1
EXHIBIT 10.25
INTER-PURCHASER AGREEMENT
This Inter-Purchaser Agreement (this "Agreement") dated as of December
28, 1994, is entered into by and among Walter International, Inc., a Texas
corporation ("Walter"), Walter Congo Holdings, Inc., a Texas corporation
("Walter Holdings"), Walter International Congo, Inc., a Texas corporation
("Old Walter Congo"), Nuevo Energy Company, a Delaware corporation ("Nuevo"),
The Congo Holding Company, a Texas corporation ("Nuevo Holdings"), and The
Nuevo Congo Company, a Texas corporation ("Old Nuevo Congo").
1. INTRODUCTION.
1.1 On June 30, 1994, Walter entered, and caused its indirect
subsidiary Old Walter Congo to enter, and Nuevo entered and caused its indirect
subsidiary, Old Nuevo Congo, to enter, into that certain Stock Purchase
Agreement (the "Purchase Agreement") with Amoco Production Company ("Amoco").
Pursuant to the Purchase Agreement, Old Walter Congo will merge with and into
Amoco Congo Exploration Company, a Delaware corporation ("ACE"), with ACE as
the surviving entity, and Old Nuevo Congo will merge with and into Amoco Congo
Petroleum Company, a Delaware corporation ("ACP"), with ACP as the surviving
entity (collectively, the "Mergers"). After the Mergers, the name of ACE will
be changed to Walter International Congo, Inc. ("New Walter Congo") and the
name of ACP will be changed to The Nuevo Congo Company ("New Nuevo Congo"). In
this Agreement, any reference to "Walter Congo" shall mean Old Walter Congo
prior to the Mergers and New Walter Congo after the Mergers, and any reference
to "Nuevo Congo" shall mean Old Nuevo Congo prior to the Mergers and New Nuevo
Congo after the Mergers.
1.2 All of the capital stock of Old Nuevo Congo is held by
Nuevo Holdings, prior to the Mergers, and all the capital stock of New Nuevo
Congo will be held by Nuevo Holdings after the Mergers. Nuevo Holdings is a
wholly-owned subsidiary of Nuevo. All of the capital stock of Old Walter Congo
is held by Walter Holdings, prior to the Mergers, and all of the capital stock
of New Walter Congo will be held by Walter Holdings after the Mergers. Walter
Holdings is a wholly-owned subsidiary of Walter.
1.3 ACE owns an undivided 25% interest in the Marine I Joint
Operating Agreement and a like beneficial interest in the Convention and Yombo
Permit. ACP owns an undivided 18.75% interest in the Marine I Joint Operating
Agreement and a like beneficial interest in the Convention and Yombo Permit.
1.4 Nuevo has posted a letter of credit for the benefit of
Amoco on behalf of both of the Purchasers in connection with the letter of
intent dated December 2, 1993, executed by Walter, Nuevo and Amoco; replacement
letters of credit in connection with extensions of the letter of intent; and a
letter of credit for the benefit of Amoco on behalf of both of the Purchasers
as required by Section 5 of the Purchase Agreement. In addition, Nuevo will
post a letter of credit for the benefit of Amoco on behalf of both Purchasers
to secure the Promissory Note as required by Section 3.A(2) of the Purchase
Agreement.
2
1.5 The purpose of this Agreement is to set forth certain
understandings between Walter and certain of its subsidiaries and Nuevo and
certain of its subsidiaries. For good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
set forth herein.
2. DEFINITIONS. Capitalized terms used in this Agreement and not
otherwise defined herein shall have the meanings set forth in the Purchase
Agreement or the Tax Agreement (as defined in the Purchase Agreement). In
addition to the terms defined elsewhere in this Agreement, the following terms
shall have the meaning set forth below, which shall be equally applicable to
both the singular and the plural forms of the terms herein defined:
"Business Day" means any day excluding Saturday, Sunday, or any day
which shall be in Houston, Texas, a legal holiday or a day on which banking
institutions in Houston, Texas are authorized or required by law to close.
"Finance Agreement" shall mean, with respect to Walter Congo, the
Finance Agreement to be entered into between OPIC, Walter Holdings and Walter
Congo and, with respect to Nuevo Congo, the Finance Agreement to be entered
into between OPIC, Nuevo Holdings and Nuevo Congo; and "Finance Agreements"
shall mean both such agreements.
"Interests" shall mean the undivided interests in the Marine I Joint
Operating Agreement and the beneficial interests in the Convention and Yombo
permit.
"Latent ORRI" shall mean those certain contractual obligations of Walter
Congo (or its assigns or successors) as described in Section 6.4.
"Latent Working Interest" shall mean those certain contractual
obligations and rights of Walter Congo (or its assigns or successors) as
described in Section 6.3.
"NOMECO" shall mean NOMECO Oil & Gas Company.
"OPIC Financing" shall mean (i) the loans to be obtained by Nuevo Congo
and Walter Congo for the cash to be paid to Amoco pursuant to the Mergers and
the development of the Yombo Permit and the related guarantee to be provided by
OPIC and (ii) the political risk insurance to be provided by OPIC.
