this Commitment Letter or the Fee Letter (together, the “Letters”), the Company periodically will reimburse such Indemnified Party for its reasonable legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith. The Company also will indemnify and hold each Indemnified Party harmless against any and all losses, claims, damages or liabilities to any such person in connection with or as a result of either this arrangement or any matter referred to in the Letters and without regard to the exclusive or contributory negligence of any of the Indemnified Parties, except to the extent that such have been found by a final, non-appealable judgment of a court that any such loss, claim, damage or liability results from the gross negligence, willful misconduct or bad faith of such Indemnified Party in performing the services that are the subject of the Letters. If for any reason the foregoing indemnification is unavailable to any Indemnified Party or insufficient to hold it harmless, then the Company shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative economic interests of the Company and the Acquired Business and their respective affiliates, stockholders, partners or other equity holders, on the one hand, and such Indemnified Party, on the other hand, in the matters contemplated by the Letters as well as the relative fault of the Company and the Acquired Business and their respective affiliates, stockholders, partners or other equity holders, on the one hand, and such Indemnified Party, on the other hand, with respect to such loss, claim, damage or liability and any other relevant equitable considerations. The reimbursement, indemnity and contribution obligations of the Company under this paragraph shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any affiliate of any Indemnified Party and the partners, directors, agents, employees and controlling persons (if any), as the case may be, of such Indemnified Party and any such affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company, such Indemnified Party, any such affiliate and any such person. The Company also agrees that neither any Indemnified Party nor any of such affiliates, partners, directors, agents, employees or controlling persons shall have any liability based on its or their exclusive or contributory negligence or otherwise to the Company, the Acquired Business or any person asserting claims on behalf of or in right of the Company, the Acquired Business or any other person in connection with or as a result of either this arrangement or any matter referred to in the Letters, except in the case of the Company, to the extent that any losses, claims, damages, liabilities or expenses incurred by the Company or its affiliates, stockholders, partners or other equity holders have resulted from the gross negligence, willful misconduct or bad faith of such Indemnified Party in performing the services that are the subject of the Letters; provided, however, that in no event shall such Indemnified Party or such other parties have any liability for any indirect, consequential or punitive damages in connection with or as a result of such Indemnified Party’s or such other parties’ activities related to the Letters, Any right to trial by jury with respect to any action or proceeding arising in connection with or as a result of either this arrangement or any matter referred to in the Letters is hereby waived by the parties hereto. The Company agrees that any suit or proceeding arising in respect to this agreement or our engagement will be tried exclusively in the U.S. District Court for the Southern District of New York or, if that court does not have subject matter jurisdiction, in any state court located in the City of New York, and the Company agrees to submit to the jurisdiction of, and to venue in, such courts. The provisions of this Annex A shall
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survive any termination or completion of the arrangement provided by the Letters, and this Commitment Letter shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws.
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