EXHIBIT 10.1
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PINNACLE GAS RESOURCES, INC.
PREFERRED STOCK AND COMMON STOCK
CONTRIBUTION AND SUBSCRIPTION AGREEMENT
DATED AS OF JUNE 23, 2003
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TABLE OF CONTENTS
<Table>
ARTICLE I. DEFINITIONS ..............................................................6
Section 1.1 Definitions ......................................................6
ARTICLE II. ISSUANCE OF SECURITIES .................................................16
Section 2.1 Initial CCBM Contribution .......................................16
Section 2.2 Initial RMG Contribution ........................................16
Section 2.3 Option of the Contributing Parties to Purchase
Additional Shares ...............................................17
Section 2.4 Initial CSFB Contribution .......................................18
Section 2.5 Subsequent CSFB Contribution ..........ERROR! BOOKMARK NOT DEFINED.
Section 2.6 Grant of Additional Warrants ....................................20
Section 2.7 Allocation Agreement ............................................20
Section 2.8 Disclaimers .....................................................20
ARTICLE III. CLOSING ...............................................................21
ARTICLE IV. CONDITIONS TO CLOSING ..................................................21
Section 4.1 Closing Conditions of the Investors .............................21
Section 4.2 Closing Conditions of the CSFB Parties ..........................23
Section 4.3 Closing Conditions of CCBM ......................................24
Section 4.4 Closing Conditions of RMG .......................................25
Section 4.5 Closing Conditions of the Company ...............................25
ARTICLE V. CONDITIONS TO THE SUBSEQUENT CSFB CONTRIBUTION ..........................26
Section 5.1 Conditions to the Subsequent CSFB Contribution ..................26
ARTICLE VI. COVENANTS ..............................................................27
Section 6.1 Cooperation, Approvals, Further Action ..........................27
Section 6.2 Closing Conditions; Adverse Effect ..............................27
Section 6.3 Supplements to Schedules ........................................27
Section 6.4 Access ..........................................................28
Section 6.5 Confidentiality .................................................28
Section 6.6 Additional Affirmative Covenants of the Company .................28
Section 6.7 Taxes. ..........................................................29
Section 6.8 Public Disclosures ..............................................30
Section 6.9 Brokers' Fees ...................................................30
Section 6.10 Company Records .................................................30
Section 6.11 Retention of Stock Certificates; Negative Pledge ................30
ARTICLE VII. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ........................ 31
Section 7.1 Organization; Qualification and Authority;
Binding Obligations .............................................31
Section 7.2 Authorized Shares and Related Matters ...........................31
Section 7.3 Defaults; Indebtedness ..........................................32
Section 7.4 No Violation ....................................................32
Section 7.5 Offering of Shares ..............................................32
</Table>
<Table>
ARTICLE VIII. REPRESENTATIONS, AND WARRANTIES OF THE INVESTORS .....................32
Section 8.1 Investment Matters ..............................................32
Section 8.2 Authority .......................................................33
Section 8.3 No Conflicts ....................................................34
Section 8.4 Other Agreements ................................................34
ARTICLE IX. REPRESENTATIONS AND WARRANTIES OF CCBM .................................34
Section 9.1 Organization; Qualification and Authority; Binding Obligations ..34
Section 9.2 Defaults; Outstanding Debt ......................................35
Section 9.3 No Violation ....................................................35
Section 9.4 Consents ........................................................35
Section 9.5 Investment Company Status .......................................35
Section 9.6 Taxes ...........................................................35
Section 9.7 Compliance with Law .............................................36
Section 9.8 Proceedings .....................................................36
Section 9.9 Title ...........................................................36
Section 9.10 Contracts .......................................................36
Section 9.11 Permits .........................................................37
Section 9.12 Consents, Preferential Rights, etc ..............................37
Section 9.13 Marketing. ......................................................37
Section 9.14 Change in Condition. ............................................37
Section 9.15 No Other Activities .............................................38
Section 9.16 Contributed Assets ..............................................38
ARTICLE X. REPRESENTATIONS AND WARRANTIES OF RMG ...................................38
Section 10.1 Organization; Qualification and Authority; Binding Obligations ..38
Section 10.2 Defaults; Outstanding Debt ......................................38
Section 10.3 No Violation ....................................................39
Section 10.4 Consents ........................................................39
Section 10.5 Investment Company Status .......................................39
Section 10.6 Taxes ...........................................................39
Section 10.7 Compliance with Law .............................................39
Section 10.8 Proceedings .....................................................40
Section 10.9 Title ...........................................................40
Section 10.10 Contracts .......................................................40
Section 10.11 Permits .........................................................40
Section 10.12 Consents, Preferential Rights, etc ..............................41
Section 10.13 Marketing. ......................................................41
Section 10.14 Change in Condition. ............................................41
Section 10.15 No Other Activities .............................................41
Section 10.16 Contributed Assets ..............................................41
Section 10.17 Environmental Matters ...........................................41
Section 10.18 Operation of the Proven Properties. .............................42
ARTICLE XI. TRANSFER OF SECURITIES .................................................42
Section 11.1 Restriction on Transfer .........................................42
Section 11.2 Restrictive Legends .............................................42
</Table>
<Table>
ARTICLE XII. TERMINATION ...........................................................43
Section 12.1 Termination .....................................................43
Section 12.2 Effect of Termination ...........................................43
ARTICLE XIII. MISCELLANEOUS ........................................................44
Section 13.1 Indemnification .................................................44
Section 13.2 Indemnification Procedures ......................................46
Section 13.3 Dispute Resolution ..............................................48
Section 13.4 Consent to Amendments ...........................................49
Section 13.5 Survival of Representations and Warranties ......................49
Section 13.6 Successors and Assigns; No Third Party Benefit ..................49
Section 13.7 Notices .........................................................50
Section 13.8 Descriptive Headings ............................................51
Section 13.9 Satisfaction Requirement ........................................51
Section 13.10 Governing Law ...................................................52
Section 13.11 Entire Agreement ................................................52
Section 13.12 Severability ....................................................52
</Table>
<Table>
Schedule 2.1(a)-1 CCBM Contributed Assets
Schedule 2.1(a)-2 Assumed CCBM Liabilities
Schedule 2.2(a)-1 RMG Contributed Assets
Schedule 2.2(a)-2 Assumed RMG Liabilities
Schedule 9.8 CCBM Proceedings
Schedule 9.10 CCBM Contracts
Schedule 9.12 CCBM Required Consents
Schedule 9.13 CCBM Marketing
Schedule 9.16 CCBM Excluded Assets
Schedule 10.8 RMG Proceedings
Schedule 10.10 RMG Contracts
Schedule 10.12 RMG Required Consents
Schedule 10.13 RMG Marketing
Schedule 10.16 RMG Excluded Assets
Exhibit A Form of AMI Agreement
Exhibit B Form of Assignment, Assumption and Bill of Sale
Exhibit C Form of Carrizo Transition Services Agreement
Exhibit D-1 Form of Schoonmaker Employment Agreement
Exhibit D-2 Form of Uhland Employment Agreement
</Table>
<Table>
Exhibit E Form of RMG Transition Services Agreement
Exhibit F Form of Securityholders Agreement
Exhibit G Allocations
Exhibit H Form of Certificate of Incorporation
Exhibit I Form of Certificate of Designations
Exhibit J Form of Bylaws
Exhibit K-1 Form of Company Officer's Certificate
Exhibit K-2 Form of CCBM/RMG Officer's Certificate
Exhibit L Approved 2003 Capital Expenditures Budget
Exhibit M Approved 2003 General and Administrative Expenses Budget
Exhibit N Form of Baker Botts Legal Opinion
Exhibit O Form of Davis Graham & Stubbs Legal Opinion
</Table>
PINNACLE GAS RESOURCES, INC.
CONTRIBUTION AND SUBSCRIPTION AGREEMENT
This CONTRIBUTION AND SUBSCRIPTION AGREEMENT, dated as of June 23, 2003
(this "AGREEMENT"), is entered into by and among Pinnacle Gas Resources, Inc., a
Delaware corporation (the "COMPANY"), CCBM, Inc., a Delaware corporation
("CCBM"), Rocky Mountain Gas, Inc., a Wyoming corporation ("RMG"), and each of
the CSFB Parties (as defined herein, and collectively with CCBM and RMG, the
"INVESTORS").
WHEREAS, subject to terms and conditions of this Agreement, CCBM has
agreed to contribute certain assets to the Company in exchange for the issuance
of common stock, par value $.01, of the Company ("COMMON STOCK") and an option
to purchase additional newly issued shares of Common Stock;
WHEREAS, subject to terms and conditions of this Agreement, RMG has
agreed to contribute certain assets to the Company in exchange for the issuance
of Common Stock and an option to purchase additional newly issued shares of
Common Stock;
WHEREAS, subject to the terms and conditions of this Agreement, the
CSFB Parties (as defined below) and have agreed to contribute cash to the
Company in exchange for the issuance of Common Stock, Series A Redeemable
Preferred Stock, par value $.01 per share, of the Company ("PREFERRED STOCK")
and warrants exercisable for the purchase of Common Stock at a price per share
equal to $100.00, as the same may be adjusted as provided therein ("WARRANTS");
and
WHEREAS, the parties hereto agree that the contributions by CCBM and
RMG contemplated by the foregoing clauses are intended to constitute transfers
described in Section 351(a) of the Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements hereinafter contained and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1 Definitions. For the purpose of this Agreement, and in
addition to terms defined elsewhere in this Agreement, the following terms shall
have the following meanings. In addition, all terms of an accounting character
not specifically defined herein have the meanings assigned thereto by the
Financial Accounting Standards Board and generally accepted accounting
principles.
"AAA" has the meaning set forth in Section 13.3(d).
"ACQUIRED ASSETS" means the assets acquired by the Company pursuant to
the First Source Agreements.
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"ACQUISITIONS" means the acquisition of assets by the Company pursuant
to the First Source Agreements.
"ADDITIONAL SHARES" has the meaning set forth in Section 2.3(a).
"AFFILIATE" means, with respect to any Person, any Person controlling,
controlled by, or under common control with such Person. For the purposes of
this definition, "control" means the possession of the power to direct or cause
the direction of management and policies of such Person, whether through the
direct or indirect ownership of voting securities, by contract or otherwise.
"AGREEMENT" has the meaning set forth in the preamble.
"AMI AGREEMENT" means the Area of Mutual Interest Agreement to be
entered into among the Company and the Investors concurrently with the execution
of this Agreement in the form of Exhibit A attached hereto.
"APPROVALS" means any approvals, authorizations, grants of authority,
consents, orders, qualifications, permits, licenses, variances, exemptions,
franchises, concessions, certificates, filings or registrations or any waivers
of the foregoing, or any notices, statements or other communications required to
be filed with, delivered to or obtained from any Governmental Entity or any
other Person.
"ASSIGNMENT, ASSUMPTION AND BILL OF SALE" means those certain
Assignments, Assumptions and Bills of Sale executed by each of CCBM and RMG in
the form of Exhibit B attached hereto.
"ASSOCIATES" of any Person, means any officer, director or employee of
such Person and such officer's, director's or employee's spouse, heirs,
executors, administrators, testamentary trustees, legatees or beneficiaries."
"ASSUMED CCBM LIABILITIES" means the obligations of CCBM to be assumed
by the Company, as set forth in Schedule 2.1(a)-2, and any other liabilities
expressly defined as Assumed CCBM Liabilities elsewhere in this Agreement.
"ASSUMED RMG LIABILITIES" means the obligations of RMG to be assumed by
the Company, as set forth in Schedule 2.2(a)-2, and any other liabilities
expressly defined as Assumed RMG Liabilities elsewhere in this Agreement.
"ASSUMPTIONS" means the assumption by the Company pursuant to the terms
hereof of the Assumed CCBM Liabilities and the Assumed RMG Liabilities.
"AWARD" has the meaning set forth in Section 13.2(e).
"BOARD" means the board of directors of the Company.
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"BUSINESS DAY" means any day which is not a Saturday, Sunday or day on
which banks are authorized by law to close in the State of New York, the State
of Texas or the State of Wyoming.
"CAPITAL REQUEST" has the meaning set forth in Section 2.5(a).
"CARRIZO" means Carrizo Oil & Gas, Inc., a Texas corporation.
"CARRIZO TRANSITION SERVICES AGREEMENT" means a Transition Services
Agreement to be entered into between the Company and Carrizo concurrently with
the execution of this Agreement in the form of Exhibit C attached hereto.
"CCBM" has the meaning set forth in the recitals.
"CCBM CONTRACTS" has the meaning set forth in Section 9.10.
"CCBM CONTRIBUTED ASSETS" means the assets to be contributed by CCBM as
set forth in Schedule 2.1(a)-1; provided, that the CCBM Contributed Assets shall
not include any proceeds, revenues, deductions, credits, refunds, rights and
causes of action or other similar assets attributable to the ownership or
operation of the CCBM Contributed Assets prior to the Closing notwithstanding
anything to the contrary in any Assignment, Assumption and Bill of Sale or other
Related Agreement.
"CCBM CONTRIBUTION" has the meaning set forth in Section 2.1(a).
"CEILING AMOUNT" means $7,500,000.
"CERTIFICATE OF DESIGNATIONS" means the Company's Certificate of
Designations, Preferences and Rights of Series A Redeemable Preferred Stock
filed with the Secretary of State of the State of Delaware on June 23, 2003.
"CLOSING" has the meaning set forth in Article III.
"CLOSING DATE" has the meaning set forth in Article III.
"COMMISSION" means the United States Securities and Exchange
Commission.
"COMMITMENT AMOUNT" has the meaning set forth in Section 2.5(a).
"COMMON STOCK" has the meaning set forth in the recitals.
"COMPANY" has the meaning set forth in the preamble.
"CONTRIBUTING PARTIES" means, collectively, CCBM and RMG.
"CONTRIBUTED ASSETS" means, collectively, the CCBM Contributed Assets
and the RMG Contributed Assets.
"CONTRIBUTION" means, collectively, the CCBM Contribution and the RMG
Contribution.
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"CSFB PARTIES" means, collectively, DLJ MB Partners III GmbH & Co. KG,
a limited company organized under the laws of Germany, DLJ Offshore Partners
III, C.V., a partnership organized under the laws of the Netherlands Antilles,
DLJ Offshore Partners III-1, C.V., a partnership organized under the laws of the
Netherlands Antilles, DLJ Offshore Partners III-2, C.V., a partnership organized
under the laws of the Netherlands Antilles, Millennium Partners II, L.P., a
Delaware limited partnership, DLJ Merchant Banking Partners III, L.P., a
Delaware limited partnership, and MBP III Plan Investors, L.P., a Delaware
limited partnership.
"CUSTOMARY FILINGS" means rights to consent which require notices to,
filings with, or other actions by Governmental Entities or tribal entities in
connection with the sale or conveyance of oil and gas leases or interests
therein if they are customarily obtained subsequent to the sale or conveyance.