"Promissory Note" shall mean the Promissory Note payable to Amoco to be
delivered by Purchasers pursuant to Section 3.A(2) of the Purchase Agreement.
"Republic" shall mean the Republic of the Congo.
"Walter Congo Note" shall mean that demand promissory note payable to
Nuevo Holdings (or its assigns or successors) delivered by Walter Congo as
described in paragraph 6.1 below.
-2-
3
3. RELATIONSHIP OF THE PARTIES. Walter and Nuevo are causing Old
Walter Congo and Old Nuevo Congo, respectively, to enter into the transactions
contemplated by the Purchase Agreement and to become independent owners of the
capital stock of ACE and ACP, respectively. After the Closing, Walter and
Nuevo will cause Walter Congo and Nuevo Congo, respectively, to own and operate
the interests under the Convention on the same terms and conditions as
currently in force pursuant to the Marine I Joint Operating Agreement. Nothing
contained in this Agreement or the Stock Purchase Agreement shall be deemed to
constitute any of Nuevo, Nuevo Holdings or Nuevo Congo, on the one hand, and
Walter, Walter Holdings or Walter Congo, on the other hand, as a partner, joint
venturer, agent or legal representative of the other or to create any fiduciary
relationship. Except as otherwise expressly provided in the Marine I Joint
Operating Agreement, or the Purchase Agreement, neither Purchaser shall have
any authority to act for or to assume any obligation or responsibility on
behalf of any other Purchaser.
4. TRANSACTION EXPENSES.
4.1 Except as provided in Section 4.2, each of Nuevo and
Walter shall reimburse the other for one-half of all reasonable and customary
expenses incurred by the other (or its respective subsidiaries) that are common
to the parties in connection with the transactions contemplated by the Purchase
Agreement and the OPIC Financing, including, without limitation, (i) all fees
and expenses in connection with the letters of credit posted pursuant to the
letter of intent and the Purchase Agreement prior to the Closing, (ii) all fees
and expenses in connection with the letter of credit posted by Nuevo pursuant
to the Purchase Agreement to secure payment of the Promissory Note described in
Section 3(B)(2) of the Purchase Agreement, but only to the extent that a
party's respective share of the obligations under such Promissory Note remains
unpaid, (iii) all legal and accounting fees and disbursements and fees and
expenses of other advisers retained by it in connection with due diligence,
negotiation, drafting, transition expenses and other similar activities,
whether in the Republic or elsewhere, and (iv) travel and other reasonable
business expenses incurred in connection with the Purchase Agreement.
4.2 Each of Walter and Nuevo shall individually bear and pay
their respective (x) fees and expenses relating to negotiations and agreements
between them, including fees and expenses incurred with respect to this
Agreement, (y) fees and expenses relating to compliance by each of Walter
(including its Affiliates) and Nuevo (including its Affiliates) with
representations, warranties and covenants relating or pertaining to each of
them, individually, in favor of Amoco, OPIC or each other, and (z) fees and
expenses relating to any other matters not substantially related to the common
undertaking by such parties as contemplated by the Purchase Agreement and the
OPIC Financing.
4.3 Walter and Nuevo shall invoice each other for amounts that
may be reimbursed pursuant to this Section, and all such amounts that meet the
requirements of this Section shall be paid by Walter to Nuevo or by Nuevo to
Walter, as appropriate, within thirty days after receipt of the invoice. Any
single expense that is to be borne by both parties in excess of $10,000 shall
be approved by both Walter and Nuevo.
-3-
4
5. OBLIGATIONS TO AMOCO AND THE IRS.
5.1 Walter shall, and shall require Walter Congo and Walter
Holdings to, and Nuevo shall, and shall require Nuevo Congo and Nuevo Holdings
to, perform all of their respective obligations (including both affirmative and
negative covenants) under the Marine I Joint Operating Agreement, the Tax
Agreement, the Purchase Agreement, the Closing Agreement and all of the
agreements executed in connection with the OPIC Financing. In addition, (i)
neither Walter nor Nuevo shall, and Walter and Nuevo shall not permit any of
their respective Affiliates to, take (or, to the extent possible, permit) any
action for which any of them would have an obligation to indemnify Amoco or any
of its Affiliates under the terms of the Tax Agreement without obtaining the
prior consent of the other and (ii) unless they obtain the prior consent of the
other, Walter and Nuevo shall, and Walter and Nuevo shall cause each of their
respective Affiliates to, take all actions necessary to avoid the occurrence of
an event for which any of them would have an obligation to indemnify Amoco or
any of its Affiliates under the terms of the Tax Agreement. Such consent may
be conditioned on, among other things, the receipt by the party that is to
provide the consent of an indemnity from an entity acceptable to such
consenting party (in its sole discretion) against any liability, cost or
expense in connection with such action.
