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EXHIBIT 10.16
AMENDMENT
TO
ADVISORY SERVICES AND
INDEMNIFICATION AGREEMENT
This Amendment to Advisory Services and Indemnification Agreement,
dated as of June 28, 1999 (this "Amendment"), amends that certain Advisory
Services and Indemnification Agreement dated January 25, 1999 (the "Agreement")
between Prize Energy Corp. (the "Company"), and Natural Gas Partners V, L.P, a
Delaware limited partnership ("NGP")
RECITALS
The Company plans to enter into a series of transactions relating to
its acquisition of assets from Pioneer Natural Resources U.S.A., Inc. and
Pioneer Resources Producing L.P. involving, among other things, the issuance and
sale of additional shares of its Common Stock to NGP to finance a portion of the
purchase price of such assets.
It is a condition to NGP's purchase of such additional shares of the
Company's common Stock that the parties enter into this Amendment.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the parties agree as follows:
1. Section 3 of the Agreement shall be amended in its entirety to read
as follows:
"3. Fees and Expenses. NGP shall be entitled to a fee of $l50,000
per year (pro-rated for any portion of a year) for its services during
the period (the "Payment Period"), beginning on July 1, 1999, and
ending upon termination of this Agreement pursuant to Section 2 hereof.
Such fee shall be payable quarterly in arrears on the last day of each
fiscal quarter of the Company beginning with the first fiscal quarter
which ends during the Payment Period. In addition, the Company shall
promptly reimburse NGP for all reasonable out-of-pocket expenses
incurred by NGP and its partners, employees and agents (including any
legal fees incurred by NGP for in-house or outside counsel) in
connection with NGP's activities pursuant to this Agreement during the
Payment Period. In consideration of the payment of the fees and
expenses described in this Paragraph 3, NGP shall not charge any
separate transaction fees for assisting the Company in future
financings or acquisitions."
2. Except as amended hereby, all of the terms and provisions of the
Agreement shall remain in full force and effect.
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3. Because NGP is an affiliate of the Company, Philip B. Smith, as a
non-interested director of the Company, joins in the execution of this Agreement
for the limited purpose of consenting to NGP's provision of the services and the
consideration described herein in accordance with the Bylaws of the Company.
This Agreement is executed as of the date first written above by a duly
authorized representative of each of the Company and NGP.
PRIZE ENERGY CORP.
By: /s/ PHILIP B. SMITH
--------------------
Philip B. Smith, Chairman of the Board and
Chief Executive Officer
NATURAL GAS PARTNERS V, L.P.
By: G.F.W. Energy V, L.P., General Partner
By: GFW V, L.L.C., General Partner
By: /s/ KENNETH A. HERSH
--------------------
Kenneth A. Hersh, Authorized Member
The undersigned director of the Company joins in the execution of
this Amendment for the limited purpose set forth in Paragraph 3 above.
/s/ PHILIP B. SMITH
------------------------
Philip B. Smith
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ADVISORY SERVICES AND
INDEMNIFICATION AGREEMENT
This Advisory Services and Indemnification Agreement, effective as of
January 25, 1999 (this "Agreement"), is between Prize Energy Corp. (the
"Company"), and Natural Gas Partners V, L.P., a Delaware limited partnership
("NGP")
The Company and NGP agree as follows:
1. Retention of Advisor; Scope of Services.
(a) Subject to the terms and conditions set forth herein, the Company
hereby retains NGP to act as an advisor to the Company.
(b) As advisor to the Company, NGP will, from time to time, as
requested by the Company, provide consultation, assistance and advice to the
Company with respect to the Company's operations, including without limitation,
the following: obtaining capital, whether through bank financing or the private
placement or public offering of equity or debt, including bank loan and credit
agreement negotiation, documentation and compliance, drafting of documents, and
planning and participation in meetings with financing sources; general oversight
of legal, accounting, placement and underwriting issues; implementing a
long-term budgeting and planning process; and business acquisitions, including
negotiation strategies and financing alternatives.
(c) The parties hereto acknowledge that (i) NGP is not regularly
engaged in the business of providing advisory services and that the services to
be performed by NGP hereunder are provided as an incident to NGP's activities as
an owner of a significant portion of the stock of the Company, (ii) the fees to
be paid to NGP hereunder were established at an amount which is believed to be
approximately equal to the amount of indirect costs and expenses NGP will incur
in providing such services, (iii) NGP is not an "investment advisor", within the
meaning of the Investment Advisors Act of 1940, as amended, or applicable state
laws, or a "broker" or "dealer" under the Securities Exchange Act of 1934, as
amended, or applicable state laws, (iv) the nature of the services to be
provided by NGP under this Agreement do not include those of an "investment
advisor" (i.e., providing advice as to the value of securities or the
advisability of investing in, purchasing or selling securities), or those of a
"broker" or "dealer" (i.e. effecting transaction in securities for the account
of the Company or others), and (v) it is specifically intended by the parties
hereto that NGP's activities hereunder not subject NGP to any regulation or
registration under federal or state laws.