"DEFENSIBLE TITLE" means, with respect to any Proven Property, such
record and beneficial title that (x) except as disclosed in Schedule 2.1(a)
(with respect to the CCBM Contributed Assets) and Schedule 2.2(a) (with respect
to the RMG Contributed Assets) entitles the party named to receive, from its
ownership of such interest, a percentage of all Hydrocarbons produced, saved and
marketed from each well or property included in the Proven Properties not less
than the Net Revenue Interest set forth in Schedule 2.1(a) (with respect to the
CCBM Contributed Assets) and Schedule 2.2(a) (with respect to the RMG
Contributed Assets) for such well or property, without reduction, suspension, or
termination for the productive life of such well or property, except (i) as a
result of elections not to participate in an operation under an applicable
operating, unit or other agreement, (ii) as required to allow other working
interest owners to make up past underproduction or processors or pipelines to
make up past underdeliveries or (iii) readjustments of interest provided for
under the terms of the applicable operating, unit or other agreement, in each
case, after the date hereof; (y) except as disclosed in Schedule 2.1(a) (with
respect to the CCBM Contributed Assets) and Schedule 2.2(a) (with respect to the
RMG Contributed Assets), obligates the party named to bear a percentage of the
costs and expenses relating to operations on, and the maintenance and production
of, such well or property, not greater than the Working Interest or operating
interest set forth in Schedule 2.1(a) (with respect to the CCBM Contributed
Assets) and Schedule 2.2(a) (with respect to the RMG Contributed Assets) without
increase for the productive life of such well or property or without a
proportionate increase in the associated Net Revenue Interest, except as a
result of an election of other parties not to participate in an operation under
an applicable operating, unit or other agreement, contribution requirements with
respect to defaulting co-owners, or readjustments of interest provided for under
the terms of the applicable operating or unit agreement, in each case, after the
date hereof; and (z) is free and clear of any Liens except Permitted
Encumbrances.
"DIRECTOR" means any member of the Board of the Company.
"DISPUTE" shall have the meaning set forth in Section 13.3(a).
"DISPUTE NOTICE" shall have the meaning set forth in Section 13.3(b).
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"EMPLOYMENT AGREEMENTS" means the Employment Agreements to be entered
into between the Company, each of Peter G. Schoonmaker and Gary Uhland
concurrently with the execution of this Agreement in the form of Exhibits D-1
and D-2, respectively, attached hereto.
"ENVIRONMENTAL LAWS" means all federal, state and local laws,
regulations, and requirements presently in effect, including the common law,
relating to pollution or protection of human health or the environment,
including without limitation, laws relating to Releases or threatened Releases
of Hazardous Materials into the indoor or outdoor environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata) or otherwise relating to the regulation, manufacture,
processing, distribution, use, treatment, storage, Release, disposal, transport
or handling of Hazardous Materials and all laws and regulations with regard to
record keeping, notification, disclosure and reporting requirements respecting
Hazardous Materials.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCLUDED CCBM LIABILITIES" has the meaning set forth in Section
2.1(b).
"EXCLUDED RMG LIABILITIES" has the meaning set forth in Section 2.2(b).
"FIRST SOURCE AGREEMENTS" means, collectively, that certain Agreement
for Purchase and Sale and that certain Earn-In Joint Venture Agreement, each
dated as of May 30, 2003, among First Source Wyoming, Inc., First Sourcenergy
Wyoming, Inc., Squaw Creek, Inc., Squaw Creek Development, Inc., Gastar
Exploration, Ltd. and RMG.
"GOOD AND LEGAL TITLE" means (i) as to any mineral rights or other real
property, that there is a lease, conveyance or other form of assignment or
transfer of record evidencing ownership by either CCBM or RMG, as the case may
be, of such real property, and (ii) as to personal property, that either CCBM or
RMG, as the case may be, has good title to such personal property.
"GOVERNMENTAL ENTITY" means any court or tribunal in any jurisdiction
(domestic or foreign) or any governmental or regulatory body, agency,
department, commission, board, bureau or other authority or instrumentality
(domestic or foreign).
"HAZARDOUS MATERIALS" means all substances, of any quantity or
concentration, defined as Hazardous Substances, Oil, Pollutants or Contaminants
in the National Oil and Hazardous Substances Pollution Contingency Plan, 40
C.F.R. Sections 300.5, or defined as such by, or regulated as such under, any
Environmental Law, and such term shall include, without limitation, PCBs,
mercury and naturally-occurring radioactive material, petroleum, natural gas,
liquefied natural gas, or synthetic gas, or any other substance which may be the
basis for any Person to require investigation, cleanup, removal, treatment or
remediation.
"HYDROCARBONS" means, collectively, natural gas, petroleum and other
liquid or gaseous hydrocarbons and related minerals and all products produced
therefrom, in each case whether in a natural or a processed state.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section
13.2(a).
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"INDEMNIFYING PARTY" means any Person required to indemnify any other
Person pursuant to Section 13.2(b).
"INDEBTEDNESS" means any obligation for borrowed money (including notes
payable and drafts accepted representing extensions of credit whether or not
representing obligations for borrowed money).
"INITIAL CSFB CONTRIBUTION" shall have the meaning set forth in Section
2.4. "INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as
amended. "INVESTORS" means, collectively, CCBM, RMG and the CSFB Parties.
"LAW" means any statute, law, rule or regulation or any judgment,
order, writ, injunction or decree of any Governmental Entity.
"LIEN" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing statement or like
instrument under the laws of any jurisdiction).
"MAJORITY INTEREST" means those Investors who beneficially own in
excess of 50% of the aggregate number of shares of the then-outstanding Common
Stock plus (without duplication) all shares of Common Stock issuable upon the
exercise of all then-outstanding Warrants.
"MATERIAL ADVERSE CHANGE" means any change, event or occurrence which
has a Material Adverse Effect; provided, however, that any change, event or
occurrence resulting from (i) changes in the price of any Hydrocarbons, or other
changes affecting the oil and gas industry generally or (ii) changes in general
economic conditions, shall not constitute a Material Adverse Change.
"MATERIAL ADVERSE EFFECT" means any material adverse effect on the
business, properties, assets or condition, financial or otherwise, or results of
operations of the Company and its subsidiaries, taken as a whole, or on the
Contributed Assets, taken as a whole, since December 31, 2002.
"NOTICE" shall have the meaning set forth in Section 13.7.
"NET REVENUE INTEREST" means an interest (expressed as a percentage or
decimal fraction) in and to all Hydrocarbons produced and saved from or
attributable to a Proven Property.
"OFFICER'S CERTIFICATE" means a certificate signed in the name of the
Company, by an executive officer of the Company.
"PERSON" means any natural person, corporation, limited partnership,
general partnership, joint stock company, joint venture, association, company,
limited liability company, trust, bank trust company, land trust, business
trust, or other organization, whether or not a legal entity, and any
Governmental Entity.
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"PERMITS" means all licenses, permits, variances, exemptions, orders,
franchises, approvals and other authorizations of or from Governmental Entities
necessary for the conduct of the business of the Company as currently conducted
and as proposed to be conducted by the Company after the Closing.
"PERMITTED ENCUMBRANCES" means:
(a) with respect to Proven Properties, lessors' royalties and any
overriding royalties, reversionary interests, net profits interests,
production payments, carried interests and other similar burdens to the
extent that they do not, individually or in the aggregate, reduce the Net
Revenue Interest of the party named below that shown in Schedule 2.1(a)
(with respect to the CCBM Contributed Assets) or Schedule 2.2(a) (with
respect to the RMG Contributed Assets) or increase the Working Interest of
the party named above that shown in Schedule 2.1(a)
(with respect to the CCBM Contributed Assets) or Schedule 2.2(a) (with
respect to the RMG Contributed Assets) without a corresponding increase in
the Net Revenue Interest;
(b) with respect to Proven Properties, all leases, contracts, unit
agreements, pooling agreements, operating agreements, and other contracts,
agreements and instruments applicable to the Contributed Assets, to the
extent that they do not, individually or in the aggregate, reduce the Net
Revenue Interest of the party named below that shown in Schedule 2.1(a)
(with respect to the CCBM Contributed Assets) or Schedule 2.2(a) (with
respect to the RMG Contributed Assets) or increase the Working Interest of
the party named above that shown in Schedule 2.1(a) or Schedule 2.2(a)
without a corresponding increase in the Net Revenue Interest;
(c) Liens for taxes or assessments that are not yet delinquent or, if
delinquent, are being contested in good faith by appropriate actions as
disclosed on Schedule 2.1(a) (with respect to the CCBM Contributed Assets)
or Schedule 2.2(a) (with respect to the RMG Contributed Assets);
(d) materialmen's, mechanic's, repairman's, employee's, contractor's,
operator's and other similar Liens or charges arising in the ordinary
course of business for amounts that are not yet delinquent (including any
amounts being withheld as provided by law), or if delinquent, are being
contested in good faith by appropriate actions as disclosed on Schedule
2.1(a) (with respect to the CCBM Contributed Assets) or Schedule 2.2(a)
(with respect to the RMG Contributed Assets);
(e) Customary Filings;
(f) rights of reassignment arising upon final intention to abandon or
release any of the Contributed Assets;
(g) easements, rights-of-way, servitudes, permits, surface leases and
other rights in respect of surface operations arising or incurred in the
ordinary course of business that do not materially interfere with the use,
operation or value of the Contributed Assets affected thereby;
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(h) all rights reserved to or vested in any Governmental Entities to
control or regulate any of the Contributed Assets in any manner and all
obligations and duties under all applicable Laws or under any Permit;
(i) any other Liens, defects or irregularities that do not,
individually or in the aggregate, materially detract from the value of or
materially interfere with the use or operation of the Contributed Assets
subject thereto or affected thereby and that would be accepted by a
reasonably prudent purchaser engaged in the business of owning and
operating coalbed methane properties in the Powder River Basin of Wyoming
and Montana;
(j) consents to assignment and similar contractual provisions affecting
the Contributed Assets, provided that, with respect to transfers to the
Contributing Parties or their predecessors in the chain of title, such
consents, where applicable, have been obtained;
(k) preferential rights to purchase and similar contractual provisions
affecting the Contributed Assets, provided that, with respect to transfers
to Contributing Parties or their predecessors in the chain of title, such
preferential rights, where applicable, have expired or been waived;
(l) terms and conditions of governmental licenses and permits affecting
the Contributed Assets;
(m) other matters that the CSFB Parties and the Company waive in
writing;
(n) litigation referenced in Schedule 9.8 or disclosed in writing by
the Contributing Parties prior to the execution of this Agreement;
(o) gas imbalances associated with the Contributed Assets set forth in
Schedule 9.13; and
(p) matters specifically listed on Schedule 2.1(a) or Schedule 2.2(a).
"PERMITTED TRANSFEREE" means, (a) with respect to any CSFB Party, (i)
any Affiliate of any CSFB Party, (ii) any managing director, director, managing
general partner, associate general partner, advisory general partner, general
partner or limited partner of any CSFB Party, (iii) any Associate of any CSFB
Party, and (iv) any trust, the beneficiaries of which, or any corporation,
limited liability company or partnership, the shareholders, members or general
or limited partners of which, include only one or more CSFB Parties, or any of
their respective Associates, (b) with respect to CCBM, (i) Carrizo or any other
Affiliate of CCBM (other than any Person deemed an Affiliate of CCBM through
control of Carrizo or any other publicly traded parent, direct or indirect, of
CCBM), (ii) any Associate of CCBM, (iii) any trust, the beneficiaries of which,
or any corporation, limited liability company or partnership, the shareholders,
members or general or limited partners of which, include only CCBM or any of its
Associates, (c) with respect to RMG, (i) any Affiliate of RMG (other than any
Person deemed an Affiliate of RMG through control of U.S. Energy or any other
publicly traded parent, direct or indirect, of RMG), (ii) any Associate of RMG,
(iii) any trust, the beneficiaries of which, or any corporation, limited
liability company or partnership, the shareholders, members or general or
limited partners of which, include only RMG or any of its Associates; provided,
however, that
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any transferee from any CSFB Party, CCBM or RMG pursuant to clauses (a), (b) or
(c) above will act through DLJ Merchant Banking Partners III, L.P., CCBM and
RMG, respectively.
"PREFERRED STOCK" has the meaning set forth in the recitals.
"PROCEEDINGS" means all proceedings, actions, claims, suits,
investigations and inquiries by or before any arbitrator or Governmental Entity.
"PRO RATA PORTION" has the meaning set forth in 0.
"PROVEN PROPERTY" means the Contributed Assets comprised of discrete
well locations, wells, groups of wells, well completions, multiple well
completions, units, leases or other property or contractual interests which are
classified as a proved developed producing, proved developed nonproducing or
proved undeveloped properties or interests in Schedules 2.1(a) and 2.2(a).
"RECORDS" means books, accounts, ledgers tax returns, financial and
other records, including audit work papers, correspondence and contracts of
every kind related to the Contributed Assets.
"RELATED AGREEMENTS" means the Securityholders Agreement, the
Employment Agreements, the AMI Agreement, the Transition Services Agreements,
the First Source Agreements and the Assignments, Assumptions and Bill of Sales
executed by each of CCBM and RMG.
"RELEASE" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, dispersal, leaching or migration into the
indoor or outdoor environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or into or out of
any property, including the movement of Hazardous Materials through or in air,
soil, surface water, groundwater or property.
"REQUIRED CONSENTS" means all approvals and consents required to be
obtained by the Company, CCBM or RMG with respect to the consummation of each of
the transactions contemplated by this Agreement, including, without limitation,
those set forth on Schedule 9.12 and Schedule 10.12.
"RESPONSE" shall have the meaning set forth in Section 13.3(b).
14
"RMG" has the meaning set forth in the recitals.
"RMG CONTRIBUTED ASSETS" means the assets to be contributed by RMG as
set forth in Schedule 2.2(a)-1 hereto; provided, that the RMG Contributed Assets
shall not include any proceeds, revenues, deductions, credits, refunds, rights
and causes of action or other similar assets attributable to the ownership or
operation of the RMG Contributed Assets prior to the Closing. For the avoidance
of doubt, the RMG Contributed Assets shall not include the Acquired Assets but
shall include all rights and interests of RMG arising under the First Source
Agreements notwithstanding anything to the contrary in any Assignment,
Assumption and Bill of Sale or other Related Agreement.
"RMG CONTRACTS" has the meaning set forth in Section 10.10.
"RMG CONTRIBUTION" has the meaning set forth in Section 2.2(a).
"RMG PLEDGE" means the Pledge Agreement between RMG and the Company.
"RMG TRANSITION SERVICES AGREEMENT" means a Transition Services
Agreement to be entered into between the Company and RMG concurrently with the
execution of this Agreement in the form of Exhibit E attached hereto.
"SECURITIES" means, collectively, the Common Stock (including Common
Stock issued upon exercise of the Warrants and/or pursuant to Section 2.3),
Preferred Stock and Warrants.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR MANAGER" shall have the meaning set forth in Section 13.3(b).
"SHARES" means, collectively, the shares of Preferred Stock and Common
Stock.
"SECURITYHOLDERS AGREEMENT" means the Securityholders Agreement among
the Company and holders of Securities in the form attached hereto as Exhibit F,
as amended and in effect from time to time.
"SUBSEQUENT CSFB CONTRIBUTION" has the meaning set forth in Section
2.5(a).
"TAXES" means all federal, state, county, local, foreign or other
taxes, charges, fees, levies, imposts, duties, licenses or other governmental
assessments, together with any interest, penalties, additions to tax or
additional amounts imposed with respect thereto.
"THIRD PARTY CLAIM" means a Claim that is not a Claim by the Company,
the Investors or any of their Affiliates for their own losses.
"THRESHOLD AMOUNT" means $75,000.
"TRANCHE A PRICE" the meaning set forth in Section 2.3(a).
"TRANCHE A SHARES" has the meaning set forth in Section 2.3(a).
"TRANCHE B PRICE" the meaning set forth in Section 2.3(a).
"TRANCHE B SHARES" has the meaning set forth in Section 2.3(a).
"TRANSITION SERVICES AGREEMENTS" means, collectively, the RMG
Transition Services Agreement and the Carrizo Transition Services Agreement.