5.2 To the extent that any act, omission, condition or event
with respect to Walter or any of its Affiliates causes the occurrence of a
Triggering Event without the prior consent of Nuevo or any Affiliate of Nuevo
having been obtained to such act, omission, condition or event, Walter shall
reimburse Nuevo for any and all amounts payable by Nuevo or any Affiliate of
Nuevo to Amoco or any Affiliate of Amoco pursuant to the Tax Agreement or to
the IRS pursuant to the Closing Agreement. Such reimbursement shall be
adjusted to eliminate any net tax effect from such reimbursement or payments
pursuant to the Tax Agreement or to the IRS.
5.3 To the extent that any act, omission, condition or event
with respect to Nuevo or any of its Affiliates causes the occurrence of a
Triggering Event without the prior consent of Walter or any Affiliate of Walter
having been obtained to such act, omission, condition or event, Nuevo shall
reimburse Walter for any and all amounts payable by Walter or any Affiliate of
Walter to Amoco or any Affiliate of Amoco pursuant to the Tax Agreement or to
the IRS pursuant to the Closing Agreement. Such reimbursement shall be
adjusted to eliminate any net tax effect from such reimbursement or payments
pursuant to the Tax Agreement or to the IRS.
5.4 Nuevo shall reimburse Walter for any payment that Walter
is required to make to Amoco or its Affiliates in connection with any
representation or warranty relating or pertaining to Nuevo or its Affiliates in
the Purchase Agreement.
5.5 Walter shall reimburse Nuevo for any payment that Nuevo is
required to make to Amoco or its Affiliates in connection with any
representation or warranty relating or pertaining to Walter or its Affiliates
in the Purchase Agreement.
-4-
5
5.6 Except as provided in Sections 5.2, 5.3, 5.4 or 5.5, in
the event Walter or any of its respective Affiliates is obligated to pay to
Amoco or any of its Affiliates any amount in connection with the Purchase
Agreement (including the Promissory Note and the Production Payment), the Tax
Agreement or the Closing Agreement and Nuevo does not pay an equal amount to
Amoco or its Affiliates, then Nuevo shall reimburse Walter the amount necessary
to equalize the payments by Walter and its Affiliates, collectively, and Nuevo
and its Affiliates, collectively.
5.7 Except as provided in Sections 5.2, 5.3, 5.4 or 5.5, in
the event Nuevo or any of its respective Affiliates is obligated to pay to
Amoco or any of its Affiliates any amount in connection with the Purchase
Agreement (including the Promissory Note and the Production Payment), the Tax
Agreement or the Closing Agreement and Walter does not pay an equal amount to
Amoco or its Affiliates, then Walter shall reimburse Nuevo the amount necessary
to equalize the payments by Walter and its Affiliates, collectively, and Nuevo
and its Affiliates, collectively.
5.8 In the event that Amoco or any of its Affiliates receives
any funds under the letters of credit posted by Nuevo prior to the Closing,
then reimbursements to the issuer of such letters of credit by Nuevo or any of
its Affiliates that are discharged by the funds delivered to Amoco or its
Affiliates shall be deemed a payment by Nuevo and its Affiliates for purposes
of this Section 5. In the event that Amoco or any of its Affiliates receives
any funds under the letter of credit posted by Nuevo pursuant to the Purchase
Agreement to secure payment of the Promissory Note described in Section 3(B)(2)
of the Purchase Agreement, then reimbursements to the issuer of such letter of
credit by Nuevo or any of its Affiliates shall be deemed a payment by Nuevo and
its Affiliates for purposes of this Section 5 as long as Walter has not paid
its share of such Promissory Note.
5.9 At least ten days prior to filing any consolidated federal
income tax return, Walter shall provide Nuevo a copy of the certification to be
included with such return described in Treas. Reg. Section
1.1503-2(g)(2)(vi)(B) which is required to avoid a Triggering Event. At least
ten days prior to filing any consolidated federal income tax return, Nuevo
shall provide Walter a copy of the certification to be included with such
return described in Treas. Reg. Section 1.1503-2(g)(2)(vi)(B) which is required
to avoid a Triggering Event. Within two business days of a party's providing a
notice to Amoco under Section 3 of the Tax Agreement, it shall provide a copy
to the other parties hereto.
5.10 Pursuant to the Stock Purchase Agreement, the combined
purchase price for the stock of ACE and ACP is the sum of $31.5 million plus
the Balancing Payment--the sum of $18 million plus 57.143% of the Balancing
Payment attributable to the ACE stock and the sum of $13.5 million plus 42.857%
of the Balancing Payment attributable to the stock of ACP. The parties will
pay this purchase price to Amoco in the following manner: Walter Holdings will
pay the sum of $18 million plus 57.143% of the Balancing Payment to Amoco for
100% of the stock of ACE and Nuevo Holdings will pay the sum of $13.5 million
plus 42.857% of the Balancing Payment to Amoco for 100% of the stock of ACP.
-5-
6
6. NUEVO HOLDINGS LOAN TO WALTER CONGO; CREATION OF LATENT WORKING
INTEREST AND LATENT ORRI.