(d) The parties hereto acknowledge and agree that NGP will make
available any and all of its employees, agents and other resources, which NGP,
it its sole discretion, determines are necessary for it to perform its services
hereunder. The parties further acknowledge that, unless and until NGP provides
notice to the contrary, all decisions with respect to staffing, scheduling
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and allocating NGP's resources for purposes of this Agreement will be
coordinated on behalf of NGP by its representatives Kenneth A. Hersh and David
R. Albin, and any request by the Company for the performance of services
hereunder shall be directed to Kenneth A. Hersh or David R. Albin.
2. Termination. This Agreement shall continue (unless otherwise
extended by the mutual agreement of the parties) until the earlier of (i) the
date of dissolution of the Company, and (ii) the second anniversary of the date
of the consummation of the Company's first issuance of securities pursuant to a
public offering registered pursuant to the Securities Act of 1933, as amended
(the "1933 Act"). Notwithstanding the immediately preceding sentence, this
Agreement may be terminated effective as of the end of any fiscal quarter of the
Company at any time in the sole discretion of NGP, if NGP provides written
notice of its election to terminate this Agreement to the Company not less than
30 days before the date on which termination is to be effective. Upon
termination, neither party will have any further obligation under this
Agreement, except for (i) the Company's obligation to pay to NGP the fees and
reimbursements then due pursuant to Paragraph 3 hereof, for the period prior to
the termination, which obligation shall continue after such termination until
such amounts are paid in full, and (ii) the Company's obligation to provide the
indemnification contained in Paragraph 4 hereof, which shall continue in effect
for a period of four years after such termination.
3. Fees and Expenses. NGP shall be entitled to a fee of $75,000 per
year (pro-rated for any portion of a year) for its services during the period
(the "Payment Period"), which begins on the first to occur of (i) the first day
of the first month in which the net present value (calculated pursuant to the
rules and regulations promulgated by the Securities and Exchange Commission) of
the Company's oil and gas reserves is greater than $15,000,000 and (ii) the
first day of the first month in which the Company obtains financing of at least
$1,000,000 from a third party not affiliated with the Company's shareholders,
whether pursuant to bank debt, equity investment or otherwise, and ends upon
termination of this Agreement pursuant to Section 2 hereof. Such fee shall be
payable quarterly in arrears on the last day of each fiscal quarter of the
Company beginning with the first fiscal quarter which ends during the Payment
Period. In addition, the Company shall promptly reimburse NGP for all reasonable
out-of-pocket expenses incurred by NGP and its partners, employees and agents
(including any legal fees incurred by NGP by in-house or outside counsel) in
connection with NGP's activities pursuant to this Agreement during the Payment
Period. In consideration of the payment of the fees and expenses described in
this Paragraph 3, NGP shall not charge any separate transaction fees for
assisting the Company in future financings or acquisitions.
4. Indemnification. In consideration of NGP's investment in the Company
and the services performed and to be performed by NGP for the Company, and for
other good and valuable consideration, the Company and NGP hereby agree as
follows:
(a) The Company shall indemnify and hold harmless NGP, NGP's
affiliates and affiliated entities, each of NGP's partners, officers,
employees and agents and each person, if any, who "controls" NGP
(within the meaning of the federal securities laws) (collectively the
"Indemnified Parties" and individually, an "Indemnified Party") from
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and against any and all actions or claims and any and all claims,
damages, liabilities, costs or expenses (including, without limitation,
reasonable attorneys' fees and any legal or other expenses in giving
testimony or furnishing documents in response to a subpoena or
otherwise or the costs of investigating, preparing or defending any
action or claim, whether or not in connection with any action or
litigation in which any Indemnified Party is a party), joint or
several, to which any Indemnified Party may become subject, as and when
incurred, directly or indirectly, caused by, relating to, based upon or
arising out of (i) actions taken or omitted to be taken (including any
untrue statement made or any statement omitted to be made) by the
Company or any of its affiliates (other than NGP), (ii) claims asserted
against the Company or any of its officers, directors or controlling
persons under the 1933 Act or any other federal or state securities
law, (iii) actions taken or omitted to be taken by an Indemnified Party
with the consent of the Company or any of its affiliates, or in
conformity with instructions of the Company or any of its affiliates,
(iv) NGP's engagement under this Agreement, including, without
limitation, any act or omission by NGP in connection with its role as
an advisor and its acceptance of or the performance or non-performance
of its obligations under this Agreement. The Company will not however,
be responsible for indemnifying any claims, damages, liabilities, costs
or expenses pursuant to clause (iv) of the immediately preceding
sentence that are found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) to have resulted from an
Indemnified Party's bad faith, gross negligence or willful misconduct.