"WARRANTS" has the meaning set forth in the recitals.
"WELLS" has the meaning set forth in Section 6.6(d).
15
"WORKING INTEREST" means, with respect any Contributing Party, the
percentage interest of such Contributing Party of costs and expenses
attributable to the maintenance, development and operation of a Proven Property,
prior to giving effect to rights of non-consent hereafter exercised by others
and claims with respect to non-payment by defaulting parties to operating
agreements and similar contracts.
ARTICLE II.
ISSUANCE OF SECURITIES
Section 2.1 Initial CCBM Contribution.
(a) Subject to the terms and conditions of this Agreement, at
the Closing, CCBM shall contribute, convey, assign, transfer and
deliver to the Company all of its right, title and interest at the time
of the Closing in and to the CCBM Contributed Assets (the "CCBM
CONTRIBUTION"), and the Company shall assume the Assumed CCBM
Liabilities. The CCBM Contribution and the assumption of the Assumed
CCBM Liabilities will be effected by the execution and delivery by CCBM
to the Company of a duly executed Assignment, Assumption and Bill of
Sale together with such additional assignments as may be required by
Governmental Entities to effect the assignment to the Company of CCBM's
interest in the leases and other properties and interests included in
the CCBM Contributed Assets.
(b) Notwithstanding any other provision of this Agreement, the
Company shall not assume or have any liability hereunder with respect
to any other liabilities or obligations of CCBM not specifically
included in the Assumed CCBM Liabilities, whether known or unknown,
liquidated or unliquidated, contingent or fixed (the "EXCLUDED CCBM
LIABILITIES"), including, without limitation:
(i) liabilities to the extent arising out of the
business operations of CCBM or its ownership of the CCBM
Contributed Assets prior to the Closing Date;
(ii) liabilities to the extent arising out of any
businesses operated and assets owned by CCBM other than the
CCBM Contributed Assets, whether incurred before or after the
Closing Date; and
(iii) liabilities or obligations for CCBM to pay any
Taxes, including any Taxes incurred by CCBM arising out of its
business operations or its ownership of the CCBM Contributed
Assets prior to the Closing Date.
(c) In consideration for all of the foregoing, at the Closing,
subject to the terms and conditions of this Agreement, the Company will
issue to CCBM 75,000 shares of Common Stock and will grant the option
described in Section 2.3(a).
Section 2.2 Initial RMG Contribution.
(a) Subject to the terms and conditions of this Agreement, at
the Closing, RMG shall contribute, convey, assign, transfer and deliver
to the Company all of its right,
16
title and interest at the time of the Closing in and to the RMG
Contributed Assets (the "RMG CONTRIBUTION"), and the Company shall
assume the Assumed RMG Liabilities. The RMG Contribution and the
assumption of the Assumed RMG Liabilities will be effected by delivery
by RMG to the Company of a duly executed Assignment, Assumption and
Bill of Sale together with such additional assignments as may be
required by Governmental Entities to effect the assignment to the
Company of RMG's interest in the leases included in the RMG Contributed
Assets.
(b) Notwithstanding any other provision of this Agreement, the
Company shall not assume or have any liability hereunder with respect
to any other liabilities or obligations of RMG not specifically
included in the Assumed RMG Liabilities, whether known or unknown,
liquidated or unliquidated, contingent or fixed (the "EXCLUDED RMG
LIABILITIES"), including, without limitation:
(i) liabilities to the extent arising out of the
business operations of RMG or its ownership of the RMG
Contributed Assets prior to the Closing Date;
(ii) liabilities to the extent arising out of any
businesses operated and assets owned by RMG other than the RMG
Contributed Assets, whether incurred before or after the
Closing Date; and
(iii) liabilities or obligations for RMG to pay any
Taxes, including any Taxes incurred by RMG arising out of its
business operation or its ownership of the RMG Contributed
Assets prior to the Closing Date.
(c) In consideration for all of the foregoing, at the Closing,
subject to the terms and conditions of this Agreement, the Company will
issue to RMG 75,000 shares of Common Stock and will grant the option
described in Section 2.3(b).
Section 2.3 Option of the Contributing Parties to Purchase Additional
Shares.
(a) For so long as CCBM or any of its Permitted Transferees
shall own of record Common Stock, CCBM shall have the continuing
option, upon 10 Business Days' notice to the Company, to purchase in
one or more transactions after the Closing Date (i) a Pro Rata Portion
of up to 25,000 additional shares of Common Stock ("TRANCHE A SHARES")
at a purchase price per share equal to $100 as increased by 10% per
annum compounded quarterly beginning on the Closing Date and accruing
daily through the date of the purchase of such shares (the "TRANCHE A
PRICE"), and (ii) a Pro Rata Portion of up to 25,000 additional shares
of Common Stock ("TRANCHE B SHARES, and together with Tranche A Shares,
"ADDITIONAL SHARES") at a purchase price equal to $100 per share as
increased by 20% per annum compounded quarterly beginning on the
Closing Date and accruing daily through the date of the purchase of
such shares (the "TRANCHE B PRICE"). Notwithstanding anything to the
contrary contained herein, CCBM may not purchase Tranche B Shares until
such time as CCBM has purchased all of the Tranche A Shares then
available to it.
(b) For so long as RMG or any of its Permitted Transferees
shall own of record Common Stock, RMG shall have the continuing option
upon 10 Business Days'
17
notice to the Company, to purchase in one or more transactions after
the date of this Agreement (i) a Pro Rata Portion of up to 25,000
Tranche A Shares at a purchase price per share equal to the Tranche A
Price and (ii) a Pro Rata Portion of up to 25,000 Tranche B Shares at a
purchase price per share equal to the Tranche B Price. Notwithstanding
anything to the contrary contained herein, RMG may not purchase Tranche
B Shares until such time as RMG has purchased all of the Tranche A
Shares then available to it.
(c) For purposes of this Section 2.3, "PRO RATA PORTION" means
a number of Tranche A Shares or Tranche B Shares, as the case may be,
equal to 25,000 multiplied by a fraction, (i) the numerator of which is
an amount equal to the product of (A) the number of shares of Common
Stock and Preferred Stock purchased on or prior to such date by the
CSFB Parties pursuant to this Agreement as of the date of purchase of
any Additional Shares and (B) $100.00, and (ii) the denominator of
which is equal to $30,000,000; provided, that such number shall be
increased or decreased, as appropriate, in the event that prior to such
purchase there shall have occurred any subdivision, split-up,
combination or reverse split of shares of Common Stock.
(d) The purchase price for all Additional Shares shall be
payable in cash and shall be made by wire transfer of immediately
available funds to an account or accounts designated by the Company in
writing not later than at least two Business Days prior to the date of
the purchase.
(e) Except with respect to Permitted Transferees, the option
to purchase Additional Shares pursuant to this Agreement may not be
assigned without the prior written consent of a Majority Interest.
Section 2.4 Initial CSFB Contribution.
(a) Subject to the terms and conditions of this Agreement, at
the Closing the CSFB Parties shall contribute as a capital contribution
to the Company (the "INITIAL CSFB CONTRIBUTION"), and the Company shall
accept from the CSFB Parties, the following cash contributions:
<Table>
<Caption>
CSFB Party Cash Contribution
- ---------- -----------------
DLJ Merchant Banking Partners III, L.P. 13,273,904
DLJ Offshore Partners III, C.V. 707,658
DLJ Offshore Partners III-1, C.V. 236,866
DLJ Offshore Partners III-2, C.V. 168,658
Millennium Partners II, L.P. 42,042
DLJ MB Partners III GmbH & Co. KG 111,916
MBP III Plan Investors, L.P. 3,098,956
-----------
TOTAL: $17,640,000
</Table>
Such contributions shall be made by wire transfer of immediately
available funds to an account or accounts designated by the Company in
writing at least two Business Days prior to the Closing.
18
(b) In consideration of the foregoing, at the Closing, subject
to the terms and conditions of this Agreement, the Company will issue
to the CSFB Parties the number of Securities set forth below:
<Table>
<Caption>
Shares of
CSFB Party Common Stock Preferred Stock Warrants
- ---------- ------------ --------------- --------
DLJ Merchant Banking Partners III, L.P. 37,625 97,823 97,823
DLJ Offshore Partners III, C.V 2,006 5,215 5,215
DLJ Offshore Partners III-1, C.V 671 1,746 1,746
DLJ Offshore Partners III-2, C.V 478 1,243 1,243
Millennium Partners II, L.P. 119 310 310
DLJ MB Partners III GmbH & Co. KG 317 825 825
MBP III Plan Investors, L.P. 8,784 22,838 22,838
------- -------- --------
TOTALS: 50,000 130,000 130,000
</Table>
Section 2.5 Subsequent CSFB Contribution.
(a) At any time prior to July 1, 2004, the Company may request
(a "CAPITAL REQUEST") that the CSFB Parties make and, subject to the
terms and conditions of this Agreement, the CSFB Parties shall make, an
additional cash capital contribution or contributions to the Company
(each, a "SUBSEQUENT CSFB CONTRIBUTION"); provided:
(i) the aggregate amount of all Subsequent Capital
Contributions shall not exceed $11,760,000 (the "COMMITMENT
AMOUNT");
(ii) no Subsequent Capital Contribution shall be less
than $4,000,000 (unless at such time the Commitment Amount
remaining shall be less than $4,000,000);
(iii) the CSFB Parties shall have received not less
than 20 Business Days' written notice of the Subsequent CSFB
Contribution from the Chief Executive Officer of the Company;
and
(iv) a majority of the Board shall have authorized
such Capital Request and approved of such Subsequent Capital
Contribution for use in connection with (A) the drilling of
coal bed methane wells, for remedial work on coal bed methane
wells (in either case, located on the Contributed Assets or
the Acquired Assets) or the creation or improvement of
infrastructure to promote the gathering and production of coal
bed methane from such wells or (B) an acquisition of assets;
provided that such acquisition shall have been approved by the
CSFB Parties.
(b) In consideration of the foregoing, for each $980,000 in
Subsequent Capital Contribution received from the CSFB Parties, the
Company will issue to the CSFB Parties 10,000 shares of Preferred Stock
and 10,000 Warrants.
(c) The Subsequent CSFB Contribution shall be made by wire
transfer of immediately available funds to an account or accounts
designated by the Company in
19
writing not later than at least two Business Days prior to the date of
such Subsequent CSFB Contribution.
Section 2.6 Grant of Additional Warrants. In the event the Company
shall at any time on or after June 30, 2005 elect to pay dividends on the
Preferred Stock in kind, then, in accordance with Section 2(b) of the
Certificate of Designations, for each additional share of Preferred Stock
distributed as a dividend payment, the Company shall deliver a single Warrant to
the holders of each share of Preferred Stock on which each in kind dividend is
paid. The Warrants, if any, so distributed shall be exercisable for shares of
Common Stock at a price per share equal to the exercise price of the outstanding
Warrants on the day of such distribution.
Section 2.7 Allocation Agreement. Each of the Company, RMG, CCBM and
the CSFB Parties agree to the following allocations in the manner set forth on
Exhibit G for all purposes including, without limitation, for purposes of U.S.
federal, state and local income tax:
(a) An allocation of the value of the Initial CSFB
Contribution between the Warrants and the Preferred Stock.
(b) An allocation of the value of the CCBM Contributed Assets,
less the Assumed CCBM Liabilities, between the 75,000 shares of Common
Stock and the option described in Section 2.3(a).
(c) An allocation of the value of the RMG Contributed Assets,
less the Assumed RMG Liabilities, between the 75,000 shares of Common
Stock and the option described in Section 2.3(b).
(d) An allocation of the value of the 75,000 shares of Common
Stock and the option described in Section 2.3(a), increased by the
amount of the Assumed CCBM Liabilities, among the CCBM Contributed
Assets.
(e) An allocation of the value of the 75,000 shares of Common
Stock and the option described in Section 2.3(b), increased by the
amount of the Assumed RMG Liabilities, among the RMG Contributed
Assets.
Section 2.8 Disclaimers. EXCEPT AS EXPRESSLY REPRESENTED OTHERWISE IN
ARTICLES IX OR X, OR IN THE CONVEYANCE INSTRUMENTS TO BE DELIVERED BY EITHER
CCBM OR RMG, AS THE CASE MAY BE, TO THE COMPANY HEREUNDER, WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, CCBM AND RMG, AS THE CASE MAY BE, EXPRESSLY
DISCLAIM ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, ORAL OR WRITTEN, AS
TO (i) TITLE TO ANY OF THE CONTRIBUTED ASSETS, (ii) THE CONTENTS, CHARACTER OR
NATURE OF ANY DESCRIPTIVE MEMORANDUM, OR ANY REPORT OF ANY PETROLEUM ENGINEERING
CONSULTANT, OR ANY GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, RELATING TO THE
CONTRIBUTED ASSETS, PROVIDED, HOWEVER, NOTWITHSTANDING THE FOREGOING, RMG
REPRESENTS AND WARRANTS, AND CCBM REPRESENTS AND WARRANTS THAT TO ITS KNOWLEDGE,
THAT ANY HISTORICAL INFORMATION AS TO PRODUCTION AND SALES VOLUMES, VOLUMES OF
20
PRODUCED WATER AND PRICING OF HYDROCARBON SALES RELATED TO THE CCBM CONTRIBUTED
ASSETS AND THE RMG CONTRIBUTED ASSETS, RESPECTIVELY PROVIDED TO ANY SUCH
CONSULTANT FOR USE IN CONNECTION WITH THE PREPARATION OF ANY SUCH REPORT IS
ACCURATE, (iii) THE QUANTITY, QUALITY OR RECOVERABILITY OF HYDROCARBONS IN OR
FROM THE CONTRIBUTED ASSETS, (iv) ANY ESTIMATES OF THE VALUE OF THE CONTRIBUTED
ASSETS OR FUTURE REVENUES GENERATED BY THE CONTRIBUTED ASSETS, (v) THE
PRODUCTION OF HYDROCARBONS FROM THE CONTRIBUTED ASSETS, OR WHETHER PRODUCTION
HAS BEEN CONTINUOUS, OR IN PAYING QUANTITIES, (vi) THE MAINTENANCE, REPAIR,
CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE CONTRIBUTED
ASSETS, OR (vii) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE
AVAILABLE OR COMMUNICATED TO THE OTHER INVESTORS, THE COMPANY OR ANY OF THEIR
AFFILIATES, OR ANY OF THEIR EMPLOYEES, AGENTS, CONSULTANTS, REPRESENTATIVES OR
ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR
ANY DISCUSSION OR PRESENTATION RELATING THERETO, AND FURTHER DISCLAIM ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY
EQUIPMENT, MACHINERY, TOOLS, FIXTURES AND OTHER TANGIBLE PROPERTY, IT BEING
EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES HERETO THAT THE COMPANY SHALL BE
DEEMED TO BE OBTAINING EQUIPMENT, MACHINERY, TOOLS, FIXTURES AND OTHER TANGIBLE
PROPERTY IN ITS PRESENT STATUS, CONDITION AND STATE OF REPAIR, "AS IS" AND
"WHERE IS" WITH ALL FAULTS AND THAT THE COMPANY AND THE OTHER INVESTORS HAVE
MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS THEY DEEM APPROPRIATE WITH RESPECT
THERETO.
ARTICLE III.
CLOSING
The issuance and delivery of the Securities to be purchased by the
Investors shall take place at a closing (the "CLOSING") to be held at the
Houston offices of Akin Gump Strauss Hauer & Feld LLP on such date (the "CLOSING
DATE") which shall be on the day which is two consecutive Business Days after
the date on which the last of the conditions set forth in Article V is fulfilled
or waived or is capable of being fulfilled at the Closing or at such other time
or place as the parties hereto shall agree.