6.1 To enable Walter Holdings to purchase 100% of the stock of
ACE, Nuevo Holdings will loan to Walter Congo pursuant to the Walter Congo Note
a principal amount equal to the sum of $2.25 million plus 7.143% of the
Balancing Payment (the "Principal Amount"). The terms of the Walter Congo Note
shall authorize Nuevo Holdings (or its assigns or successors) to demand (at the
option of Nuevo Holdings or its assigns or successors) payment of the Walter
Congo Note either (i) in cash or (ii) in kind through the creation of certain
contract rights pursuant to the Latent Working Interest and the Latent ORRI.
The various steps associated with the Walter Congo Note and the creation of the
Latent Working Interest and the Latent ORRI are set out below and shall occur
in the order set out:
First, on the Closing Date, Nuevo Holdings will loan the Principal
Amount to Walter Congo, and such loan shall be evidenced by the Walter Congo
Note. Walter Congo agrees to use the proceeds of this loan solely to acquire
the stock of ACE.
Second, on the Closing Date, Walter Holdings will arrange for Walter
Congo to obtain, as of the Closing Date, but prior to the Closing, an amount
equal to the sum of $18 million plus 57.143% of the Balancing Payment
(including the proceeds from the Walter Congo Note). Nuevo Holdings will
arrange for Nuevo Congo to obtain, as of the Closing Date but prior to the
Closing, an amount equal to the sum of $13.5 million plus 42.857% of the
Balancing Payment.
Third, on the Closing Date, Walter Holdings will purchase 100% of the
stock of ACE from Amoco for an amount equal to the sum of $18 million plus
57.143% of the Balancing Payment, by causing Walter Congo to merge into ACE,
with ACE the surviving entity. Walter Holdings will cause ACE to change its
name to Walter International Congo, Inc. Simultaneously Nuevo Holdings will
purchase 100% of the stock of ACP from Amoco for an amount equal to the sum of
$13.5 million plus 42.857% of the Balancing Payment, by causing Nuevo Congo to
merge into ACP, with ACP the surviving entity. Nuevo Holdings will cause ACP
to change its name to The Nuevo Congo Company.
Fourth, on the Closing Date, Nuevo Holdings will contribute the Walter
Congo Note to the capital of Nuevo Congo.
Fifth, no sooner than the day immediately after the Closing Date, Nuevo
Congo will demand of Walter Congo the payment of the Walter Congo Note by the
creation of the contractual rights and obligations represented by the Latent
Working Interest and the Latent ORRI. Walter Congo will create contracts
represented by the Latent Working Interest and the Latent ORRI and deliver them
to Nuevo Congo, in complete satisfaction of all obligations of Walter Congo
under the Walter Congo Note.
6.2 Walter and Nuevo agree that they will take consistent
income tax reporting positions with respect to the contractual rights and
obligations represented by the Latent Working Interest and the Latent ORRI.
-6-
7
6.3 The contract for the Latent Working Interest will evidence
for Nuevo Congo the following contractual rights and obligations: (i) the right
of Nuevo Congo (or its assigns or successors) to receive from Walter Congo (or
its assigns or successors) an amount of cash equal to the amount of cash,
proceeds and revenues attributable to an undivided 12.5% of Walter Congo's 25%
interest in the Marine I Joint Operating Agreement and like beneficial interest
in the Convention and Yombo Permit and any rights of Walter Congo arising after
the Closing Date under the Purchase Agreement, payable by Walter Congo (or its
assigns or successors) at the times that the operator under the Marine I Joint
Operating Agreement makes distributions of proceeds from the sale of
hydrocarbons to working interest owners or at the time of a sale of such
interests; and (ii) the obligation of Nuevo Congo (or its assigns or
successors) to pay to Walter Congo (or its assigns or successors) an amount of
cash equal to 12.5% of the obligations, costs, expenses and other liabilities
payable by Walter Congo with respect to its interest in the Marine I Joint
Operating Agreement, the Convention and the Yombo Permit, including a
proportionate part of the obligations after the Closing Date under the Purchase
Agreement (but excluding (A) any part of the OPIC Financing or any OPIC
Insurance Costs and (B) the Latent ORRI), payable at such time as Walter Congo
(or its assigns or successors) is obligated to make such payments under the
Marine I Joint Operating Agreement or other instruments.
6.4 The contract for the Latent ORRI will evidence for Nuevo
Congo (or its assigns or successors) a contractual right to receive from Walter
Congo (or its assigns or successors) an amount of cash equal to the amounts
that would be paid with respect to an overriding royalty interest equal to the
difference between (a) one-half the aggregate royalty burden to the Republic on
the interest of Walter Congo and Nuevo Congo in the Convention and (b) the
royalty burden to the Republic on the interest of Walter Congo beneficially
owned by Walter Congo (ie., 21.875% out of Walter Congo's 25% interest). Such
amounts shall be calculated and paid in the same manner as royalty payments are
made to or for the account of the Republic. The Latent ORRI will also evidence
the parties' obligations to make additional payments measured by the Congolese
income tax consequences of their Congolese operations.