The Company agrees that the Indemnified Parties shall not have any
liability (whether direct or indirect, in contract, tort or otherwise)
to the Company for or in connection with any matter related to this
Agreement, except for liabilities or expenses that are found in a final
judgment by a court of competent jurisdiction (not subject to further
appeal) to have resulted primarily and directly from NGP or such other
Indemnified Party's gross negligence or willful misconduct. THE COMPANY
HEREBY ACKNOWLEDGES THAT THE FOREGOING IMDEMNITY SHALL COVER ANY LOSS,
CLAIM, DAMAGE, LIABILITY, COST OR EXPENSE THAT HAS RESULTED FROM OR IS
ALLEDGED TO HAVE RESULTED FROM THE ACTIVE OR PASSIVE OR THE SOLE, JOINT
OR CONCURRENT ORDINARY NEGLIGENCE OF NGP OR ANY OTHER INDEMNIFIED
PERSON.
(b) The indemnity provided for in subparagraph (a) of this Paragraph 4
shall be in addition to any liability that the Company may otherwise have to the
Indemnified Parties and shall be subject to the following:
(i) Promptly after receipt by an Indemnified Party under
subparagraph (a) of this Paragraph 4 of notice of the commencement of
any action, proceeding, investigation or other event with respect to
which any Indemnified Party demands indemnification hereunder, such
Indemnified Party shall, if a claim in respect thereof is to be made
against the Company, notify the Company in writing of the commencement
thereof, provided that the failure to so notify the Company shall not
relieve it from any liability that it may have to any Indemnified
Party, except to the extent the Company is prejudiced by such failure.
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(ii) Notwithstanding anything expressed or implied herein to
the contrary, the indemnity provided for herein shall cover the amount
of any settlements entered into in connection with any claim for which
an Indemnified Party may be indemnified hereunder, if and only if such
settlement is consented to by the Company.
(iii) No settlement binding on an Indemnified Party may be
made without the consent of such Indemnified Party (which consent shall
not be unreasonably withheld).
(iv) If the claim for indemnification arises out of a claim
for damages by a person other than an Indemnified Party, the Company,
after giving notice to the Indemnified Party, may undertake to defend
or settle such claim for damages and may employ counsel for such
purpose. The Indemnified Party, at its own expense, shall have the
right to employ separate counsel with respect to such claim and to
participate in, but not control, such settlement or defense; provided
that, if the Company is also a defendant in respect of any such claim
and a potential conflict exists between the interests of the Company
and those of an Indemnified Party or if the Company does not elect to
undertake the settlement or defense of such claim, the Indemnified
Parties shall, at the expense of the Company, have the right to employ
not more than one counsel to represent the Indemnified Parties with
respect to such claim and the Indemnified Parties may control any
settlement or defense applicable to the claims brought against such
Indemnified Parties.
(v) Expenses and other costs incurred by an Indemnified Party
in connection with any suit, action or other proceeding relating to
this Agreement shall be advanced by the Company to such Indemnified
Party prior to any final determination of whether an Indemnified Party
is entitled to be indemnified for such costs and expenses hereunder, if
the Indemnified Party provides to the Company an undertaking to return
any amounts so received to the extent that it is ultimately determined
that such person was not entitled to be indemnified for such costs and
expenses hereunder.
(vi) In order to provide for just and equitable contribution,
if a claim for indemnification is made hereunder but a court of
competent jurisdiction finds in a final judgment (not subject to
appeal) that such indemnification may not be enforced in such case,
even though the express provisions hereof provide for indemnification,
then in such case, the Company on the one hand, and the Indemnified
Parties on the other hand, shall contribute to the losses, claims,
damages, liabilities or costs so that the Indemnified Parties are
responsible in the aggregate for a percentage of the losses, claims,
damages, liabilities or costs equal to a fraction, the numerator of
which is the fees (but not expenses) previously received by NGP
pursuant to Paragraph 3 of this Agreement, and the denominator of which
is the sum of total aggregate amount of all consideration received by
the Company in respect of transactions giving rise to such claim for
indemnification, or, if no such transaction exists or has not been
completed, the fair market value of the Company's outstanding common
stock on the date hereof, and the Company shall be responsible for the
remainder of such losses, claims, damages,
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liabilities or costs; provided, however, that if such allocation is not
permitted by applicable law then the relative fault of the Company, on
the one hand, and the Indemnified Parties, on the other hand, in
connection with the statements, acts or omissions that resulted in such
losses, claims, damages, liabilities or costs and relevant equitable
considerations shall also be considered. No person found liable for a
fraudulent misrepresentation shall be entitled to contribution from any
person who is not also found liable for such fraudulent
misrepresentation. Notwithstanding the foregoing, the Indemnified
Parties, in the aggregate, shall not be obligated to contribute any
amount hereunder that exceeds the amount of fees (but not expenses) NGP
received previously pursuant to this Agreement.
5. GOVERNING LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT
SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF TEXAS APPLICABLE TO
CONTRACTS MADE AND TO BE FULLY PERFORMED THEREIN.
6. Successors and Assigns. The benefits of this Agreement shall inure
to the parties hereto, their respective successors and assigns, and to the
indemnified parties hereunder and their successors and representatives, and the
obligations and liabilities assumed in this Agreement by the parties hereto
shall be binding upon their respective successors and assigns. This Agreement
may not be assigned by any party to an unaffiliated party without the express
written consent of the other party hereto.
7. Notices. All communications under this Agreement shall be in writing
and shall be delivered personally or sent by personal delivery, expedited
delivery, certified mail, return receipt requested or by telecopy as follows:
If to NGP:
777 Main Street, Suite 2250
Fort Worth, Texas 76102-5304
Telecopy Number: (817) 820-6650
Attention: Kenneth A. Hersh
100 N. Guadalupe Street, Suite 205
Santa Fe, New Mexico 87501
Telecopy Number: (505) 983-8120
Attention: David R. Albin
If to the Company:
2902 E. 31st Street
Tulsa, OK 74105-2402
Telecopy Number: (918) 592-4324
Attention: Philip B. Smith
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Either party may change its address or telecopy number set forth above
by giving the other party notice of such change in accordance with the
provisions of this Paragraph 7. A notice shall be deemed given, if by personal
delivery or expedited delivery service, on the date of such delivery to such
address, if by certified mail, on the date shown on the applicable return
receipt, or if by telecopy, on the date of receipt of the transmission of such
notice at such telecopy number.
8. Approval of Agreement. Because NGP is an affiliate of the Company,
Philip B. Smith, as a non-interested director of the Company, joins in the
execution of this Agreement for the limited purpose of consenting to NGP's
provision of the services and the consideration described herein in accordance
with the Bylaws of the Company.
9. Nature of Relationship. The parties hereto intend that the services
provided by NGP to the Company pursuant to this Agreement are being provided as
an independent contractor. Nothing contained in this Agreement shall constitute
or be construed to be or create a general partnership or joint venture between
NGP and the Company or their respective successors or assigns.
10. Captions. The Paragraph titles herein are for reference purposes
only and do not control or affect the meaning or interpretation of any term or
provision hereof.
11. Amendments. No alteration, amendment, change or addition hereto
shall be binding or effective unless the same is set forth in writing signed by
a duly authorized representative of each party.
12. Partial Invalidity. If the final determination of a court of
competent jurisdiction declares, after the expiration of the time within which
judicial review (if permitted) of such determination may be perfected, that any
term or provision hereof is invalid or unenforceable (i) the remaining terms and
provisions hereof shall be unimpaired, and (ii) the invalid or unenforceable
term or provision shall be replaced by a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision.
13. Survival. All representations, warranties and agreements contained
herein shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any party hereto, and shall survive the
execution and delivery hereof.
14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which together
shall be considered one and the same agreement.
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This Agreement is executed as of the date first written above by a
duly authorized representative of each of the Company and NGP.
COMPANY
PRIZE ENERGY CORP.
By: /s/ PHILIP B. SMITH
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Philip B. Smith, President
NGP
NATURAL GAS PARTNERS V, L.P.
By: G.F.W. Energy V, L.P., General Partner
By: GFW V, L.L.C., General Partner
By: /s/ KENNETH A. HERSH
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Kenneth A. Hersh, Authorized Member
The undersigned director of the Company joins in the execution of this
Agreement for the limited purpose set forth in Paragraph 8 above.
/s/ PHILIP B. SMITH
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Philip B. Smith, President
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