ARTICLE IV.
CONDITIONS TO CLOSING
Section 4.1 Closing Conditions of the Investors. Each Investor's
obligation to acquire the Securities to be acquired by it hereunder on the
Closing Date is subject to the satisfaction or waiver, on or before the Closing
Date, of the conditions contained in this Section 4.1.
21
(a) The representations and warranties of the Company
contained in this Agreement shall be true and correct in all respects
at and as of the Closing Date, as if made at and as of such date
(except that representations and warranties made as of a specific date
need be true only as of that date).
(b) The Company shall have performed in all material respects
all of its obligations under this Agreement required to be performed by
it on or prior to the Closing Date.
(c) Each Investor shall have received (i) an Officer's
Certificate signed by the President of the Company, dated the Closing
Date, attaching (A) a true and complete copy of the Company's
Certificate of Incorporation, together with all amendments thereto, as
filed with the Secretary of State of the State of Delaware in the form
attached hereto as Exhibit H, (B) a true and complete copy of the
Certificate of Designations, as filed with the Secretary of State of
the State of Delaware and in the form attached hereto as Exhibit I, (C)
a true and complete copy of the Company's Bylaws in effect on the date
thereof in the form attached hereto as Exhibit J, (D) certificates of
good standing of the appropriate officials of the jurisdiction of
formation of the Company and of each state or other jurisdiction in
which the Company is qualified to transact business, and is transacting
business, except those other jurisdictions where the failure to be so
qualified would not have a Material Adverse Effect and (E) a true and
correct copy of the resolutions of the Board authorizing and approving
the execution of this Agreement and each Related Agreement and the
performance of the transactions contemplated hereby and thereby and
(ii) a Closing Certificate signed by the President of the Company,
dated the Closing Date, in the form of Exhibit K-1 attached hereto.
(d) The offering and sale of the Securities under this
Agreement shall have complied with all applicable requirements of
federal and state securities laws.
(e) (i) There shall be no Proceedings pending or, to the
Company's knowledge threatened, against or affecting the Company or any
of its properties or rights, or any of its Affiliates, Associates,
officers or Directors, before any Governmental Entity which (A) seeks
to restrain, enjoin or prevent the consummation of the transactions
contemplated by this Agreement or (B) questions the validity or
legality of any such transaction, and (ii) to the Company's knowledge
there shall be no valid basis for any such Proceeding.
(f) The Company shall have duly received all Approvals,
Permits and certificates, other than Customary Filings, by or of all
Governmental Entities required for the issuance of the Securities by
the Company, the execution and delivery of the Related Agreements and
the consummation of the transactions contemplated hereby and thereby,
and all of the foregoing shall be in full force and effect at the
Closing Date.
(g) The initial members of the Board shall have been appointed
Directors of the Company, as specified in the Securityholders
Agreement, effective upon the Closing.
22
(h) The Company and each of Peter G. Schoonmaker and Gary W.
Uhland shall have entered into the Employment Agreements.
(i) The Company and RMG shall have entered into the RMG
Transition Services Agreement.
(j) The Company and Carrizo shall have entered into the
Carrizo Transition Services Agreement.
(k) The Company and the Investors shall have entered into the
Securityholders Agreement and the AMI Agreement.
(l) The 2003 Capital Expenditures Budget, a copy of which is
attached as Exhibit L hereto, shall have been approved by the Board.
(m) The 2003 General and Administrative Expenses Budget, a
copy of which is attached as Exhibit M hereto, shall have been approved
by the Board.
(n) The Company shall have delivered to the Investors a
detailed statement setting forth the uses of the proceeds resulting
from the offer and sale of the Securities pursuant to this Agreement,
which statement shall be acceptable to the Investors.
(o) The Company shall have delivered to the Investors a
five-year financial forecast for the Company which forecast shall be
based on assumptions believed reasonable by management for the Company
and otherwise acceptable to the Investors; provided that,
notwithstanding any other provisions hereof, it is recognized by the
Investors that such projections and any reserve report delivered in
connection with this Agreement as they relate to future events are not
to be viewed as fact and that the actual results during the period or
periods covered by the projections or reserve reports may differ from
the projected results set forth therein by a material amount; and,
without limiting the generality of the foregoing, no representation or
warranty is made in this Agreement as to future prices of hydrocarbons
or as to the timing or results of future exploration or production
operations.
(p) Each of CCBM and RMG shall have delivered to the Company
possession of the certificates representing or evidencing the Common
Stock issued to such parties pursuant hereto.
(q) Each of the Contributions and the Initial CSFB
Contribution shall be made concurrently and each Investor's obligation
to make its respective contribution is conditioned upon the concurrent
contribution of each other Investor.
Section 4.2 Closing Conditions of the CSFB Parties. In addition to the
conditions set forth in Section 4.1 above, the obligation of the CSFB Parties to
make the Initial CSFB Contribution and to acquire Securities in connection
therewith, is further subject to the satisfaction or waiver, on or prior to the
Closing Date, of the conditions contained in this Section 4.2.
23
(a) Baker Botts L.L.P., counsel to CCBM, shall have delivered
a legal opinion dated the Closing Date substantially in the form
attached hereto as Exhibit N to the CSFB Parties.
(b) Davis Graham & Stubbs LLP, counsel to RMG, shall have
delivered a legal opinion dated the Closing Date substantially in the
form attached hereto as Exhibit O to the CSFB Parties.
(c) All conditions precedent to the consummation of the
Acquisitions shall have been satisfied or waived except for the payment
of the purchase price with respect thereto, and RMG shall have
delivered true and correct copies of the First Source Agreements and
such agreements shall have been validly and fully executed by the
purchasers and sellers party thereto.
(d) The representations and warranties of CCBM and RMG
contained in this Agreement shall be true and correct in all respects
at and as of the Closing Date, as if made at and as of such date
(except that representations and warranties made as of a specific date
need be true only as of that date).
(e) CCBM and RMG shall have performed in all material respects
all of their respective obligations under this Agreement required to be
performed by them on or prior to the Closing Date.
(f) The CSFB Parties shall have received all such counterpart
originals or certified or other copies of such documents as they may
reasonably request.
(g) The CSFB Parties shall have been furnished with reasonably
requested evidence of all Required Consents, other than Customary
Filings, and each such Required Consent shall be unconditional or be
subject to conditions which have been satisfied on or before the
Closing Date.
(h) There shall have occurred no Material Adverse Change.
Section 4.3 Closing Conditions of CCBM. In addition to the conditions
set forth in Section 4.1 above, the obligation of CCBM to acquire the Shares to
be acquired by it hereunder on the Closing Date is further subject to the
satisfaction or waiver, on or before the Closing Date, of the conditions
contained in this Section 4.3.
(a) The representations and warranties of the CSFB Parties and
RMG contained in this Agreement shall be true and correct in all
respects at and as of the Closing Date, as if made at and as of such
date (except that representations and warranties made as of a specific
date need be true only as of that date).
(b) The CSFB Parties and RMG shall have performed in all
material respects all of their respective obligations under this
Agreement required to be performed by them on or prior to the Closing
Date.
24
(c) CCBM shall have received all such counterpart originals or
certified or other copies of such documents as it may reasonably
request.
Section 4.4 Closing Conditions of RMG. In addition to the conditions
set forth in Section 4.1 above, the obligation of RMG to acquire the Shares to
be acquired by it hereunder on the Closing Date is further subject to the
satisfaction or waiver, on or before the Closing Date, of the conditions
contained in this Section 4.3.
(a) The representations and warranties of the CSFB Parties and
CCBM contained in this Agreement shall be true and correct in all
respects at and as of the Closing Date, as if made at and as of such
date (except that representations and warranties made as of a specific
date need be true only as of that date).
(b) The CSFB Parties and CCBM shall have performed in all
material respects all of their respective obligations under this
Agreement required to be performed by them on or prior to the Closing
Date.
(c) RMG shall have received all such counterpart originals or
certified or other copies of such documents as it may reasonably
request.
Section 4.5 Closing Conditions of the Company. The Company's obligation
to issue the Securities to any Investor hereunder at any Closing is subject to
the satisfaction or waiver, on or before the applicable Closing Date of the
conditions contained in this Section 4.5.
(a) The representations and warranties of such Investor
contained in Article VIII hereof shall be true in all respects at and
as of the applicable Closing Date, as if made at and as if such date
(except that representations and warranties made as of a specific date
need be true only as of that date).
(b) Each of CCBM and RMG shall have delivered to the Company
an Officer's Certificate in the form of Exhibit K-2, dated the Closing
Date.
(c) Such Investor shall have performed in all material
respects all of its obligations under this Agreement required to be
performed by it on or prior to the applicable Closing Date.
(d) In the case of RMG and CCBM, each of RMG and CCBM,
respectively, shall have delivered to the Company possession of the
certificates representing the Common Stock issued to such Investor
pursuant hereto.
(e) The Company shall have duly received all Approvals,
Permits and certificates, other than Customary Filings, by or of all
Governmental Entities required for the issuance of the Securities by
the Company, the execution and delivery of the Related Agreements and
the consummation of the transactions contemplated hereby and thereby,
and all of the foregoing shall be in full force and effect at the
Closing Date.
25
ARTICLE V.
CONDITIONS TO THE SUBSEQUENT CSFB CONTRIBUTION
Section 5.1 Conditions to the Subsequent CSFB Contribution. The
obligation of the CSFB Parties to make the Subsequent CSFB Contribution and to
acquire the Securities to be acquired by them in connection therewith is subject
to the prior satisfaction or waiver of the conditions contained in this Section
5.1.
(a) The representations and warranties of the Company
contained in this Agreement shall be true and correct at and as of the
date of the Subsequent CSFB Contribution, as if made at and as of such
date (except that representations and warranties made as of a specific
date need be true only as of that date) except for such breaches that
would not, individually or in the aggregate, have a Material Adverse
Effect.
(b) The Company shall have performed in all material respects
all of its obligations under this Agreement and any Related Agreement
required to be performed by it on or prior to the date of the
Subsequent CSFB Contribution.
(c) The representations and warranties of CCBM and RMG
contained in this Agreement shall be true and correct at and as of the
date of the Subsequent CSFB Contribution, as if made at and as of such
date (except that representations and warranties made as of a specific
date need be true only as of that date).
(d) CCBM and RMG shall have performed in all material respects
all of their respective obligations under this Agreement and any
Related Agreement to which each is a party required to be performed by
it on or prior to the date of the Subsequent CSFB Contribution.
(e) There shall have occurred no Material Adverse Change nor
any change, event or occurrence which has a material adverse effect on
the prospects of the Company and its subsidiaries, taken as a whole, or
on the Contributed Assets and the Acquired Assets, taken as a whole,
since the Closing Date.
(f) There shall not have occurred any breach by the Company in
any material term or provision of the Preferred Stock or any of the
Related Agreements.
(g) Prior to any Subsequent CSFB Contribution, the Company
shall have delivered a use of proceeds statement indicating that the
proceeds of such contribution shall be used only in connection with (i)
expenditures approved by a majority of the Board with respect to the
drilling of coal bed methane wells, for remedial work on coal bed
methane wells (in either case, located on the Contributed Assets or the
Acquired Assets) or the creation or improvement of infrastructure to
promote the gathering and production of coal bed methane from such
wells or (ii) any acquisition approved by the CSFB Parties, which
approval may be withheld in their sole and absolute discretion.
26
ARTICLE VI.
COVENANTS
Section 6.1 Cooperation, Approvals, Further Action. The Company and the
each of the Investors covenants and agrees to cooperate and use all commercially
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement, including cooperating
fully with the other parties to obtain all Approvals that may be necessary or
which may be reasonably requested by the Company or the Investors to consummate
the transactions contemplated by this Agreement and the Related Agreements. In
case at any time after the date hereof any commercially reasonable further
action is reasonably necessary or desirable to carry out the purposes of this
Agreement, the parties hereto shall take all such reasonably necessary action.
Without limiting the foregoing, the parties hereto acknowledge that CCBM and RMG
shall be responsible for obtaining any Required Consents prior to the Closing
and CCBM and RMG agree to assist and cooperate with the Company in obtaining any
approvals of any Governmental Entities with respect to the assignment of the
leases included in the Contributed Assets.
Section 6.2 Closing Conditions; Adverse Effect. Each of CCBM and RMG
covenants and agrees, from the date hereof until the earlier of the Closing Date
or the termination of this Agreement, (i) not to take any action that will, or
is reasonably likely to, (A) cause any breach of its respective representations
and warranties contained herein such that any condition to the Closing contained
herein would not be satisfied or (B) adversely affect the Contributed Assets and
(ii) not to amend or otherwise modify any term or provision of any Related
Agreement, in each case, without the prior written consent of the CSFB Parties;
provided, however, that such consent shall be deemed given unless the CSFB
Parties notify CCBM and RMG to the contrary within three Business Days of
receipt of a written request therefor.
Section 6.3 Supplements to Schedules. Each of the parties hereto agree
that any party hereto may supplement or amend any schedule required by Article
VII, Article VIII, Article IX or Article X with respect to any matter hereafter
arising which, if existing or occurring at the date of this Agreement, would
have been required to be set forth or described in such schedules; provided,
however, that no supplement or amendment of any schedule made pursuant to this
Section 6.3 shall be deemed to cure any preexisting breach of any representation
or warranty made in this Agreement unless the parties agree thereto in writing.
27
Section 6.4 Access. At all times from and after the date hereof until
the Closing, each of CCBM and RMG shall afford the other Investors and their
respective counsel and other authorized representatives reasonable access to its
respective properties, employees and officers and subsidiaries and to all
Records, in each case, as related to the Contributed Assets provided, however,
that each of CCBM and RMG reserves the right to withhold any information if
disclosure is prohibited by an agreement with a third party. The foregoing
notwithstanding, each of CCBM and RMG shall use its commercially reasonable
efforts to obtain any such third party consent required in connection with the
provision to the other Investors of any information related to the Contributed
Assets.
Section 6.5 Confidentiality. Each Investor shall, and shall cause its
representatives to, hold confidential all information relating to CCBM and RMG
or any of their respective subsidiaries it has received from such party or any
of its representatives and any information such Investor receives (whether
before or after the date hereof) from CCBM or RMG or any of their respective
representatives as a result of Section 6.4 above or such Investor's ownership of
Securities; provided, however, that the foregoing shall not apply to (A)
information that is or becomes generally available to the public other than as a
result of a disclosure by such Investor or any of its Affiliates or
representatives in violation of this Section 6.5, (B) information that is or
becomes available to such Investor or any of its representatives on a
nonconfidential basis from a source other than CCBM or RMG or their respective
Affiliates or representatives, provided that such source is not known by such
Investor to be bound by a confidentiality agreement with, or other obligation of
secrecy to, the Investor to whom such duty is owed or any other party, (C)
disclosures to any partner, Affiliate, subsidiary or parent company of such
Investor for the purpose of evaluating its investment in the Company (in which
case, such Investor shall cause each such Person to hold the information
confidential in accordance with this Section 6.5) or (D) information that is
required to be disclosed by such Investor or any of its representatives as a
result of any applicable Law; provided further, that in the event information is
required to be disclosed pursuant to clause (D) above, the Person proposing such
disclosure shall provide the applicable other Investor, to the extent
practicable an opportunity, reasonably in advance of such disclosure, to review
and comment on the form and content of the proposed disclosure. The foregoing to
the contrary notwithstanding, the obligations of confidentiality contained
herein, as they relate to the transactions contemplated by this Agreement, shall
not apply to the tax structure or tax treatment of such transactions, and each
party hereto (and any of their respective employees, representatives, or agents)
may disclose to any and all Persons, without limitation of any kind, the tax
structure and tax treatment of the transactions contemplated by this Agreement
and all materials of any kind (including opinions or other tax analysis) that
are provided to such Person relating to the tax treatment and tax structure of
such transactions (provided that such disclosure shall not include the name (or
other identifying information not relevant to the tax structure or tax
treatment) of any Person and shall not include information for which
nondisclosure is reasonably necessary in order to comply with applicable
securities laws).