6.5 Walter Congo shall not be liable for any actions taken
hereunder with respect to the Latent Working Interest or the Latent ORRI if
made in good faith and without gross negligence, fraud or bad faith. Walter
Congo shall not be treated as a fiduciary with respect to the Latent Working
Interest or the Latent ORPI.
6.6 Nuevo and Nuevo Congo hereby jointly and severally agree
to indemnify and hold harmless Walter Congo and its Affiliates from and against
any and all claims, damages, losses, liabilities and expenses of any kind,
including but not limited to any liability or expense arising from U.S. or
Congolese income, capital gains, or other taxes paid or payable on production
or with respect to the Latent Working Interest or the Latent ORRI, in
connection with or arising directly or indirectly out of the creation of the
Latent Working Interest or the Latent ORRI and payments made thereunder, unless
such claims, damages, losses, liabilities or expenses resulted from the sole
gross negligence, fraud or bad faith of Walter or Walter Congo. Such indemnity
with respect to taxes shall be grossed up or decreased as necessary to
eliminate any net tax effect from such indemnity payments.
-7-
8
6.7 Nuevo and Walter agree that prior to the creation of the
contractual rights represented by the Latent Working Interest and the Latent
ORRI, they shall (i) comply with the requirements of the Tax Agreement, and
(ii) submit (and shall cause their respective controlled subsidiaries to join
in such submission) to the Internal Revenue Service (the "IRS") a request for a
Closing Agreement as specified in Treasury Regulations Section
1.1503-2(g)(2)(iv)(B)(2). In conjunction with such Closing Agreement, Walter
shall request from the IRS such rulings as Nuevo and Walter shall jointly deem
necessary, taking into account the ruling submitted to the IRS by Amoco in
conjunction with the sale of the stock of ACE and ACP. The parties agree to
make all representations and supply all information necessary for the IRS to
enter into the Closing Agreement and to issue the rulings that may be requested
pursuant to the prior sentence.
6.8 If Nuevo Congo requests and Nuevo Congo has obtained the
appropriate approvals, Walter Congo will make assignments to Nuevo Congo of the
interests in the Marine I Joint Operating Agreement represented by the Latent
Working Interest and the Latent ORRI.
7. LOANS BETWEEN THE COMPANIES; ACQUISITIONS PURSUANT TO FINANCE
AGREEMENTS.
7.1 In the event that either Walter Congo acquires the capital
stock or assets of Nuevo Congo or Nuevo Congo acquires the capital stock or
assets of Walter Congo pursuant to Section 9.14 of the respective Finance
Agreement, the acquiring party shall pay to the other an amount equal to the
appraised value as determined by an independent appraiser selected by Walter
and Nuevo (and, if Walter and Nuevo are unable to agree, then, at the request
of either of them, the judge of the Southern District of Texas that is senior
in term of service shall select an independent appraiser). The appraiser shall
utilize the most recent reserve value calculations prepared by the engineer
most recently employed by Walter Congo and Nuevo Congo pursuant to the Finance
Agreements. Such engineer shall utilize pricing parameters consistent with the
methodology utilized in connection with reports provided under the Finance
Agreements and shall utilize a discount rate of 25%.
7.2 In the event that either Nuevo Congo or Walter Congo
becomes a defaulting party under the terms of Section 8.05 of the Marine I
Joint Operating Agreement, the non-defaulting party shall have the right (but
not the obligation) to loan to the defaulting party prior to the expiration of
the ninety-day period described in Section 8.05(b) of the Marine I Joint
Operating Agreement the amount necessary to cure such default. The entire
amount loaned by the non-defaulting party to the defaulting party shall be used
within such ninety-day period to cure the default in accordance with Section
8.05(b) of the Marine I Joint Operating Agreement.
7.3 In the event that either Walter Congo or Nuevo Congo cures
a default by the other pursuant to Section 9.13 of the respective Finance
Agreement, the amount advanced to cure the default shall be deemed to be a loan
by the non-defaulting party.
7.4 In the event that any amount is loaned by either Walter
Congo or Nuevo Congo pursuant to Section 7.2 or is deemed to be loaned pursuant
to Section 7.3, such loaned amount shall be payable on demand (subject to the
terms of any subordination agreement in favor of OPIC required in connection
with the OPIC Financing) and shall bear interest at the lesser of (i) the prime
rate announced from time to time by Texas Commerce Bank National
-8-
9
Association plus 5% per annum or (ii) the maximum nonusurious rate permitted by
applicable law.
8. WORK PROGRAMS, BUDGET AND AFES; ADMINISTRATIVE AND TECHNICAL
MATTERS.
