CO-SALE AGREEMENT
THIS CO-SALE AGREEMENT (this "AGREEMENT") is made and entered into as of
this 4th day of May, 1998, by and among Cliffwood Oil & Gas Corp., a Texas
corporation (the "COMPANY"), Cliffwood Acquisition - 1998 Limited Partnership, a
Texas limited partnership (the "PARTNERSHIP"), Energy Capital Investment Company
PLC, an English investment company ("ENERGY PLC"), and EnCap Equity 1996 Limited
Partnership, a Texas limited partnership ("ENCAP 96") (with Energy PLC and EnCap
96 sometimes being herein called the "LIMITED PARTNERS").
RECITALS:
A. Contemporaneously with the execution and delivery of this Agreement,
the Company and the Limited Partners are executing and delivering that certain
First Amended and Restated Agreement of Limited Partnership of the Partnership
dated as of even date herewith (the "PARTNERSHIP AGREEMENT"). The Company is the
sole general partner of the Partnership and the Limited Partners are the limited
partners of the Partnership.
B. Under, and subject to the terms of, the Partnership Agreement, the
Company has agreed that if it or an Affiliate (as defined in the Partnership
Agreement) proposes to participate, either directly or indirectly or by itself
or with others, in the acquisition, exploitation and/or development of a Subject
Property (as defined in the Partnership Agreement), the Company shall propose
that the Partnership also participate in such acquisition, exploitation and/or
development.
C. If the Partnership elects to participate in a Subject Property with
the Company or an Affiliate thereof as provided in the Partnership Agreement,
the parties hereto desire to provide the Partnership with certain rights in the
event the Company or an Affiliate thereof thereafter elect to sell or otherwise
dispose of its interest in such Subject Property.
D. The Company acknowledges and affirms that it recognizes the Limited
Partners would not be willing to execute and deliver the Partnership Agreement
without the covenants and agreements of the Company herein and that the Company
is therefore executing and delivering this Agreement to induce the Limited
Partners to execute and deliver the Partnership Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing Recitals and the
mutual covenants and agreements contained herein and in the Partnership
Agreement, the sufficiency of which is hereby acknowledged and confirmed, the
parties hereto, intending to be legally bound, do hereby agree as follows:
1. RIGHT TO JOIN IN SALE.
If the Company and/or any Affiliate thereof (the "SELLING PARTY",
whether one or more) proposes to sell, dispose of or otherwise transfer all or a
portion of its interest in a Subject Property (the "SUBJECT INTEREST"), the
Selling Party shall refrain from effecting such transaction unless, prior to the
consummation thereof, the Partnership shall have been afforded the opportunity
to join in such sale on the basis hereinafter described. Prior to the
consummation of any proposed sale, disposition or transfer of the Subject
Interest, the Selling Party shall cause the person or entity that proposes to
acquire the Subject Interest (the "PROPOSED PURCHASER") to make an offer (the
"PURCHASE OFFER") in writing to the Partnership to purchase the Pro Rata
Percentage (as defined below) of the Subject Property owned by the Partnership
(and the Company or the Partnership shall immediately forward to the Limited
Partners a copy of any Purchase Offer). As used in the immediately preceding
sentence, the term "PRO RATA PERCENTAGE" shall refer to that percentage of the
Selling Party's total interest in the Subject Property that the Proposed
Purchaser proposes to purchase. Such purchase shall be made on the same price
(as adjusted for the relative interests in the Subject Property to be
transferred) and other terms and conditions as the Proposed Purchaser has
offered with respect to the Subject Interest. The Partnership shall have 30 days
from the date of receipt of the Purchase Offer in which to accept such Purchase
Offer, and the closing of such purchase shall occur contemporaneously with the
purchase and sale of the Subject Interest. The parties hereto agree that the
determination of whether the Partnership shall accept a Purchase Offer shall be
made solely by the Limited Partners.
2. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Partnership and the Limited Partners, and the Partnership and
each Limited Partner hereby severally represents and warrants to the Company as
follows:
(a) It is duly formed and validly existing under the laws of the
jurisdiction of its formation.
(b) It has the requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder.
(c) The execution, delivery and performance by it of this Agreement has
been duly and validly authorized.
(d) The execution, delivery and performance by it of this Agreement is
within its powers and will not (i) be in contravention of or violate any
provisions of its articles of incorporation, bylaws, partnership agreement or
other governing documents, as amended to the date hereof, or (ii) be in
contravention of or result in any breach or constitute a default under any
applicable law, rule, regulation, judgment, license, permit or order or any
loan, note or other agreement or instrument to which it is a party or by which
it or any of its properties are bound.
(e) Upon delivery of this Agreement by all of the parties hereto, this
Agreement will have been duly and validly executed and will be binding upon it
and enforceable in accordance with its terms.
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3. NOTICES. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or sent
by reputable express courier service (charges prepaid), or mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid, or sent by telefax, to the parties at the following address (or to such
other address or to the attention of such other person as the recipient party
has specified by prior like notice to the sending party):
IF TO THE COMPANY OR THE PARTNERSHIP:
-------------------------------------
c/o Cliffwood Oil & Gas Corp.
110 Cypress Station Drive, Suite 220
Houston, Texas 77090
Telecopier No.: (281)537-8324
Attention: Frank A. Lodzinski, President
IF TO THE LIMITED PARTNERS:
---------------------------
c/o EnCap Investments L.C.
1100 Louisiana
Suite 3150
Houston, Texas 77002
Telecopier No.: (713)659-6130
Attention: Robert L. Zorich, Managing Director
4. AMENDMENTS. This Agreement may be changed, modified, or amended only
by an instrument in writing duly executed by the parties hereto.
5. ENTIRE AGREEMENT. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof.
6. NO WAIVER. The failure of any party to insist upon strict performance
of any obligation hereunder, irrespective of the length of time for which such
failure continues, shall not be a waiver of such part's right to demand strict
compliance in the future. No consent or waiver, express or implied, to or of any
breach or default in the performance of any obligation hereunder shall
constitute a consent or waiver to or of any other breach or default in the
performance of the same or any other obligation hereunder.
7. APPLICABLE LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGA
TIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND INTERPRETED, CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
8. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
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9. REFERENCES. All references in this Agreement to sections, subsections
and other subdivisions refer to corresponding sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. 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 herein. 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. Words in the singular form shall be construed to
include the plural and VICE VERSA, unless the context otherwise requires and
pronouns in masculine, feminine and neuter genders shall be construed to include
any other gender.
10. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CLIFFWOOD OIL & GAS CORP.
By:_____________________________
Name: Frank A. Lodzinski
Title: President
CLIFFWOOD ACQUISITON - 1998 LIMITED
PARTNERSHIP
By: CLIFFWOOD OIL & GAS CORP.,
General Partner
By:_____________________________
Name: Frank A. Lodzinski
Title: President
ENERGY CAPITAL INVESTMENT
COMPANY PLC
By: ____________________________
Name: Gary R. Petersen
Title: Director
ENCAP EQUITY 1996 LIMITED
PARTNERSHIP
By: ENCAP INVESTMENTS L.C.
By:_____________________________
Name: Robert L. Zorich
Title: Managing Director
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