Section 6.6 Additional Affirmative Covenants of the Company. All
covenants contained in this Section 6.6 shall be given independent effect. The
provisions of this Section 6.6 are for the benefit of Investors for so long as
they hold any Securities.
28
(a) The Company covenants that (i) all shares of Common Stock
that may be issued upon the exercise of the Warrants and all of the
Additional Shares that may be issued pursuant to this Agreement will,
upon issuance and upon full payment therefor, be validly issued, fully
paid and nonassessable (except to the extent specified in the Delaware
General Corporation Law) and free from all taxes, liens and charges
(other than under the Securityholders Agreement) with respect to the
issuance thereof and (ii) the Company will at all times have authorized
and reserved a sufficient number of shares of Common Stock to permit
the (A) issuance of all of the Additional Shares and (B) during the
period within which the Warrants may be exercisable for shares of
Common Stock, the exercise of all Warrants.
(b) Within 60 days after Closing, upon presentation of
reasonably requested documentary proof the Company will (i) pay, or
reimburse the CSFB Parties for the payment of, all reasonable
out-of-pocket expenses arising in connection with the transactions and
other agreements and instruments contemplated by this Agreement with
respect to the Closing, including the reasonable fees and expenses of
the CSFB Parties' counsel, advisors and consultants and (ii) reimburse
RMG for the fees payable under that certain Financial Advisory
Agreement, dated the 24th day of July, 2002, between U.S. Energy and
Sanders Morris Harris Inc. which are actually incurred by U.S. Energy,
provided such reimbursement shall not exceed $1,150,000 in the
aggregate.
(c) The Company will take all actions necessary to become duly
qualified to own, hold and operate the Contributed Assets and the
Acquired Assets, shall comply with all bonding requirements to own,
hold and operate such assets and shall obtain insurance with respect to
such assets of the type and in amounts customary for the oil and gas
industry.
(d) Prior to Closing, the Company shall cause to be delivered
to the CSFB Parties title opinions and other title information with
respect to the producing wells, group of wells and units and leases and
well locations ("WELLS") contributed by the Contributing Parties and
the Wells acquired upon consummation of the Acquisitions, in each case
in form and substance reasonably acceptable to the CSFB Parties.
Section 6.7 Taxes. Each Contributing Party shall be severally
responsible for, and shall pay, when due, all unpaid ad valorem property,
production, windfall profit, severance and similar taxes and assessments based
upon or measured by the ownership of such party's Contributed Assets or the
production of Hydrocarbons or the receipt of proceeds therefrom attributable to
the period prior to the Closing Date. After the Closing Date, when the Company
receives tax statements for the Contributed Assets from the appropriate taxing
authorities for which the Contributing Parties are responsible in whole or in
part, the Company shall deliver to each of the Contributing Parties a copy of
such statements, together with the amount, if applicable, of each Contributing
Party's pro rata share thereof, and each Contributing Party shall
pay to the Company the amount for which it is responsible within three Business
Days of receipt of such statement. For purposes of the immediately preceding
sentence, a Contributing Party's pro rata share of such Taxes shall be based on
(a) in the case of any such Taxes that are determined by reference to
production, windfall profit or severance, the percentage of production, income
or profits, as applicable, for the period to which such Taxes relates that is
29
produced or earned prior to the Closing Date and (b) in the case of any other
such Taxes, the percentage of the actual period to which such Taxes relate that
precedes the Closing Date.
Section 6.8 Public Disclosures. Any public announcements regarding this
Agreement, the Related Agreements or the transactions contemplated hereby and
thereby, or the financial performance of the Company shall be made only with the
mutual consent of all Investors, which consent shall not be unreasonably
withheld or delayed, except as may be required, and to the extent required, by
applicable law or stock exchange regulations, in which case the Investor
required to issue the public announcement shall allow the other Investors
reasonable time to comment on such release or statement in advance of its
issuance.
Section 6.9 Brokers' Fees. No broker, finder or investment banker
(other than Sanders Morris Harris, the fees and expenses of which shall be paid
by RMG) is entitled to any brokerage, finder's fee or other fee or commission
payable by the Company or any subsidiary of the Company in connection with the
transactions contemplated by this Agreement based upon arrangements made by and
on behalf of Company or any subsidiary of the Company.
Section 6.10 Company Records. Until the later of six years after the
Closing Date and two years after the expiration of any related indemnification
obligations of the Investors in connection with this Agreement, the Company
shall:
(a) (i) preserve and retain the Records, (ii) furnish copies
of the Records, to the extent not retained by the Investors, to the
Investors at the Investors' expense and (iii) make such Records
available to the Investors and their respective officers, employees,
consultants and representative upon reasonable notice and during normal
business hours; provided, however, that (A) in the event that the
Company transfers all or a portion of the Contributed Assets to any
third party during such period, the Company may transfer to such third
party all or a portion of the Records relating to the Contributed
Assets being transferred, provided that such third party expressly
assumes in writing the obligations of the Company set forth in this
Section 6.10 and the Company first offers the Investors the
opportunity, at the Investors' expense, to copy such Records, and (B)
in the event that Buyer desires to destroy or dispose of all or any
portion of the Records during such period, Buyer shall first offer the
Investors the opportunity, at the Investors' expense, to obtain such
Records prior to destruction or disposition thereof by the Company; and
(b) permit reasonable access of representatives of the
Investors to employees of the Company and its affiliates on a mutually
convenient basis to obtain additional information with respect to the
continuing obligations or rights, if any, of the Investors in
connection with this Agreement.
Section 6.11 Retention of Stock Certificates; Negative Pledge. The
Company shall retain possession of the certificates representing the Common
Stock issued to each of RMG and CCBM pursuant hereto until July 1, 2004;
provided that in the event the Company shall bring a Claim prior to such date
with respect to a breach of representation or warranty by RMG or CCBM, the
Company shall retain possession of the certificates representing the Common
Stock issued to RMG or CCBM, as the case may be, until the earlier of (i) the
date such Claim shall be resolved pursuant to Section 13.2 without liability to
RMG or CCBM, as the case may be, and
30
(ii) the date on which any Award with respect to such Claim shall be satisfied
by RMG or CCBM, as the case may be. Prior to the return of their respective
stock certificates pursuant hereto, neither RMG nor CCBM shall create, incur,
assume or suffer to exist any lien upon or security interest in any of the
Common Stock beneficially owned by such party and represented by such
certificates.
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each Investor as of the Closing
Date that:
Section 7.1 Organization; Qualification and Authority; Binding
Obligations. The Company is a corporation duly formed and validly existing in
good standing under the laws of the State of Delaware. The Company has been
recently incorporated and has not engaged in any activities other than those
related to this Agreement. The Company has no subsidiaries. The Company is duly
qualified to transact business as a foreign corporation and is in good standing
in each jurisdiction in which the character of its properties or the nature of
its business makes such qualification necessary, except where the failure to so
qualify or to be in good standing would not reasonably be expected to have a
Material Adverse Effect. Subject to Customary Filings, the Company has the
corporate power to own its properties and to carry on its business as it is now
being conducted. The Company has all requisite corporate power and authority to
enter into this Agreement and each Related Agreement to which it is a party and
to issue and sell the Shares and the Warrants and to issue the Additional Shares
upon payment therefor and Common Stock upon exercise of the Warrants and has the
requisite power and authority to carry out the transactions contemplated hereby
to be performed by it, and the execution, delivery and performance of this
Agreement and each other agreement or instrument executed and delivered by the
Company pursuant hereto or in connection herewith have been duly authorized by
all necessary action. This Agreement and each other agreement or instrument
executed and delivered by the Company pursuant hereto or in connection herewith
constitute the legal, valid and binding obligations of the Company and, except
as may be affected (i) by applicable bankruptcy, insolvency, moratorium,
reorganization and other similar laws and judicial decisions affecting the
rights of creditors generally and (ii) by general principles of equity and
public policy (regardless of whether considered at law or in equity), are
enforceable against the Company in accordance with their respective terms.
Section 7.2 Authorized Shares and Related Matters. As of the date of
this Agreement (a) the aggregate authorized Shares of the Company consists of
2,000,000 Shares, of which 1,000,000 are shares of Common Stock and 1,000,000
are shares of Preferred Stock; (b) prior to the issuances contemplated hereby,
no shares of Common Stock or Preferred Stock are issued and outstanding; (c)
except as expressly provided in this Agreement, the Warrants, the Certificate of
Designations or the Securityholders Agreement, the Company does not have
outstanding any securities convertible into or exchangeable for any Shares, any
rights to subscribe for or to purchase or any options for the purchase of, or,
except pursuant to this Agreement, any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any other
character relating to the issuance of, any Shares, or any securities convertible
into or exchangeable for any Shares; and (d) except pursuant to the terms
31
of the Preferred Stock contemplated to be issued hereby, the Company is not
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any Shares.
Section 7.3 Defaults; Indebtedness. The Company is not in violation of
and is not in default (a) under its certificate of incorporation or bylaws or
any Related Agreement or (b) with respect to any Law and there exists no
condition, event or act which constitutes, or which after notice, lapse of time,
or both, would constitute, such a default under any of the foregoing. The
Company has no outstanding Indebtedness.
Section 7.4 No Violation. The execution and delivery of this Agreement
by the Company and the Investors do not, and the consummation by the Company and
the Investors of the agreements and transactions contemplated by this Agreement
(including the Contributions and the Assumptions) will not, (a) conflict with,
or result in any violation of or default or loss of any benefit under, any
provision of the certificate of incorporation or bylaws of the Company, (b)
violate any Approval, Law or Permit to which the Company is a party or to which
the Company or any of its property is subject or (c) conflict with, or result in
a breach or violation of, or accelerate the performance required by, the terms
of any agreement, contract, indenture or other instrument to which the Company
is a party or to which any of its property is subject, or constitute a default
or loss of any right thereunder or an event which, with the lapse of time or
notice or both, is likely to result in a default or loss of any right thereunder
or the creation of any Lien upon any of the assets or properties of the Company,
except, in the case of clause (b) and (c) above, for any such violations,
conflicts, breaches or accelerations which would not, individually or in the
aggregate, have a Material Adverse Effect.
Section 7.5 Offering of Shares. Based in part on the representations
and warranties of the Investors in Article VIII, the offer, sale and issuance of
the Securities pursuant to this Agreement do not require registration of such
securities under the Securities Act or registration or qualification under any
applicable state "blue sky" or securities laws. The Company, directly or
indirectly, has not taken and will not take any action which would subject the
issuance or sale of any of the Securities to the provisions of Section 5 of the
Securities Act or violate the provisions of any securities, "blue sky" law or
similar law of any applicable jurisdiction.
ARTICLE VIII.
REPRESENTATIONS, AND WARRANTIES OF THE INVESTORS
Each Investor severally but not jointly, represents and warrants solely
with respect to itself to the Company and to the other Investors as of the
Closing Date that:
Section 8.1 Investment Matters.
(a) Such Investor is acquiring Securities solely for its
beneficial account, for investment purposes, and not with a view to, or
for resale in connection with, any distribution of Securities in
violation of applicable securities laws;
(b) Such Investor understands that the Securities have not
been registered under the Securities Act or any state securities laws
by reason of specific exemptions under the provisions thereof, the
availability of which depend in part upon the bona fide
32
nature of its investment intent and upon the accuracy of its
representations made in this Article VIII;
(c) Such Investor understands that the Company is relying in
part upon the representations and agreements contained in this Article
VIII for the purpose of determining whether the offer, sale and
issuance of the Securities meets the requirements for such exemptions;
(d) Such Investor is an "accredited investor" as defined in
Rule 501(a) under the Securities Act;
(e) Such Investor has such knowledge, skill and experience in
business, financial and investment matters that it is capable of
evaluating the merits and risks of an investment in Securities to which
it is subscribing;
(f) Such Investor understands that the Securities will be
"restricted securities" under applicable federal securities laws and
that the Securities Act and the rules of the Commission provide in
substance that it may dispose of the Securities only pursuant to an
effective registration statement under the Securities Act or an
exemption therefrom, and it understands that the Company has no
obligation or intention to register any of the Securities thereunder
(except pursuant to the registration rights granted in the
Securityholders Agreement); and
(g) Such Investor has been furnished by the Company all
information (or provided access to all information) regarding the
business and financial condition of the Company, its expected plans for
future business activities, the attributes of the Securities for which
such Investor is subscribing and the merits and risks of an investment
in such Securities which it has requested or otherwise needs to
evaluate the investment in such Securities; that in making the proposed
investment decision, such Investor is relying solely on such
information, the representations, warranties and agreements of each
other Investor and on investigations made by it and its
representatives; and that the offer to sell the Securities hereunder
was communicated to such Investor in such a manner that it was able to
ask questions of and receive answers from the management of the Company
concerning the terms and conditions of the proposed transaction and
that at no time was it presented with or solicited by or through any
leaflet, public promotional meeting, television advertisement or any
other form of general or public advertising or solicitation.
Section 8.2 Authority.
(a) Such Investor has full power and authority to enter into
and perform its obligations under this Agreement; and
(b) This Agreement has been duly authorized, executed and
delivered by a Person authorized to do so, constitutes the legal, valid
and binding obligation of such Investor and, except as may be affected
(i) by bankruptcy, insolvency, moratorium, reorganization and other
similar laws and judicial decisions affecting the rights of creditors
generally and (ii) by general principles of equity and public policy
(regardless
33
of whether considered at law or in equity), is enforceable against such
Investor in accordance with its terms.
Section 8.3 No Conflicts. The execution, delivery and performance by
such Investor of this Agreement and the consummation by such Investor of the
transactions contemplated hereby will not, without the giving of notice or the
lapse of time, or both, (i) violate any provision of Law to which such Investor
is subject, or (ii) conflict with, or result in a breach or default under, any
term or condition of its certificate of incorporation or bylaws, or partnership
agreement or other organizational document, as applicable, or any agreement or
other instrument to which such Investor is a party or by which such Investor is
bound.
Section 8.4 Other Agreements. Such Investor has not entered into any
agreement, written or otherwise, to dispose of the Securities (or any interest
therein) it receives pursuant to this Agreement.
ARTICLE IX.
REPRESENTATIONS AND WARRANTIES OF CCBM
In addition to the representations and warranties contained in Article
VIII hereof, CCBM, represents and warrants to the other Investors and the
Company as of the Closing Date that:
Section 9.1 Organization; Qualification and Authority; Binding
Obligations.