8.1 After the earlier of (i) the repayment by each of Walter
Congo and Nuevo Congo of all its obligations under its respective Finance
Agreement and all related documents or (ii) the completion of the development
program approved by OPIC in connection with the Finance Agreements, Walter
shall not permit Walter Congo, and Nuevo shall not permit Nuevo Congo, to
submit any work program, budget or authorization for expenditure pursuant to
Article 6 of the Marine I Joint Operating Agreement, or submit any other matter
for a vote of the owners of the Interests under the Marine I Joint Operating
Agreement without obtaining the prior approval of Nuevo Congo or Walter Congo,
as the case may be, which approval shall not be unreasonably withheld.
8.2 If (i) any matter is presented for a vote to the owners of
the Interests under the Marine I Joint Operating Agreement and (ii) the result
of the vote would change if the percentage attributable to the Latent Working
Interest were voted by Nuevo Congo rather than Walter Congo, then Walter Congo
shall vote its interest in a manner that will cause the same result that would
be obtained if the Latent Working Interest were voted by Nuevo Congo.
8.3 In the event that Walter or any of its Affiliates engages
Nuevo, Torch Operating Company or any of their respective Affiliates to perform
services with respect to the Yombo Permit, Nuevo shall, or shall cause Torch
Operating Company or such Affiliate to, provide a monthly invoice to Walter
Congo for such services, and Walter shall pay or cause Walter Congo to pay the
amount of such invoice within thirty days after receipt of such invoice.
8.4 Walter shall administer, or cause its Affiliates to
administer, in conformity with the standards set forth in Section 4.07 of the
Marine I Joint Operating Agreement, the OPIC Financing on behalf of Nuevo
Holdings and Nuevo Congo, including (i) the preparation for the review and
approval by Nuevo Holdings of all reports, certificates and other submissions
by Nuevo Holdings and Nuevo Congo pursuant to the agreements evidencing the
OPIC Financing, other than any financial statements or other financial
information pertaining primarily to Nuevo or its Affiliates, and (ii) the
coordination with the engineer that will provide reports to OPIC in connection
with the OPIC Financing so that the engineer has full and complete information
necessary to timely prepare whatever reports the engineer is required to
deliver pursuant to the OPIC Financing. Nuevo may assume the obligation to
administer the OPIC Financing provided to Nuevo Holdings and Nuevo Congo at any
time after thirty days notice to Walter. As long as Walter or one of its
Affiliates is administering the OPIC Financing on behalf of Nuevo Congo and
Nuevo Holdings, Nuevo shall cause Nuevo Congo to reimburse Walter and its
Affiliates for one-half of all of the reasonable costs and expenses incurred by
Walter and its Affiliates in connection with the administration of the OPIC
Financing.
-9-
10
9. RIGHT OF FIRST REFUSAL.
9.1 If Walter or Nuevo, or any of their respective Affiliates,
agrees or makes an arrangement (i) to sell all or any portion of the assets
constituting the interests under the Convention, the Yombo Permit or the Marine
I Joint Operating Agreement, (ii) to sell all or any portion of the capital
stock of Walter Holdings or Nuevo Holdings or any rights thereto, (iii) to sell
all or any portion of the capital stock of Walter Congo or Nuevo Congo,
respectively, (iv) for a merger of Walter Congo or Nuevo Congo, respectively,
with or into any other entity, or (v) for a merger of Walter Holdings or Nuevo
Holdings, respectively, with or into any other entity, then Walter or Nuevo,
respectively, shall promptly give written notice to Nuevo or Walter,
respectively. The notice shall contain the name and address of the
prospective purchaser, a summary of all relevant terms of the offer and a copy
of all agreements with, and offers from, the prospective purchaser relating to
the sale.
9.2 To the extent that Amoco or any of its Affiliates has a
preferential right under the Purchase Agreement, the Tax Agreement, or the
Option Agreement in connection with a proposed sale of Interests or capital
stock, or proposed merger, by or on behalf of either Nuevo Congo or Walter
Congo, and none of Amoco or such Affiliates elects to exercise such
preferential right, (i) Nuevo shall have an optional prior right to purchase or
merge (or to cause one of its subsidiaries to purchase or merge) on the same
terms and conditions as the proposed sale of such Interests or such capital
stock, or the proposed merger, as appropriate, by Walter Congo, Walter Holdings
or Walter, respectively; and (ii) Walter shall have an optional prior right to
purchase or merge (or to cause one of its subsidiaries to purchase or merge) on
the same terms and conditions as the proposed sale of such Interests, or the
proposed sale of such capital stock, or the proposed merger, as appropriate, by
Nuevo Congo, Nuevo Holdings, or Nuevo, respectively. To exercise the prior
right, Nuevo or Walter, as appropriate, must provide to the other a notice of
its (or its Affiliate's) intent to purchase such Interests or capital stock, or
to merge, as the case may be, within 15 days after receipt of the notice
described in Section 9.1. If such prior right is exercised and any right of
Amoco or any of its Affiliates is not exercised, the purchasing or merging
parties shall be entitled to complete the proposed purchase or merger in
accordance with the terms specified in the notice.
9.3 In the event that the proposed consideration to be
received by Walter or Nuevo or any of their respective Affiliates in connection
with any transaction described in Section 9.1 is not cash, then Nuevo and
Walter shall engage an independent appraiser acceptable to both of them to
determine the cash value of the proposed consideration. The person exercising
the right of first refusal shall pay to the other the cash value of the
non-cash consideration as determined by the appraiser.
9.4 There shall not be a preferential right under this Section
9 where Nuevo or Walter or any of their respective Affiliates grants a lien or
security interest in any asset or transfers any asset (via merger,
consolidation or otherwise) to any Affiliate of Nuevo or Walter, respectively,
nor shall the preferential right under this Section 9 apply to a merger by
Walter (or its Affiliates) with or into NOMECO (or its Affiliates).
-10-
11
10. BALANCING OF WORKING CAPITAL. The combined working capital of
ACE and ACP on the date of Closing shall be allocated to Walter Congo and Nuevo
Congo such that Walter Congo will own 57.143% of total combined working capital
of both entities and Nuevo Congo will own 42.857% of the total combined working
capital of both entities. To accomplish this, Walter and Nuevo shall prior to
June 30, 1995 examine the books of ACE and ACP to determine the actual working
capital of the two Companies as of the date of Closing. As soon as practical
after this determination has been made, Walter Congo shall pay to Nuevo Congo
an amount equal to the difference between (i) 42.857% of the amount obtained by
adding total cash and accounts receivable of both ACE and ACP and subtracting
therefrom total current liabilities of ACE and ACP, in each case determined
after, but as of, the Closing and (ii) the balance reflected on the books of
ACP equal to the amount obtained by adding cash and accounts receivable and
subtracting therefrom total current liabilities in each case determined on, but
as of, the Closing. In addition, amounts with respect to each of Crude Oil
Inventory, Materials and Supplies, and Prepaid Expenses equal to the difference
between 42.857% of the combined total amount determined after, but as of, the
Closing and the amount reflected on the books of ACP on the date of Closing
shall be transferred from the books of ACE to the books of ACP.
11. RESOLUTION OF DISPUTES.
11.1 On the request of any party hereto, whether made before or
after the institution of any legal proceeding, any action, dispute, claim or
controversy of any kind now existing or hereafter arising between any of the
parties hereto in any way arising out of, pertaining to or in connection with
this Agreement (a "Dispute") shall be resolved by binding arbitration in
accordance with the terms hereof. Any party may, by summary proceedings, bring
an action in court to compel arbitration of any Dispute.
11.2 Any arbitration shall be administered by the American
Arbitration Association (the "AAA") in accordance with the terms of this
Section, the Commercial Arbitration Rules of the AAA, and, to the maximum
extent applicable, the Federal Arbitration Act. Judgment on any award rendered
by an arbitrator may be entered in any court having jurisdiction.
11.3 Any arbitration shall be conducted before one arbitrator.
The arbitrator shall be a practicing attorney licensed to practice in the State
of Texas who is knowledgeable in the subject matter of the Dispute selected by
agreement between the parties hereto. If the parties cannot agree on an
arbitrator within 30 days after the request for an arbitration, then any party
may request the AAA to select an arbitrator. The arbitrator may engage
engineers, accountants or other consultants that the arbitrator deems necessary
to render a conclusion in the arbitration proceeding.
11.4 To the maximum extent practicable, an arbitration
proceeding hereunder shall be concluded within 60 days of the filing of the
Dispute with the AAA. Arbitration proceedings shall be conducted in Houston,
Texas. The arbitrator shall be empowered to impose sanctions and to take such
other actions as the arbitrator deems necessary to the same extent a judge
could impose sanctions or take such other actions pursuant to the Federal Rules
of Civil Procedure and applicable law. At the conclusion of any arbitration
proceeding, the arbitrator shall make specific written findings of fact and
conclusions of law. The arbitrator shall have the power to
-11-
12
award recovery of all costs and fees to the prevailing party. Each party
agrees to keep all Disputes and arbitration proceedings strictly confidential
except for disclosure of information required by applicable law.
11.5 All fees of the arbitrator and any engineer, accountant or
other consultant engaged by the arbitrator, shall be paid by Walter and Nuevo
equally unless otherwise awarded by the arbitrator.
12. PAYMENTS AND RECORDS. All payments due pursuant to Section 6
hereof shall be made at the address set forth below or at such other address as
Nuevo Congo may designate. All payments due with respect to any loan made
pursuant to Section 7 shall be made at the address set forth below or at such
other address as Nuevo or Walter may designate. Walter Congo shall maintain
true and correct books and records sufficient to enable Nuevo Congo to verify
the correctness of the amounts paid and payable to Nuevo Congo in connection
with the Latent Working Interest and the Latent ORRI.
13. ACCESS TO BOOKS AND RECORDS. At Nuevo's request, Walter shall
provide Nuevo with access, at the office of Walter during normal business
hours, to the books and records of Walter and its Affiliates relating to the
payments due under Section 4 hereof, the Yombo Permit, the Convention, the
Marine I Joint Operating Agreement and the OPIC Financing to enable Nuevo to
verify the compliance with the obligations of Walter and its Affiliates
hereunder. At Walter's request, Nuevo shall provide Walter with access, at the
office of Nuevo during normal business hours, to the books and records of Nuevo
and its Affiliates relating to the Yombo Permit, the Convention, the Marine I
Joint Operating Agreement and the OPIC Financing to enable Walter to verify the
compliance with the obligations of Nuevo and its Affiliates hereunder.
14. AREA OF INTEREST. In the event that Walter or Nuevo, or any of
their respective Affiliates, acquires, or acquires any right to acquire, any
interest in any rights to explore for, develop or produce hydrocarbons within
the Republic (the "Acquisitor"), then the Acquisitor shall provide a notice to
the other (the "offeree") describing the acquisition and all relevant terms of
any obligations associated with the acquired rights. In addition, the
notification by the Acquisitor shall contain an offer to assign to the offeree
one-half of the interest acquired for the payment of one-half of the
consideration paid by the Acquisitor and the assumption by the offeree of
one-half of the obligations of the Acquisitor with respect to the acquired
interest. To exercise the right to acquire, the offeree must notify the
Acquisitor within thirty days receipt of the notice.
15. SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 9,
this Agreement shall inure to the benefit of and be binding upon the successors
and assigns of the respective parties hereto.
16. WAIVERS AND AMENDMENTS. To be effective, all amendments and
other modifications hereof and all consents that may be given pursuant hereto
must be in writing and signed by each of the parties hereto. Any party may by
written instrument (i) waive compliance by any other party with, or modify any
of, the covenants or agreements made to it by any other
-12-
13
party contained in this Agreement of (ii) waive or modify performance of any of
the obligations or other acts of any of the other parties hereto. The delay or
failure on the part of any party hereto to insist, in any one instance or more,
upon strict performance of any of the terms or conditions of this Agreement, or
to exercise any right or privilege herein conferred shall not be construed as a
waiver of any such terms, conditions, rights or privileges but the same shall
continue and remain in full force and effect. All rights and remedies are
cumulative.
17. NOTICES. All notices, consents and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
(a) when delivered by hand, (b) when sent by telecopier (with receipt
confirmed), provided that a copy is promptly thereafter mailed in the United
States by first class postage prepaid registered or certified mail, return
receipt requested, (c) when received by the addressee, if sent by express
delivery service (receipt requested) or by such other means as the parties may
agree from time to time or (d) five Business Days after being mailed in the
United States, by first class postage prepaid registered or certified mail,
return receipt requested; in each case to the appropriate addresses and
telecopier numbers set forth below (or to such other addresses, telex numbers
and telecopier numbers as a party may designate as to itself by notice to the
other parties):
if to Walter or any of its Affiliates:
Walter International, Inc.
1021 Main Street, Suite 2110
Houston, Texas 77002-6502
Telecopier No.: (713) 756-1111
Attention: F. Fox Benton, Jr.
if to Nuevo or any of its Affiliates:
Nuevo Energy Company
1221 Lamar, Suite 1600
Houston, Texas 77010
Telecopier No.: (713) 655-1711
Attention: Roland E. Sledge
18. SECTION HEADINGS. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
20. ENTIRE AGREEMENT. This Agreement, the exhibits, schedules and
annexes hereto, if any, contain the entire agreement between the parties hereto
with respect to the subject matter
-13-
14
hereof and thereof and supersede all prior agreements and undertakings between
the parties hereto relating to the subject matters hereof and thereof.
21. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the law of the State of Texas.
22. PAYMENT TERMS AND INTEREST CALCULATIONS.
22.1 If the due date for any payment hereunder falls on the
Saturday or a non-Monday bank holiday, such payment shall be made on the last
banking day before the non-banking day, and if such payment falls due on a
Sunday or a Monday bank holiday, such payment shall be made on the next
succeeding banking day.
22.2 Interest shall accrue on any unpaid and outstanding amount
on which interest is stated to accrue hereunder from the time such amount is
due and payable through the date upon which such amount, together with accrued
interest thereon, is paid in full.
22.3 All interest calculations hereunder shall be compounded
quarterly, to the extent permitted by law, if not paid currently.
22.4 A wire transfer or delivery of a check shall not operate
to discharge any payment under this Agreement and is accepted subject to
collection.
23. NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement shall
entitle any party other than Walter, Walter Holdings, Old Walter Congo, Nuevo,
Nuevo Holdings, and Old Nuevo Congo to any claim, cause of action, remedy or
right of any kind.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
Walter International, Inc.
Walter Congo Holdings, Inc.
Walter International Congo, Inc.
By: /s/ F. Fox Benton, Jr.
------------------------------
Name: F. Fox Benton, Jr.
-----------------------
Title: Exec. Vice Pres.
-----------------------
Nuevo Energy Company
The Congo Holding Company
The Nuevo Congo Company
By: /s/ Michael D. Watford
------------------------------
Michael D. Watford
President
-14-