(a) CCBM (i) is a corporation duly formed and validly existing
in good standing under the laws of the State of Delaware, (ii) is duly
qualified to transact business as a foreign corporation and is in good
standing in each jurisdiction in which the character of its properties
or the nature of its business makes such qualification necessary,
except where the failure to so qualify or to be in good standing would
not reasonably be expected to have a Material Adverse Effect, (iii) has
the corporate power to own its properties and to carry on its business
as it is now being conducted, (iv) has all requisite corporate power
and authority to enter into this Agreement and each Related Agreement
to which it is a party and has the requisite power and authority to
carry out the transactions contemplated hereby and thereby to be
performed by it, and the execution, delivery and performance hereof and
thereof have been duly authorized by all necessary action;
(b) no Approval of any stockholders of CCBM or any
stockholders of any Affiliate is required for consummation of the
transactions contemplated by this Agreement or the Related Agreements;
and
(c) this Agreement, each Related Agreement to which it is a
party and each other agreement or instrument executed and delivered by
CCBM pursuant hereto or in connection herewith constitutes the legal,
valid and binding obligations of CCBM and, except as may (i) be
affected by applicable bankruptcy, insolvency, moratorium,
reorganization and other similar laws and judicial decisions affecting
the rights of creditors generally and (ii) by general principles of
equity and public policy (regardless of whether considered at law or in
equity), are enforceable against CCBM in accordance with their
respective terms.
34
Section 9.2 Defaults; Outstanding Debt. CCBM has not violated nor is it
in default under (a) its certificate of incorporation or bylaws, (b) any
Indebtedness, (c) any indenture, mortgage, lease, or any other contract,
agreement or instrument to which it is a party or by which it or any of its
properties are bound or affected or (d) with respect to any order, writ,
injunction or decree of any court or any federal, state, municipal or other
domestic department, commission, board, bureau, agency or instrumentality, and
to CCBM's knowledge there exists no condition, event or act which constitutes,
or which after notice, lapse of time, or both, would constitute, such a default
under any of the foregoing, except for such violations or defaults described in
clauses (b), (c) or (d) above which would not, in the aggregate, have a Material
Adverse Effect.
Section 9.3 No Violation. The execution and delivery by CCBM of this
Agreement and each Related Agreement to which it is a party does not, and the
execution and delivery by Carrizo of the Carrizo Transition Services Agreement
and the consummation of the agreements and transactions contemplated by this
Agreement and such Related Agreements will not (a) conflict with, or result in
any violation of or default or loss of any benefit under, any provision of the
certificate of incorporation and bylaws of Carrizo, CCBM or any subsidiary
thereof, (b) to CCBM's knowledge, violate any Approval, Law or Permit to which
Carrizo, CCBM or any subsidiary thereof is a party or to which the Company or
any subsidiary thereof or any of their respective property is subject or (c)
subject to receipt of the Required Consents, conflict with, or result in a
breach or violation of, or accelerate the performance required by, the terms of
any agreement, contract, indenture or other instrument (including oil and gas
leases) to which Carrizo, CCBM or any subsidiary thereof is a party or, to the
knowledge of CCBM, to which any of the CCBM Contributed Assets are subject, or
constitute a default thereunder or an event which, with the lapse of time or
notice or both, is likely to result in a default thereunder or the creation of
any Lien upon any of the assets or properties of CCBM or any subsidiary thereof,
except, in the case of clauses (b) and (c) above, for any such violations,
conflicts, breaches or accelerations not directly pertaining to the CCBM
Contributed Assets which would not, individually or in the aggregate, have a
Material Adverse Effect.
Section 9.4 Consents. Neither the nature of CCBM nor any of its
businesses or properties, nor any relationship between CCBM and any other Person
is such as to require on behalf of CCBM any Approval, other than Customary
Filings, of any Governmental Entity in connection with the valid execution,
delivery and performance of this Agreement or fulfillment of or compliance with
the terms and provisions hereof, other than Customary Filings and other filings
which have been made or consents obtained or not required to be made until after
the Closing Date.
Section 9.5 Investment Company Status. CCBM is not and, upon the
consummation of the transactions contemplated by this Agreement and the Related
Agreements, will not be, an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act.
Section 9.6 Taxes. To the knowledge of CCBM, all ad valorem, property,
production, severance and similar taxes and assessments based on or measured by
the ownership of property or the production or removal of Hydrocarbons or the
receipt of proceeds therefrom and relating to the CCBM Contributed Assets, to
the extent such taxes and assessments have become due and payable as of the
Closing, have been timely paid and all applicable tax returns required to be
35
filed have been filed and there are no material claims by any applicable taxing
authority pending against CCBM or any Affiliate thereof applicable to the CCBM
Contributed Assets.
Section 9.7 Compliance with Law. CCBM and each of its subsidiaries (i)
is not in violation of any applicable Law (including without limitation Laws
relating to environmental matters, securities, properties, production, sales,
gathering and transportation of Hydrocarbons, occupational safety and health and
product safety), except for any violations which would not, individually or in
the aggregate, have a Material Adverse Effect, (ii) has not received any written
notice, which has not been dismissed or otherwise disposed of, that it has
violated any applicable Laws, (iii) has not been charged or, to the knowledge of
CCBM, formally threatened with or, to the knowledge of CCBM, under investigation
with respect to any violation of any applicable Law and (iv) is not a party to
or subject to the provisions of any judgment, order, writ, injunction, decree or
award of any court, arbitrator, board, panel or Governmental Entity.
Section 9.8 Proceedings. Except as disclosed on Schedule 9.8, there are
no Proceedings pending or, to the knowledge of CCBM, threatened against CCBM or
any of its subsidiaries relating to or against or affecting any CCBM Contributed
Assets, any Assumed CCBM Liabilities or the Company or any of the Company's
properties, at law or in equity, or before or by any Governmental Entity or
before any arbitration board or panel, wherever located.
Section 9.9 Title. CCBM has, and on the Closing Date the Company will
have (a) Defensible Title to the CCBM Contributed Assets which constitute Proven
Properties, free and clear of (i) all Liens arising by, through or under CCBM or
any Affiliate thereof (other than in the case of nonoperated properties, Liens
arising through the actions or omissions of the operator of which CCBM had no
knowledge) and (ii) to the knowledge of CCBM, all other Liens, in any case,
other than Permitted Encumbrances, and (b) Good and Legal Title in all of the
CCBM Contributed Assets that do not constitute Proven Properties, free and clear
of all Liens created by, through and under CCBM or any Affiliate thereof, but
not otherwise, in the case of mineral rights or other real property, other than
Permitted Encumbrances.
Section 9.10 Contracts. Except as disclosed on Schedule 9.10, and
except where the failure of any of the following statements to be true and
correct would not have a Material Adverse Effect: (i) to the knowledge of CCBM,
the leases, contracts, agreements, licenses and permits included in the CCBM
Contributed Assets (the "CCBM CONTRACTS") to which CCBM is a party are in full
force and effect and, to the knowledge of CCBM, all rental obligations with
respect any leases have been paid when due; and (ii) CCBM is not in breach or
default (and, to the knowledge of CCBM, no situation exists which with the
passing of time or giving of notice would create a breach or default) of its
obligations under the CCBM Contracts and none of the Contributions, the
Assumptions, the execution or delivery of this Agreement or any Related
Agreement or the consummation of the transactions contemplated by this Agreement
or any Related Agreement will result in a breach or default of its obligations
under the CCBM Contracts. To the knowledge of CCBM, no breach or default by any
third party (or situation which with the passage of time or giving of notice
would create a breach or default) exists under any CCBM Contract. CCBM has not
received any notice of any claimed defaults, offsets or cancellations from any
lessors with respect to the CCBM Contributed Assets. CCBM has made available to
the other Investors, upon request, copies of all CCBM Contracts and any
amendments thereto to which CCBM is a party.
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Section 9.11 Permits. To the knowledge of CCBM (a) the operator of the
CCBM Contributed Assets has all Permits required to own and operate the CCBM
Contributed Assets, and such Permits are in full force and effect, and to CCBM's
knowledge, there have not been any violations with respect to any such Permits
nor is there any action pending or threatened that would change the terms of
such Permits and (b) subject to Customary Filings, the execution and delivery by
CCBM of this Agreement and each of the Related Agreements to which it is a party
and the consummation by it of the transactions contemplated hereby will not
result in any revocation cancellation, suspension or modification of any such
Permits.
Section 9.12 Consents, Preferential Rights, etc. Other than the
applicable Required Consents set forth on Schedule 9.12, none of the CCBM
Contribution, the execution or delivery by CCBM of this Agreement or any Related
Agreement to which it is a party or the consummation of the agreements and
transactions contemplated by this Agreement or any such Related Agreement
requires any consent, approval or waiver from any Person that is not a
Governmental Entity for the assignment to the Company of the CCBM Contributed
Assets including, without limitation, with respect to any CCBM Contract, oil and
gas lease, area of mutual interest or seismic data license that have not already
been obtained (and such consents or waivers that have been obtained do not
contain any requirements on the part of the Company or any Investor and are not
conditional upon any future event occurring except conditions satisfied on or
prior to Closing) and, to the knowledge of CCBM, all preferential rights to
purchase, rights of first refusal and any similar rights affecting the CCBM
Contributed Assets have been waived.
Section 9.13 Marketing. To the knowledge of CCBM, except as disclosed
on Schedule 9.13, no amounts of Hydrocarbons produced from the CCBM Contributed
Assets are subject to a sales contract (except for contracts terminable without
penalty by CCBM on not more than 30 days notice), and except as may be contained
in any document described on Schedule 9.13, no Person has any call upon, option
to purchase or similar rights under any agreement with respect to the CCBM
Contributed Assets or to the production therefrom. CCBM has not in any respect
collected, nor will CCBM in any respect collect, any proceeds from the sale of
Hydrocarbons produced from the CCBM Contributed Assets that are subject to
refund except as disclosed on Schedule 9.13. To the knowledge of CCBM, except as
disclosed on Schedule 9.13, as of the date hereof, proceeds from the sale of
Hydrocarbons from the CCBM Contributed Assets are being received in all respects
by CCBM in a timely manner and were not being held in suspense for any reason.
To the knowledge of CCBM, CCBM has not been nor will CCBM be obligated by virtue
of any prepayment made under any production sales contract or any other contract
containing a "take or pay" clause, or under any gas balancing, deferred
production or similar arrangement to deliver gas or other minerals produced from
or allocated to any of the CCBM Contributed Assets at some future time without
receiving full payment therefor at the time of delivery. To the knowledge of
CCBM, except as disclosed on Schedule 9.13, there are no material gas imbalances
as between CCBM and any third party with respect to operations relating to the
CCBM Contributed Assets.
Section 9.14 Change in Condition. To the knowledge of CCBM, there has
occurred no physical change in the CCBM Contributed Assets (other than
operations and production in the ordinary course) or other casualty since
December 31, 2002 that materially adversely affects the value, use or operation
of any of the CCBM Contributed Assets (other than declines due to actual
depletion).
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Section 9.15 No Other Activities. To the knowledge of CCBM, except as
contemplated by this Agreement, the Company has not engaged in any material
business activity.
Section 9.16 Contributed Assets. With the exception of the assets
described on Schedule 9.16, CCBM is contributing to the Company, pursuant to
this Agreement, all of its assets, real and intangible in, or relating to the
production of oil and gas in, the States of Montana and Wyoming
ARTICLE X.
REPRESENTATIONS AND WARRANTIES OF RMG
In addition to the representations and warranties contained in Article
VIII hereof RMG represents and warrants to the other Investors and the Company
as of the Closing Date that:
Section 10.1 Organization; Qualification and Authority; Binding
Obligations.
(a) RMG (i) is a corporation duly formed and validly existing
in good standing under the laws of the State of Wyoming, (ii) is duly
qualified to transact business as a foreign corporation and is in good
standing in each jurisdiction in which the character of its properties
or the nature of its business makes such qualification necessary,
except where the failure to so qualify or to be in good standing would
not reasonably be expected to have a Material Adverse Effect, (iii) has
the corporate power to own its properties and to carry on its business
as it is now being conducted, (iv) has all requisite corporate power
and authority to enter into this Agreement and each Related Agreement
to which it is a party and has the requisite power and authority to
carry out the transactions contemplated hereby and thereby to be
performed by it, and the execution, delivery and performance hereof and
thereof have been duly authorized by all necessary action;
(b) no Approval of any stockholders of RMG or any stockholders
of any Affiliate, is required for consummation of the transactions
contemplated by this Agreement and each Related Agreement; and
(c) this Agreement, each Related Agreement to which it is a
party and each other agreement or instrument executed and delivered by
RMG pursuant hereto or thereto or in connection herewith or therewith
constitute the legal, valid and binding obligations of RMG and, except
as may (i) be affected by applicable bankruptcy, insolvency,
moratorium, reorganization and other similar laws and judicial
decisions affecting the rights of creditors generally and (ii) by
general principles of equity and public policy (regardless of whether
considered at law or in equity), are enforceable against RMG in
accordance with their respective terms.
Section 10.2 Defaults; Outstanding Debt. RMG has not violated nor is it
in default under (a) its certificate of incorporation or bylaws, (b) any
Indebtedness, (c) any indenture, mortgage, lease, or any other contract,
agreement or instrument to which it is a party or by which it or any of its
properties are bound or affected or (d) with respect to any order, writ,
injunction or decree of any court or any federal, state, municipal or other
domestic department, commission, board, bureau, agency or instrumentality, and
to RMG's knowledge there exists no condition,
38
event or act which constitutes, or which after notice, lapse of time, or both,
would constitute, such a default under any of the foregoing, except for such
violations or defaults described in clauses (b), (c) or (d) above which would
not, in the aggregate, have a Material Adverse Effect.
Section 10.3 No Violation. The execution and delivery by RMG of this
Agreement and each Related Agreement to which it is a party does not, and the
consummation of the agreements and transactions contemplated by this Agreement
and such Related Agreements will not (a) conflict with, or result in any
violation of or default or loss of any benefit under, any provision of the
certificate of incorporation and bylaws of RMG or any subsidiary thereof, (b) to
RMG's knowledge, violate any Approval, Law or Permit to which RMG or any
subsidiary thereof is a party or to which the Company or any subsidiary thereof
or any of their respective property is subject or (c) subject to receipt of the
Required Consents, conflict with, or result in a breach or violation of, or
accelerate the performance required by, the terms of any agreement, contract,
indenture or other instrument (including oil and gas leases) to which RMG or any
subsidiary thereof is a party or to which any of the RMG Contributed Assets are
subject, or constitute a default thereunder or an event which, with the lapse of
time or notice or both, is likely to result in a default thereunder or the
creation of any Lien upon any of the assets or properties of RMG or any
subsidiary thereof, except, in the case of clauses (b) and (c) above, for any
such violations, conflicts, breaches or accelerations not directly pertaining to
the RMG Contributed Assets which would not, individually or in the aggregate,
have a Material Adverse Effect.
Section 10.4 Consents. Neither the nature of RMG nor any of its
businesses or properties, nor any relationship between RMG and any other Person
is such as to require on behalf of RMG any Approval, other than Customary
Filings, of any Governmental Entity in connection with the valid execution,
delivery and performance of this Agreement or the Related Agreements or
fulfillment of or compliance with the terms and provisions hereof or thereof,
other than Customary Filings and other filings which have been made or consents
obtained or not required to be made until after the Closing Date, except for any
Approvals which, if not obtained, would not, individually or in the aggregate,
have a Material Adverse Effect.
Section 10.5 Investment Company Status. RMG is not and, upon the
consummation of the transactions contemplated by this Agreement and the Related
Agreements, will not be, an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act.
Section 10.6 Taxes. All ad valorem, property, production, severance and
similar taxes and assessments based on or measured by the ownership of property
or the production or removal of Hydrocarbons or the receipt of proceeds
therefrom and relating to the RMG Contributed Assets, to the extent such taxes
and assessments have become due and payable as of the Closing, have been timely
paid and all applicable tax returns required to be filed have been filed and
there are no material claims by any applicable taxing authority pending against
RMG or any Affiliate thereof applicable to the RMG Contributed Assets.
Section 10.7 Compliance with Law. RMG and each of its subsidiaries (i)
is not in violation of any applicable Law (including without limitation Laws
relating to environmental matters, securities, properties, production, sales,
gathering and transportation of Hydrocarbons, occupational safety and health and
product safety), except for any violations which would not,
39
individually or in the aggregate, have a Material Adverse Effect, (ii) has not
received any written notice, which has not been dismissed or otherwise disposed
of, that it has violated any applicable Laws, (iii) has not been charged or, to
the knowledge of RMG, formally threatened with or, to the knowledge of RMG,
under investigation with respect to any violation of any applicable Law and (iv)
is not a party to or subject to the provisions of any judgment, order, writ,
injunction, decree or award of any court, arbitrator, board, panel or
Governmental Entity.
Section 10.8 Proceedings. Except as disclosed on Schedule 10.8, there
are no Proceedings pending or, to the knowledge of RMG, threatened against RMG
or any of its subsidiaries relating to or against or affecting any RMG
Contributed Assets, any Assumed RMG Liabilities or the Company or any of the
Company's properties, at law or in equity, or before or by any Governmental
Entity or before any arbitration board or panel, wherever located.
Section 10.9 Title. RMG has, and on the Closing Date the Company will
have, (a) Defensible Title to the RMG Contributed Assets that constitute Proven
Properties, free and clear of all Liens other than Permitted Encumbrances and
(b) Good and Legal Title in all of the RMG Contributed Assets that do not
constitute Proven Properties free and clear of all Liens created by, through or
under RMG or any affiliate thereof, but not otherwise, in the case of mineral
rights or other real property other than Permitted Encumbrances.
Section 10.10 Contracts. Except as disclosed on Schedule 10.10, and
except where the failure of any of the following statements to be true and
correct would not have a Material Adverse Effect: (i) the leases, contracts,
agreements, licenses and permits included in the RMG Contributed Assets (the
"RMG CONTRACTS") to which RMG is a party are in full force and effect and all
rental obligations with respect any leases have been paid when due; and (ii) RMG
is not in breach or default (and, to the knowledge of RMG, no situation exists
which with the passing of time or giving of notice would create a breach or
default) of its obligations under the RMG Contracts and none of the
Contributions, the Assumptions, the execution or delivery of this Agreement or
any Related Agreement or the consummation of the transactions contemplated by
this Agreement or any Related Agreement will result in a breach or default of
its obligations under the RMG Contracts. To the knowledge of RMG, no breach or
default by any third party (or situation which with the passage of time or
giving of notice would create a breach or default) exists under any RMG
Contract. RMG has not received any notice of any claimed defaults, offsets or
cancellations from any lessors with respect to the RMG Contributed Assets. RMG
has made available to the other Investors, upon request, copies of all RMG
Contracts and any amendments thereto to which RMG is a party.
Section 10.11 Permits. (a) RMG has all Permits required to own and
operate the RMG Contributed Assets that it operates as presently being owned and
operated, and such Permits are in full force and effect, and to RMG's knowledge,
there have not been any violations with respect to any such Permits nor is there
any action pending or threatened that would change the terms of such Permits and
(b) subject to Customary Filings, the execution and delivery by RMG of this
Agreement and each of the Related Agreements to which it is a party and the
consummation by it of the transactions contemplated hereby and thereby will not
result in any revocation cancellation, suspension or modification of any such
Permit.
40
Section 10.12 Consents, Preferential Rights, etc. Other than the
applicable Required Consents set forth on Schedule 10.12, none of the RMG
Contribution, the execution or delivery by RMG of this Agreement or any Related
Agreement to which it is a party, or the consummation of the agreements and
transactions contemplated by this Agreement or any such Related Agreement
requires any consent, approval or waiver from any Person that is not a
Governmental Entity for the assignment to the Company of the RMG Contributed
Assets including, without limitation, with respect to any RMG Contract, oil and
gas lease, area of mutual interest or seismic data license that have not already
been obtained (and such consents or waivers that have been obtained do not
contain any requirements on the part of the Company or any Investor and are not
conditional upon any future event occurring except conditions satisfied on or
prior to Closing) and all preferential rights to purchase, rights of first
refusal and any similar rights affecting the RMG Contributed Assets have been
waived.
Section 10.13 Marketing. Except as disclosed on Schedule 10.13, no
amounts of Hydrocarbons produced from the RMG Contributed Assets are subject to
a sales contract (except for contracts terminable without penalty by RMG on not
more than 30 days notice), and except as may be contained in any document
described on Schedule 10.13, no Person has any call upon, option to purchase or
similar rights under any agreement with respect to the RMG Contributed Assets or
to the production therefrom. RMG has not in any respect collected, nor will RMG
in any respect collect, any proceeds from the sale of Hydrocarbons produced from
the RMG Contributed Assets that are subject to refund except as disclosed on
Schedule 10.13. Except as disclosed on Schedule 10.13, As of the date hereof,
proceeds from the sale of Hydrocarbons from the RMG Contributed Assets are being
received in all respects by RMG in a timely manner and were not being held in
suspense for any reason. RMG has not been nor will RMG be obligated by virtue of
any prepayment made under any production sales contract or any other contract
containing a "take or pay" clause, or under any gas balancing, deferred
production or similar arrangement to deliver gas or other minerals produced from
or allocated to any of the RMG Contributed Assets at some future time without
receiving full payment therefor at the time of delivery. Except as disclosed on
Schedule 10.13, there are no material gas imbalances as between RMG and any
third party with respect to operations relating to the RMG Contributed Assets.
Section 10.14 Change in Condition. There has occurred no physical
change in the RMG Contributed Assets (other than operations and production in
the ordinary course) or other casualty since December 31, 2002 that materially
adversely affects the value, use or operation of any of the RMG Contributed
Assets (other than declines due to actual depletion).
Section 10.15 No Other Activities. To the knowledge of RMG, except as
contemplated by this Agreement, the Company has not engaged in any material
business activity.
Section 10.16 Contributed Assets. With the exception of the assets
described on Schedule 10.16, RMG is contributing to the Company, pursuant to
this Agreement, all of its assets, real and intangible in, or relating to the
production of oil and gas in, the States of Montana and Wyoming
Section 10.17 Environmental Matters. Except as set forth on Schedule
10.17, (i) the Contributed Assets and the operations thereon are in compliance
with all applicable
41
Environmental Laws, except where the failure to comply would not have a Material
Adverse Effect; (ii) the Contributed Assets and the operations thereon are not
subject to any existing, pending or, to the knowledge of RMG, threatened
Proceedings under any Environmental Law; (iii) all Permits required to be
obtained or filed with respect to the Contributed Assets or operations thereon
under any Environmental Law have been obtained or filed and are valid, currently
in full force and effect, and have not been violated; (iv) there has been no
unauthorized release of any Hazardous Material, pollutant or contaminant into
the environment affecting the Contributed Assets; (v) there has been no exposure
of any Person or property to any Hazardous Material, pollutant or contaminant in
connection with the properties, operations and activities related to the
Contributed Assets; and (vi) RMG has made available to the other Investors all
internal and external environmental audits, reports and studies and all
correspondence on substantial environmental matters (in each case relevant to
the Company and/or the Contributed Assets).
Section 10.18 Operation of the Proven Properties. RMG has at all times
developed, maintained and operated the Proven Properties in accordance with
customary practices in the oil and gas production industry, in compliance with
applicable laws, ordinances, rules, regulations and orders and in a prudent,
good and workmanlike manner. All equipment used in connection with the operation
of the Proven Properties is in good working order, ordinary wear and tear
excepted, and has been constructed and maintained in accordance with sound
oilfield operating practices. All such equipment is owned or co-owned by CCBM
and/or RMG or leased or co-leased from non-affiliated lessors.
ARTICLE XI.
TRANSFER OF SECURITIES
Section 11.1 Restriction on Transfer. The Securities shall not be
transferable except a holder of Securities may transfer such Securities upon the
conditions specified in this Article XI, which conditions are intended to ensure
compliance with the provisions of the Securities Act in respect of the transfer
thereof; provided, however, that any such transfer shall be subject to the
restrictions contained in the Securityholders Agreement and any transferee, by
acceptance of the Securities, shall be deemed to have agreed to be bound by and
entitled to the benefits of such agreement.
Section 11.2 Restrictive Legends.
Each certificate for the Securities, and each certificate for any such
securities issued to subsequent transferees of any such certificate shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND THE OFFER AND SALE OF SUCH SECURITIES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES OR
BLUE SKY LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT
OR APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
42
ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE
CONDITIONS SPECIFIED IN THE CONTRIBUTION AND SUBSCRIPTION AGREEMENT
DATED, AS OF JUNE 23, 2003, AMONG THE ISSUER HEREOF AND CERTAIN OTHER
PARTIES THERETO AND THE SECURITYHOLDERS AGREEMENT, DATED AS OF JUNE 23,
2003, AMONG THE ISSUER HEREOF AND CERTAIN OTHER PARTIES THERETO, AND NO
TRANSFER OF THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED. COPIES OF SUCH AGREEMENTS MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE ISSUER HEREOF."
ARTICLE XII.
TERMINATION
Section 12.1 Termination. This Agreement may be terminated prior to the
Closing:
(a) by mutual agreement of the parties hereto;
(b) by any Investor in the event of a breach by any other
Investor of any representation or warranty contained in this Agreement
or any covenant or agreement required by the terms of this Agreement to
be performed prior to the Closing Date which would give rise to the
failure of a condition set forth in Article IV which cannot be cured
or, if curable, has not been cured within 15 Business Days following
receipt by the breaching party of written notice of such breach;
(c) by any Investor if a court of competent jurisdiction or
other Governmental Entity shall have issued an order, decree or ruling
or taken any other action (which order, decree or ruling the Company
and the Investors shall use all commercially reasonable efforts to
lift), in each case permanently restraining, enjoining, or otherwise
prohibiting the transactions contemplated by this Agreement, and such
order, decree, ruling or other action shall have become final and
nonappealable; provided, however, that the right to terminate this
Agreement under this Section 12.1(c) shall not be available to any
party whose breach of this Agreement has been the cause of, or resulted
in, such order, decree, ruling or other action; or
(d) by any Investor if the Closing shall not have occurred
within 45 days of the date hereof, provided, however, that the right to
terminate this Agreement under this Section 12.1(d) shall not be
available to any party whose breach of this Agreement has been the
cause of, or resulted in, the failure of the Closing Date to occur
within such period.
Section 12.2 Effect of Termination. In the event of the termination of
this Agreement, written notice thereof shall be given to all other parties
hereto by the terminating party specifying the provision pursuant to which the
termination is made, and this Agreement shall forthwith become null and void,
except for liability of a party arising out of willful breach of, or
misrepresentation under, this Agreement prior to such termination.
43
ARTICLE XIII.
MISCELLANEOUS
Section 13.1 Indemnification.
(a) Subject to the limitations set forth herein, each of CCBM
and RMG severally agrees to indemnify and hold the Company and the
other Investors harmless from and against any liabilities, claims,
losses, damages, costs and expenses of any kind (including, without
limitation, the reasonable fees and disbursements of the Company's
counsel and counsel to each of the Investors in connection with any
investigative, administrative or judicial proceeding, whether or not
the Company or either other Investor is designated as a party thereto)
that may be incurred by the Company or either other Investor, relating
to or arising out of (i) any breach of the representations and
warranties made by such Contributing Party in Article IX and Article X
hereof or, with respect to the representations made in Section 9.9 and
Section 10.9, any breach which cannot be cured or, if curable, has not
been cured within 60 calendar days following receipt by the breaching
party of written notice of such breach, (ii) any operation of assets of
such Contributing Party not contributed to the Company under this
Agreement, (iii) any Excluded CCBM Liabilities (in the case of CCBM's
obligation of indemnification) or Excluded RMG Liabilities (in the case
of RMG's obligation of indemnification), as the
44
case may be, or (iv) ownership or operation of the CCBM Contributed
Assets and the RMG Contributed Assets by CCBM and RMG, respectively,
prior to the Closing Date including any liabilities arising with
respect to such period (collectively, the "CLAIMS").
(b) Notwithstanding the provisions of this Section 13.1, (i)
neither Indemnifying Party (as defined below) shall be required to
indemnify or hold harmless any of the Indemnified Parties (as defined
below) on account of any Claims under clause (i) of Section 13.1(a)
unless and until the aggregate liability of such Indemnifying Party in
respect of all such Claims exceeds the Threshold Amount; provided,
however, that once such aggregate Claims exceed the Threshold Amount,
the Indemnifying Party shall be required to indemnify and hold harmless
the Indemnified Parties to the fullest extent permitted by law from all
such Claims, excluding those within the Threshold Amount and (ii)
neither Indemnifying Party's aggregate liability in respect of all such
Claims under clause (i) of Section 13.1(a) will exceed the Ceiling
Amount.
(c) NO PARTY HERETO (OR ITS AFFILIATES) SHALL HAVE THE RIGHT
TO INDEMNIFICATION HEREUNDER FOR ANY CONSEQUENTIAL, EXEMPLARY, SPECIAL,
INCIDENTAL, SPECULATIVE, TREBLE OR PUNITIVE DAMAGES (INCLUDING ANY LOSS
OF EARNINGS OR PROFITS, LOSS OF REVENUE OR INCOME, COST OF CAPITAL OR
LOSS OF BUSINESS REPUTATION OR OPPORTUNITY) SUFFERED BY SUCH PARTY
UNLESS SUCH DAMAGES WERE INCURRED BY A THIRD PARTY AND ARE THE SUBJECT
OF A THIRD PARTY CLAIM FOR WHICH A PARTY HERETO MAY OTHERWISE BE
INDEMNIFIED PURSUANT HERETO.
(d) THE PARTIES HERETO INTEND THAT THE INDEMNITIES SET FORTH
IN SECTION 13.2(a) BE CONSTRUED AND APPLIED AS
45
WRITTEN ABOVE NOTWITHSTANDING ANY RULE OF CONSTRUCTION TO THE CONTRARY.
WITHOUT LIMITING THE FOREGOING, THE INDEMNITIES SHALL APPLY
NOTWITHSTANDING ANY STATE'S "EXPRESS NEGLIGENCE RULE" OR SIMILAR RULE
THAT WOULD DENY COVERAGE BASED ON AN INDEMNITEE'S SOLE, CONCURRENT OR
CONTRIBUTORY ACTIVE OR PASSIVE NEGLIGENCE OR GROSS NEGLIGENCE OR STRICT
LIABILITY. IT IS THE INTENT OF THE PARTIES THAT, TO THE EXTENT PROVIDED
IN SECTION 13.2(a), THE INDEMNITIES SET FORTH HEREIN SHALL APPLY TO AN
INDEMNITEE'S SOLE, CONCURRENT OR CONTRIBUTORY ACTIVE OR PASSIVE
NEGLIGENCE, GROSS NEGLIGENCE OR STRICT LIABILITY. THE PARTIES AGREE
THAT THIS PROVISION IS "CONSPICUOUS" FOR PURPOSES OF ALL STATE LAWS.
Section 13.2 Indemnification Procedures.
(a) Any Person seeking indemnification under Section 13.1 (the
"INDEMNIFIED PARTY") with respect to a Claim that is not a Third Party
Claim shall commence and resolve such Claim solely in accordance with
the dispute resolution procedures set forth in Section 13.3.
(b) If any Third Party Claim is asserted against any
Indemnified Party and such Indemnified Party intends to seek
indemnification hereunder from a party to this Agreement (the
"INDEMNIFYING PARTY"), then such Indemnified Party shall give notice of
the Third Party Claim to the Indemnifying Party as soon as practicable
after the Indemnified Party has reason to believe that the Indemnifying
Party will have an indemnification obligation with respect to such
Third Party Claim and shall provide the Indemnifying Party with all
papers served with respect to such Third Party Claim. Such notice shall
describe in reasonable detail the nature of the Third Party Claim, an
estimate of the amount of damages attributable to the Third Party Claim
and the basis of the Indemnified Party's request for indemnification
under this Agreement. The failure of the Indemnified Party to so notify
the Indemnifying Party of the Third Party Claim shall not relieve the
Indemnifying Party from any duty to indemnify hereunder unless and to
the extent that the Indemnifying Party demonstrates that the failure of
the Indemnified Party to promptly notify it of such Third Party Claim
materially prejudiced its ability to defend such Third Party Claim;
provided, that the failure of the Indemnified Party to notify the
Indemnifying Party shall not relieve the Indemnifying Party from any
liability which it may have to the Indemnified Party otherwise than
under this Agreement. Thereafter, the Indemnified Party shall deliver
to the Indemnifying Party, within five Business Days after the
Indemnified Party's receipt thereof, copies of all notices and
documents (including court papers) received by the Indemnified Party
relating to the Third Party Claim.
(c) The Indemnifying Party shall have the right to participate
in, or assume control of, and the Indemnifying Party's insurance
carrier shall have the right to participate in, the defense of the
Third Party Claim at its own expense by giving prompt written notice to
the Indemnified Party, using counsel of its choice reasonably
acceptable
46
to the Indemnified Party. If it elects to assume control of the defense
of such Third Party Claim, the Indemnifying Party shall defend such
Third Party Claim by promptly and vigorously prosecuting all
appropriate proceedings to a final conclusion or settlement. After
notice from the Indemnifying Party to the Indemnified Party of its
election to assume the defense of such Third Party Claim, the
Indemnified Party shall have the right to participate in the defense of
the Third Party Claim using counsel of its choice, but the Indemnifying
Party shall not be liable to the Indemnified Party hereunder for any
legal or other expenses subsequently incurred by the Indemnified Party
in connection with its participation in the defense thereof unless (i)
the employment thereof has been specifically authorized in writing by
the Indemnifying Party, (ii) the Indemnifying Party fails to assume the
defense or diligently prosecute the Third Party Claim or (iii) there
shall exist or develop a conflict that would ethically prohibit counsel
to the Indemnifying Party from representing the Indemnified Party. If
requested by the Indemnifying Party, the Indemnified Party agrees to
cooperate with the Indemnifying Party and its counsel in contesting any
Third Party Claim that the Indemnifying Party elects to contest,
including the making of any related counterclaim against the Third
Party asserting the Third Party Claim or any cross-complaint against
any Person, in each case only if and to the extend that any such
counterclaim or cross-complaint arises from the same actions or facts
giving rise to the Third Party Claim. The Indemnifying Party shall have
the right, acting in good faith and with due regard to the interests of
the Indemnified Party, to control all decisions regarding the handling
of the defense without the consent of the Indemnified Party, but shall
not have the right to admit liability with respect to, or compromise,
settle or discharge any Third Party Claim or consent to the entry of
any judgment with respect to such Third Party Claim without the consent
of the Indemnified Party, which consent shall not be unreasonably
withheld, unless such settlement, compromise or consent includes an
unconditional release of the Indemnified Party from all liability and
obligations arising out of such Third Party Claim and which would not
otherwise adversely affect the Indemnified Party.
(d) If the Indemnifying Party fails to assume the defense of a
Third Party Claim within 30 days after receipt of written notice of the
Third Party Claim, then the Indemnified Party shall have the right to
defend the Third Party Claim by promptly and vigorously prosecuting all
appropriate proceedings to a final conclusion or settlement. The
Indemnifying Party shall have the right to participate in the defense
of the Third Party Claim using counsel of its choice, but the
Indemnified Party shall not be liable to the Indemnifying Party
hereunder for any legal or other expenses incurred by the Indemnifying
Party in connection with its participation in the defense thereof. If
requested by the Indemnified Party, the Indemnifying Party agrees to
cooperate with the Indemnified Party and its counsel in contesting any
Third Party Claim that the Indemnified Party elects to contest,
including the making of any related counterclaim against the Third
Party asserting the Third Party Claim or any cross-complaint against
any Person, in each case only if and to the extent that any such
counterclaim or cross-complaint arises from the same actions or facts
giving rise to the Third Party Claim. The Indemnified Party shall have
the right, acting in good faith and with due regard to the interests of
the Indemnifying Party, to control all decisions regarding the handling
of the defense without the consent of the Indemnifying Party, but shall
not have the right to compromise or settle any Third Party Claim or
consent to the entry of any judgment with
47
respect to such Third Party Claim without the consent of the
Indemnifying Party, which consent shall not be unreasonably withheld,
unless such settlement compromise or consent includes an unconditional
release of the Indemnifying Party from all liability and obligations
arising out of such Third Party Claim.
(e) In the event an Indemnifying Party is determined to be
liable with respect to any Claim pursuant to Section 13.3, such
Indemnifying Party, within five Business Days after any such
determination, shall pay to the Company in cash the full amount for
which it is determined liable (an "AWARD"); provided, however, in lieu
of any such cash payment the Indemnifying Party may, at its option,
tender to the Company all of its right, title and interest in and to
that number of shares of Common Stock (rounded to the nearest whole
share) equal to the Award divided by $100, free and clear of all
Encumbrances which, if accepted by the Company shall constitute a full
accord and satisfaction with respect to the Award.
Section 13.3 Dispute Resolution.
(a) Any controversy, dispute or claim arising out of or
relating to this Agreement or the Related Agreements, or the
transactions contemplated thereby (a "DISPUTE") shall be resolved in
accordance with this Section 13.3.
(b) Any party may give the other party written notice (a
"DISPUTE NOTICE") of any Dispute which has not been resolved in the
normal course of business. Within 15 Business Days after delivery of
the Dispute Notice, the receiving party shall submit to the other party
a written response (the "RESPONSE"). The Dispute Notice and the
Response shall each include (i) a statement setting forth the position
of the party giving such notice, a summary of the arguments supporting
such position and, if applicable, the relief sought and (ii) the name
and title of a senior manager of such party who has authority to settle
the Dispute and will be responsible for the negotiations related to the
settlement of the Dispute (the "SENIOR MANAGER").
(c) Within 10 days after delivery of the Response provided for
in Section 13.3(b), the Senior Managers of both parties shall meet or
communicate by telephone at a mutually acceptable time and place, and
thereafter as often as they reasonably deem necessary, and shall
negotiate in good faith to attempt to resolve the Dispute that is the
subject of such Dispute Notice. If such Dispute has not been resolved
within 30 days after delivery of the Dispute Notice, then the parties
shall attempt to settle the Dispute pursuant to Section 13.3(d).
(d) In the event the Dispute has not been resolved within 30
days after the delivery of the Dispute Notice, the Dispute shall be
resolved by arbitration administered by the American Arbitration
Association (the "AAA") in accordance with the terms of this Section
13.3(d), the Commercial Arbitration Rules of the AAA, and, to the
maximum extent applicable, the United States Arbitration Act. Judgment
on any matter rendered by arbitrators may be entered in any court
having jurisdiction. Any arbitration shall be conducted before three
arbitrators. The arbitrators shall be individuals knowledgeable in the
subject matter of the Dispute. Each party shall select one arbitrator
and the two
48
arbitrators so selected shall select the third arbitrator. If the third
arbitrator is not selected within 30 Business Days after the request
for an arbitration, then any party may request the AAA to select the
third arbitrator. The arbitrators may engage engineers, accountants or
other consultants they deem necessary to render a conclusion in the
arbitration proceeding. To the maximum extent practicable, an
arbitration proceeding hereunder shall be concluded within 90 Business
Days of filing a Dispute with the AAA. Arbitration proceedings shall be
conducted in Houston, Texas. Arbitrators shall be empowered to impose
sanctions and to take such other actions as the arbitrators deem
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
arbitrators shall make specific written findings of fact and
conclusions of law. The arbitrators shall have the power to award
recovery of all costs and fees to the prevailing party. All fees of the
arbitrators and any engineer, accountant or other consultant engaged by
the arbitrators, shall be shared equally unless otherwise awarded by
the arbitrators. Notwithstanding the foregoing, if the amount in
controversy is less than $1,000,000, then, instead of selecting three
arbitrators by the process described above, one arbitrator shall be
selected in accordance with the rules of AAA. In this event the
arbitration proceeding shall be conducted for all purposes as set forth
in this Section 13.3(d), except that the proceeding shall be conducted
by the one arbitrator, instead of the three.
(e) All negotiations between the Senior Managers pursuant to
this Section 13.3 shall be treated as compromise and settlement
negotiations. Nothing said or disclosed, nor any document produced, in
the course of such negotiations that is not otherwise independently
discoverable shall be offered or received as evidence or used for
impeachment or for any other purpose in any current or future
arbitration or litigation.
Section 13.4 Consent to Amendments. This Agreement may be amended and
the observance of any term of this Agreement may be waived with (and only with)
the written consent of the Company and each Investor.
Section 13.5 Survival of Representations and Warranties. Unless this
Agreement is terminated pursuant to Section 12.1, in which case the
representations and warranties do not survive termination, all representations
and warranties contained herein or made in writing by or on behalf of any party
to this Agreement in connection herewith shall survive the execution and
delivery of this Agreement until July 1, 2004, regardless of any investigation
made by or on behalf of any party. No party may bring any Claim based upon a
breach of the representations or warranties contained in this Agreement after
such date.
Section 13.6 Successors and Assigns; No Third Party Benefit. All
covenants and agreements in this Agreement contained by or on behalf of the
parties hereto shall bind and inure to the benefit of the respective successors
and assigns of the parties hereto and, to the extent provided in this Agreement,
to the benefit of any future holders of Shares issued pursuant to this
Agreement, but in no event to the purchaser of Shares in any registered offering
under the Securities Act or any "brokers' transactions" effected pursuant to
Rule 144 of the Securities Act. Subject to the foregoing and except as provided
in Section 13.1, nothing in this Agreement shall confer upon any person or
entity not a party to this Agreement, or the legal representatives of
49
such person or entity, any rights or remedies of any nature or kind whatsoever
under or by reason of this Agreement. No transfer of Securities shall relieve
any party of its obligations hereunder, if the transferee of such Securities
does not perform any assumed obligation.
Section 13.7 Notices. Any and all notices, designations, consents,
offers, acceptances, or other communications provided for herein (each a
"NOTICE") shall be given in writing by registered or certified mail, personal
delivery, overnight courier or facsimile, which shall be addressed, or sent, to
the respective addresses as follows (or such other address as the Company or any
Investor may specify to the Company and all other Investors by Notice):
If to the Company, addressed to:
Pinnacle Gas Resources, Inc.
1 E. Alger, Suite 206
Sheridan, Wyoming 82801
Attention: Peter G. Schoonmaker
Gary W. Uhland
Facsimile: (307) 673-9711
If to the CSFB Parties, addressed to:
Credit Suisse First Boston Private Equity
1100 Louisiana Street, Suite 4600
Houston, Texas 77002
Attention: Steven A. Webster
Robert L. Cabes
Facsimile: (713) 890-1500
with a copy to (which does not constitute Notice):
Credit Suisse First Boston Private Equity
Eleven Madison Avenue, 16th Floor
New York, New York 10010
Attention: Benjamin A. Silbert
Facsimile: (917) 326-8076
with a copy to (which does not constitute Notice):
Akin Gump Strauss Hauer & Feld LLP
711 Louisiana Street, Suite 1900
Houston, Texas 77002
Attention: James L. Rice III
J. Michael Chambers
Facsimile: (713) 236-0822
50
If to CCBM, addressed to:
CCBM, Inc.
14701 St. Mary's Lane, Suite 800
Houston, Texas 77079
Attention: S.P. Johnson IV
Facsimile: (281) 496-0884
with a copy to (which does not constitute Notice):
Baker Botts L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 77002
Attention: Gene J. Oshman
Facsimile: (713) 229-7778
If to RMG, addressed to:
Rocky Mountain Gas, Inc.
877 North 8th West
Riverton, Wyoming 82501
Attention: Keith G. Larsen
Facsimile: (307) 857-3050
with a copy to (which does not constitute Notice):
Davis Graham & Stubbs LLP
1550 Seventeenth Street, Suite 500
Denver, Colorado 80202
Attention: Scot W. Anderson
Facsimile: (303) 893-1379
Each such communication shall for all purposes of this Agreement be treated as
effective or having been given when delivered if delivered personally, or, if
sent by courier, on the next business day following the day of dispatch or, if
sent by facsimile transmission, on the date of such transmission if confirmation
of such transmission is received or if sent by registered or certified mail
shall be deemed to have been received on the fifth Business Day after the date
of such mailing.
Section 13.8 Descriptive Headings. The descriptive headings of the
several Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
Section 13.9 Satisfaction Requirement. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to the Investors, the determination of
such satisfaction shall be made collectively by the Investors in their
reasonable judgment exercised in good faith.
51
Section 13.10 Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the law of the State of Texas, without giving effect to the choice of law or
conflicts principles thereof.
Section 13.11 Entire Agreement. This Agreement and the Related
Agreements contain the entire agreement among the parties with respect to the
subject matter herein and therein and supersede all prior and contemporaneous
arrangements or understandings with respect thereto.
Section 13.12 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable Law, but if any provision of this Agreement is held to be prohibited
or unenforceable in any jurisdiction, such provision will be ineffective only to
the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
[Signature Page to Follow]
52
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PINNACLE GAS RESOURCES, INC.
By:
-----------------------------------
Name:
Title:
CCBM, INC.
By:
-----------------------------------
Name:
Title:
ROCKY MOUNTAIN GAS, INC.
By:
-----------------------------------
Name:
Title:
MILLENNIUM PARTNERS II, L.P.
By: DLJ Merchant Banking III, Inc.,
a Managing General Partner
By:
-----------------------------------
Name:
Title:
DLJ MERCHANT BANKING III, INC.,
as Advisory General Partner on behalf of DLJ
Offshore Partners III, C.V.
By:
-----------------------------------
Name:
Title:
DLJ MERCHANT BANKING III, INC.,
as Advisory General Partner on behalf of DLJ
Offshore Partners III-1, C.V. and as
attorney-in-fact for DLJ Merchant Banking III,
L.P., as Associate General Partner of DLJ
Offshore Partners III-1, C.V.
By:
-----------------------------------
Name:
Title:
DLJ MERCHANT BANKING III, INC.,
as Advisory General Partner on behalf of DLJ
Offshore Partners III-2, C.V. and as
attorney-in-fact for DLJ Merchant Banking III,
L.P., as Associate General Partner of DLJ
Offshore Partners III-2, C.V.
By:
-----------------------------------
Name:
Title:
DLJ MERCHANT BANKING PARTNERS III, L.P.
By: DLJ Merchant Banking III, Inc.,
as Managing General Partner
By:
-----------------------------------
Name:
Title:
DLJ MB PARTNERS III GMBH & CO. KG
By: DLJ Merchant Banking III, L.P.,
as Managing Limited Partner
By: DLJ Merchant Banking III, LLC,
as General Partner
By: DLJ Merchant Banking III, Inc., as
Managing Member
By:
-----------------------------------
Name:
Title:
MBP III PLAN INVESTORS, L.P.
By: DLJ Merchant Banking III, Inc.,
as General Partner
By:
-----------------------------------
Name:
Title: