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AGREEMENT AND PLAN OF MERGER
by and among
ENERGY PARTNERS, LTD.,
SAINTS ACQUISITION SUBSIDIARY, INC.
and
HALL-HOUSTON OIL COMPANY
Dated as of December 16, 2001
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TABLE OF CONTENTS
ARTICLE I
THE MERGER; CERTIFICATE OF
INCORPORATION; BY-LAWS; DIRECTORS AND OFFICERS
Section 1.1 The Merger................................................1
Section 1.2 Filing....................................................2
Section 1.3 Closing of the Merger.....................................2
Section 1.4 Articles of Incorporation.................................2
Section 1.5 By-Laws...................................................2
Section 1.6 Directors and Executive Officers of Buyer.................2
Section 1.7 Director and Officers of Newco............................2
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Capital Stock of the Surviving Corporation................3
Section 2.2 Conversion of Capital Stock of the Company................3
Section 2.3 Rights of the Company's Shareholders......................3
Section 2.4 No Liability..............................................4
Section 2.5 Lost Certificates.........................................4
Section 2.6 Stock Transfer Books......................................4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Corporate Existence and Power.............................4
Section 3.2 Capitalization............................................5
Section 3.3 Authorization and Validity of Agreement...................5
Section 3.4 No Conflict; No Breach or Default.........................5
Section 3.5 No Consent Required.......................................6
Section 3.6 Financial Statements......................................6
Section 3.7 Conduct of Business.......................................7
Section 3.8 Environmental Matters.....................................9
Section 3.9 Litigation................................................11
Section 3.10 Owned Real Property.......................................11
Section 3.11 Certain Leases............................................11
Section 3.12 Oil and Gas Properties....................................11
Section 3.13 Compliance with Laws......................................13
Section 3.14 Permits...................................................13
Section 3.15 Certain Contracts.........................................13
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Section 3.16 Employee Matters..........................................14
Section 3.17 Intellectual Property.....................................16
Section 3.18 Brokers or Finders; Change of Control Payments............17
Section 3.19 Insurance.................................................17
Section 3.20 Taxes.....................................................17
Section 3.21 Absence of Undisclosed Liabilities........................19
Section 3.22 No Affiliate Transactions.................................19
Section 3.23 Board Recommendation......................................19
Section 3.24 Shareholder Approval; Other Transaction Documents.........19
Section 3.25 Accounting Practices......................................20
Section 3.26 Minute Books..............................................20
Section 3.27 Bank Accounts; Powers of Attorney.........................20
Section 3.28 Use of Proceeds of Bridge Loans...........................20
Section 3.29 Number of Accredited Investors............................20
Section 3.30 No Untrue Statements......................................20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND NEWCO
Section 4.1 Corporate Existence.......................................21
Section 4.2 Capitalization............................................21
Section 4.3 Authorization and Validity of Agreement...................21
Section 4.4 No Conflict...............................................22
Section 4.5 No Consent Required.......................................22
Section 4.6 Brokers and Finders.......................................22
Section 4.7 Authorization of Transaction Consideration................22
Section 4.8 Oil and Gas Qualification.................................23
Section 4.9 Investor Qualification....................................23
Section 4.10 Exchange Act Filings......................................23
ARTICLE V
COVENANTS
Section 5.1 Cooperation...............................................23
Section 5.2 Exclusivity...............................................24
Section 5.3 Availability of Employees and Records.....................24
Section 5.4 Notification of Changes and Default.......................25
Section 5.5 Financial Statements, Etc.................................25
Section 5.6 Publicity.................................................25
Section 5.7 Confidentiality of Information............................26
Section 5.8 Conduct of Business.......................................26
Section 5.9 Restructuring of Working Interest Purchase Agreement......28
Section 5.10 Employee Benefits.........................................28
Section 5.11 Representation Letters....................................29
Section 5.12 Taking of Necessary Action; Further Action................29
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ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to Obligations of Buyer and Newco..............29
6.1.1 Accuracy of Representations and Warranties.....29
6.1.2 Performance of Covenants and Agreements........30
6.1.3 No Injunction; Consents........................30
6.1.4 Debt Retirement................................30
6.1.5 Employment Agreements..........................30
6.1.6 Dissenting Shareholders........................30
6.1.7 Fairness Opinion...............................30
6.1.8 Financing......................................30
6.1.9 Company Material Adverse Effect................30
6.1.10 Transaction Documents..........................30
6.1.11 Release of Liens...............................30
6.1.12 Deliveries by the Company......................31
Section 6.2 Conditions to Obligations of the Company..................31
6.2.1 Accuracy of Representations and Warranties.....31
6.2.2 Performance of Covenants and Agreements........31
6.2.3 No Injunction; Consents........................31
6.2.4 Buyer Stockholder Agreement....................31
6.2.5 Shareholder Voting Agreement...................31
6.2.6 Buyer Material Adverse Effect..................31
6.2.7 Deliveries by Buyer and Newco..................31
ARTICLE VII
CLOSING
Section 7.1 The Closing...............................................32
Section 7.2 The Company's Obligations.................................32
Section 7.3 Buyer's and Newco's Obligations...........................33
ARTICLE VIII
TERMINATION
Section 8.1 Termination...............................................34
Section 8.2 Effect of Termination.....................................34
ARTICLE IX
DEFINITIONS
Section 9.1 Definitions...............................................34
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ARTICLE X
MISCELLANEOUS
Section 10.1 Notices...................................................42
Section 10.2 Assignment................................................44
Section 10.3 Entire Agreement..........................................44
Section 10.4 Construction..............................................44
Section 10.5 Amendment.................................................44
Section 10.6 Waivers...................................................44
Section 10.7 Fees and Expenses of Transactions.........................44
Section 10.8 Counterparts..............................................45
Section 10.9 Governing Law.............................................45
Section 10.10 Arbitration...............................................45
EXHIBITS
Exhibit A-1 Executive Officers of Buyer upon the Closing
Exhibit A-2 Officers of Surviving Corporation upon the Closing
Exhibit B Earnout Term Sheet
Exhibit C-1 Form of $11 Buyer Warrant
Exhibit C-2 Form of $9 Buyer Warrant
Exhibit D Form of Debt Exchange Agreement
Exhibit E-1 Form of Buyer Preferred Stock
Exhibit E-2 Form of Exchange Note for Buyer Preferred Stock
Exhibit F Form of Buyer Senior Subordinated Note
Exhibit G-1 Working Interest Purchase Agreement
Exhibit G-2 Overriding Royalty Interest Purchase Agreement
Exhibit G-3 Employee Royalty Trust Purchase Agreement and Debt
Exchange
Exhibit H Company Principal Shareholder Agreement
Exhibit I Buyer Registration Rights Agreement
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of this
December 16, 2001, by and among ENERGY PARTNERS, LTD., a Delaware corporation
("Buyer"), SAINTS ACQUISITION SUBSIDIARY, INC., a Texas corporation and wholly
owned subsidiary of Buyer ("Newco"), and HALL-HOUSTON OIL COMPANY, a Texas
corporation (the "Company").
RECITALS
The Boards of Directors of the Company, Buyer and Newco each have
determined that it is advisable and in their respective best interests to enter
into a business combination pursuant to which Buyer, by or through Newco or
another Affiliate of Buyer, will acquire by merger in exchange for the Merger
Consideration the entire equity interest of the Company.
Concurrently with the Merger, certain indebtedness of the Company and
certain interests in oil and gas leases (or hydrocarbon production under the
terms thereof) and related personal property held by third parties who are
Affiliates of the Company will be retired or exchanged or acquired, as
appropriate, for a combination of cash and debt and equity securities of Buyer.
Newco is a newly formed corporation created for the purpose of effecting
the Merger.
All capitalized terms used herein shall have the meanings provided therefor
in Article IX.
AGREEMENTS
Accordingly, in consideration of the recitals and of the respective
covenants, representations, warranties and agreements herein contained, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
ARTICLE I
THE MERGER; CERTIFICATE OF
INCORPORATION; BY-LAWS; DIRECTORS AND OFFICERS
Section 1.1 The Merger. At the Closing, Newco shall be merged (the
"Merger") with and into the Company as provided herein. Thereupon, the corporate
existence of the Company, with all its purposes, powers and objects, shall
continue unaffected and unimpaired by the Merger, and the corporate identity and
existence, with all the purposes, powers and objects, of Newco shall be merged
with and into the Company, and the Company shall be the corporation surviving
the Merger (hereinafter sometimes called the "Surviving Corporation"), which
shall continue its corporate exis-
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tence under the laws of the State of Texas. The name of the Surviving
Corporation shall be Hall-Houston Oil Company.
Section 1.2 Filing. As soon as practicable after fulfillment or waiver of
the conditions set forth in Article VI or on such later date as may be mutually
agreed to between Buyer and the Company, the parties hereto will cause to be
filed with the office of the Secretary of State of the State of Texas, a
certificate of merger (the "Certificate of Merger"), in such form as required
by, and executed in accordance with, the relevant provisions of the TBCA.
Section 1.3 Closing of the Merger. The Merger shall be effective at the
time that the filing of the Certificate of Merger, or at such later time
specified in the Certificate of Merger, which time is herein sometimes referred
to as the "Closing" and the date thereof is sometimes referred to as the
"Effective Date."
Section 1.4 Articles of Incorporation. The Articles of Incorporation of
Newco, as in effect immediately prior to the Closing, shall be the Articles of
Incorporation of the Surviving Corporation until the same shall thereafter be
altered, amended, or repealed in accordance with law and such Articles of
Incorporation.
Section 1.5 By-Laws. The By-Laws of Newco shall be the By-Laws of the
Surviving Corporation until the same shall thereafter be altered, amended or
repealed in accordance with law, the Articles of Incorporation of the Surviving
Corporation or said By-Laws.
Section 1.6 Directors and Executive Officers of Buyer.
(a) Directors. Upon the Closing, Buyer shall promptly take all actions
necessary to cause Gary L. Hall (the "Company Designee") to be elected to the
Board of Directors of Buyer, including, if necessary, increasing the size of the
Buyer's Board of Directors or obtaining the resignation of one of the existing
directors of Buyer. The Company Designee shall serve on the Buyer's Board of
Directors until his successor is duly elected or appointed and qualified.
Buyer's obligations to obtain the appointment of the Company Designee shall be
subject to the provisions of Buyer's Certificate of Incorporation, the Buyer
Stockholder Agreement and the Delaware General Corporation Law.
(b) Executive Officers. Upon the Closing, the executive officers of
Buyer shall be as set forth on Exhibit A-1, in each case until their respective
successors are duly elected or appointed and qualified.
Section 1.7 Director and Officers of Newco. The director of Newco
immediately prior to the Closing shall be the director of the Surviving
Corporation, to hold office in accordance with the Articles of Incorporation and
By-laws of the Surviving Corporation, and, upon the Closing, the officers of the
Surviving Corporation shall be as set forth on Exhibit A-2, in each case until
their respective successors are duly elected or appointed and qualified.
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ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Capital Stock of the Surviving Corporation. The authorized
number and par value of shares of all classes of capital stock of Newco
immediately prior to the Closing shall be the authorized number and par value of
shares of the classes of capital stock of the Surviving Corporation from and
after the Closing.
Section 2.2 Conversion of Capital Stock of the Company. (a) At the Closing,
all holders of Company Capital Stock shall, by virtue of the Merger, be entitled
to receive the Merger Consideration, other than with respect to shares of
Company Capital Stock (i) held in the treasury of the Company, which shall not
be considered as outstanding for purposes of this Agreement, or (ii) as to which
the holder has commenced as of the Closing all procedures necessary through the
Closing to assert dissenters' rights in accordance with the TBCA.
(b) Except as set forth in Section 2.2(a), each share of (i) Company
Common Stock shall be entitled to receive (x) $0.047237 in cash, (y) 0.2361842
$11 Buyer Warrants and (z) 0.078728 $9 Buyer Warrants, (the consideration
provided for in (x), (y) and (z), collectively, the "Common Stock Merger
Consideration"), and (ii) Company Preferred Stock which has not been converted
into Common Stock or redeemed prior to the Closing shall be entitled to receive
(w) $1.249736 in cash, (x) a pro rata share of 75% of the Earnout, (y) 6.248681
$11 Buyer Warrants and (z) 2.082894 $9 Buyer Warrants (the consideration
provided for in (w), (x), (y) and (z), together, "Preferred Stock Merger
Consideration" and, together with the Common Stock Merger Consideration, the
"Merger Consideration").
(c) At the Closing, any Company Capital Stock held in the treasury of
the Company shall cease to exist and be canceled.
Section 2.3 Rights of the Company's Shareholders. At the Closing, the
holders of Company Capital Stock shall cease to have any rights as shareholders
of the Company (except such dissenters' rights, if any, as such holders may have
pursuant to the TBCA). After the Closing, each holder of Company Capital Stock
shall be entitled upon the surrender of each such certificate (duly endorsed or
accompanied by appropriate stock powers duly endorsed in blank for transfer) to
Buyer to receive in exchange therefor the Merger Consideration allocable to such
holder. Pending such surrender and exchange, such holder's certificate or
certificates for Company Capital Stock shall be deemed for all corporate
purposes, by virtue of the Merger and without any further action on the part of
the parties hereto or the holder thereof, to evidence only the right to receive
the Merger Consideration allocable to such holder.
Section 2.4 No Liability. Neither Buyer nor the Surviving Corporation shall
be liable to any holder of certificates for any shares of Company Capital Stock
(or dividends or distributions with respect thereto), or cash delivered to a
public official pursuant to any abandoned property, escheat or similar law.
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Section 2.5 Lost Certificates. If any certificate for Company Capital Stock
shall have been lost, stolen or destroyed, upon the making of a customary
affidavit and indemnity agreement of that fact by the person claiming such
certificate to be lost, stolen or destroyed, Buyer will issue in exchange for
such lost, stolen or destroyed certificate the Merger Consideration allocable to
the Company Capital Stock evidenced by such lost, stolen or destroyed
certificate.
Section 2.6 Stock Transfer Books. At the Closing, the stock transfer books
of the Company shall be closed and there shall be no further registration of
transfers of shares of Company Capital Stock thereafter on the records of the
Company. On or after the Closing, any certificates presented to Buyer for any
reason shall be converted into the Merger Consideration allocable to the Company
Capital Stock evidenced by such certificates.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the corresponding section of the disclosure schedule
previously delivered to Buyer and Newco (the "Disclosure Schedule"), the Company
hereby represents and warrants as follows to Buyer and Newco. An event or
condition shall be deemed to have a "Company Material Adverse Effect" for
purposes of this Article III if such event or condition, individually or
together with other events or conditions, qualifies as a change in or has an
effect on the Company or any of its subsidiaries that is or could reasonably be
expected to be materially adverse to the business, operations, properties
(including intangible properties), condition (financial or otherwise), assets,
liabilities or prospects of the Company and its subsidiaries, taken as a whole.
Section 3.1 Corporate Existence and Power. Each of the Company and its
subsidiaries is a corporation or limited liability company duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization set forth in Section 3.1 of the Disclosure
Schedule and has all requisite corporate or limited liability company power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Each of the Company and its subsidiaries is duly
qualified as a foreign corporation or limited liability company to do business,
and is in good standing, in each jurisdiction where the character of its
properties owned or leased or the nature of its activities makes such
qualification necessary, except for failures to be so qualified or in good
standing which do not have and could not reasonably be expected to, individually
or in the aggregate, have a Company Material Adverse Effect. The Company has
previously furnished to Buyer true and complete copies of the certificate or
articles of incorporation or organization (or other applicable charter document)
and by-laws or regulations of the Company and each of its subsidiaries, which
are in full force and effect. None of the Company or its subsidiaries is in
violation of any of the provisions of its certificate or articles of
incorporation or organization or its bylaws or regulations.
Section 3.2 Capitalization. (a) The authorized and outstanding capital
stock of the Company is as set forth in Section 3.2 of the Disclosure Schedule.
All of the issued and out-
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standing Company Capital Stock is duly authorized, validly issued, fully paid
and nonassessable. The Company has no other equity securities of any class
issued, reserved for issuance or outstanding, and there are no outstanding
options, warrants, agreements or rights to subscribe for or to purchase, or
commitments to issue, or other securities of the Company which, pursuant to
their terms, are convertible into or exchangeable for, equity securities of the
Company.
(b) Section 3.2 of the Disclosure Schedule sets forth the names of,
and respective number of shares of Company Capital Stock owned by, the
shareholders of the Company on the date hereof (the "Existing Shareholders") and
each agreement or understanding by the Company or any shareholder with respect
to the voting of the capital stock of the Company or its subsidiaries.
(c) Section 3.2 of the Disclosure Schedule sets forth the record and
beneficial ownership of all of the outstanding shares of capital stock or
membership interests of each of the subsidiaries of the Company. No subsidiary
of the Company has any other equity securities of any class, issued, reserved
for issuance or outstanding, and there are no outstanding options, warrants,
agreements or rights to subscribe for or to purchase, or commitments to issue,
or other securities of any subsidiary of the Company which, pursuant to their
terms, are convertible into or exchangeable for, equity securities of any
subsidiary of the Company. All of such shares so owned by the Company are
validly issued, fully paid and nonassessable and are owned by it free and clear
of any Lien.
Section 3.3 Authorization and Validity of Agreement. The Company has the
corporate power and authority to execute, deliver and perform each of the
Transaction Documents and any other agreements and instruments to be executed by
the Company pursuant hereto and thereto. The execution, delivery and performance
of each Transaction Document to be executed by the Company and any other
agreements and instruments to be executed by the Company pursuant hereto have
been duly authorized by all necessary corporate action on the part of the
Company. Each of the Transaction Documents and such other agreements and
instruments to be executed by the Company pursuant hereto and thereto are, or
upon their due execution and delivery will be, the valid and binding obligations
of the Company enforceable against it in accordance with their respective terms,
except to the extent that the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other Laws relating to or
affecting creditors' rights generally and by general principles of equity.
Section 3.4 No Conflict; No Breach or Default. (a) Neither the execution
and delivery by the Company of any Transaction Document or any other agreements
and instruments to be executed by the Company pursuant hereto and thereto, nor
the performance by it of the Transactions to be performed by it, will (i)
violate or conflict with the provisions of the charter or organizational
documents of the Company or any of its subsidiaries; (ii) result in the breach
of, or constitute a default under, (A) any applicable Law or any Order
applicable to or binding upon the Company and its subsidiaries or any of their
respective assets or properties, in a manner which could, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect or
could reasonably be expected to have a material adverse effect on the ability of
any of them to perform their respective obligations hereunder or thereunder, or
(B) any Contract to which the Company and its subsidiaries is a party or by
which any of their respective assets or properties are bound, the breach of
which or default under which could, individually or in the aggregate, reasonably
be expected to have a Company
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Material Adverse Effect or could reasonably be expected to have a material
adverse effect on the ability of any of them to perform their respective
obligations hereunder or thereunder; or (iii) result in the creation or
imposition of any Lien upon any of the assets or properties of any of the
Company and its subsidiaries which could, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
(b) No breach or default (or any event which solely by notice and/or the
passage of time would become a default) exists or is alleged to exist with
respect to the performance of any obligation of the Company or its subsidiaries
under the terms of any Contract to which any of them is a party or to which any
of their respective assets are subject, or by which any of them is otherwise
bound, except for breaches or defaults (or alleged breaches or defaults) which,
individually or in the aggregate, could not reasonably be expected to have a
Company Material Adverse Effect.
Section 3.5 No Consent Required. No consent, approval, authorization,
notice or filing of or with any Governmental Authority, including, without
limitation, the MMS, or any third party is required to be obtained, made or
given in order to permit the Company to execute and deliver any Transaction
Document and any other agreements and instruments to be executed and delivered
by the Company pursuant hereto and thereto, and to perform the Transactions to
be performed by it, the absence of which could, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect or
could reasonably be expected to have a material adverse effect on its ability to
perform its obligations under any Transaction Document and such other agreements
and instruments.
Section 3.6 Financial Statements. The Company has previously delivered to
Buyer and Newco accurate and complete copies of (a) the audited balance sheets
of the Company at December 31 for each of the years ended 1998, 1999 and 2000,
and the related statements of income and statements of cash flows for each of
the years then ended, together with the notes thereto, all as reported upon by
KPMG LLP, independent public accountants, and (b) the unaudited balance sheets
of the Company as of March 31, June 30 and September 30, 2001 (the latest being
the "September 30, 2001 Balance Sheet") and the related statements of income and
statements of cash flow for the three-month period then ended, certified by the
chief financial officer of the Company (the financial statements referenced in
Section 3.6(a) and (b) collectively, the "Financial Statements"). The Company
has made available to Buyer and Newco accurate and complete copies of those work
papers of the Company used or prepared by KPMG LLP in connection with any of the
foregoing financial statements referenced in the letter dated November 28, 2001
between KPMG LLP and Buyer. The Financial Statements fairly present the
financial position of the Company and the results of its operations as of the
dates and for the periods indicated thereon and have been prepared in accordance
with GAAP.
Section 3.7 Conduct of Business. Except as otherwise expressly contemplated
by this Agreement, since September 30, 2001 (with respect to clause (a), during
December 31, 2000 through September 30, 2001, such representation shall be true
except for the conduct of oil and gas operations in the ordinary course of
business), neither the Company nor any of its subsidiaries (i) has entered into
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any transaction nor conducted its business in any material respect other than in
the ordinary course of business consistent with past practice, or (ii) has:
(a) experienced any change which, individually or in the aggregate, could
reasonably be expected to have a Company Material Adverse Effect,
other than events that are the effect of economic or political factors
affecting the economy as a whole or events that are the effect of
factors generally affecting the oil and gas industry;
(b) incurred, created or suffered to be created any Liens other than
Permitted Liens;
(c) increased the compensation of or to become payable to any officers,
employees, agents, sales representatives or consultants of the Company
or its subsidiaries (including any such increase pursuant to any
bonus, pension, profit-sharing or other plan or commitment), or
entered into any employment Contract with any officer or employee, or
any Contract with any agent, sales representative or consultant, which
is not terminable on 30 days' notice or less;
(d) made any declaration, payment or setting aside for payment of any
dividend or other distribution in respect of the capital stock of the
Company or its subsidiaries or any redemption, purchase or other
acquisition of any shares of the capital stock or other securities of
the Company or any of the Affiliate Interests;
(e) made any material write-down of the value of any inventory or
write-off as uncollectible of any accounts or notes receivable of the
Company or its subsidiaries, or made any write-up of the value of any
assets of the Company or its subsidiaries;
(f) made any single capital expenditure or commitment in excess of $75,000
for any addition to property, plant or equipment;
(g) sold, transferred or otherwise disposed of any assets having a value
in excess of $200,000 in the aggregate, except for sales of
hydrocarbon production and inventory in the ordinary course of
business consistent with past practice;
(h) suffered any damage to or destruction of its physical properties in
excess of $200,000 in the aggregate, whether or not covered by
insurance;
(i) incurred any obligation or liability (fixed or contingent) relating to
its business except trade or business obligations incurred in the
ordinary course of business consistent with past practice;
(j) discharged or satisfied any Lien or paid any obligation or liability
(fixed or contingent) prior to its stated maturity in excess of
$100,000 in the aggregate;
(k) canceled or compromised any debt or claim, or waived or released any
rights of value other than in the ordinary course of business
consistent with past practice;
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(l) transferred, abandoned or granted any rights under or with respect to
any leases, licenses, agreements or Intellectual Property or entered
into any agreement limiting the Company's or its subsidiaries' ability
to conduct their operations;
(m) issued, sold or otherwise disposed of any shares of capital stock or
any evidence of indebtedness or other securities (except extensions or
renewals or replacements of evidences of indebtedness which
extensions, renewals or replacements were issued in the ordinary
course of business consistent with past practice with respect to
evidence of indebtedness reflected in the Financial Statements);
(n) made any loan or advance to, or any investment in, any person
(including any officer, director, employee, agent, sales
representative or consultant), corporation, business, partnership,
joint venture, enterprise, firm or other entity;
(o) lost (or expects to lose) any one or more material customers or
suppliers which loss or losses, individually or in the aggregate, have
had or could reasonably be expected to have a Company Material Adverse
Effect;
(p) amended its charter or organizational documents or by-laws or
equivalent;
(q) introduced any material change with respect to the operation of its
business, including its method of accounting;
(r) accelerated the collection of its accounts receivable or deferred the
payment of its accounts payable out of the ordinary course of business
consistent with past practice;
(s) incurred any indebtedness for borrowed money or the equivalent
thereof;
(t) changed its financial or accounting methods, principles or practices
or tax elections; or
(u) entered into any agreement or understanding to do any of the
foregoing, other than pursuant to any Transaction Document.
Section 3.8 Environmental Matters. (a) Each of the Company and its
subsidiaries has obtained (or is capable of obtaining without incurring any
material incremental expense) all Environmental Permits necessary for the
operation of its business and has no reason to believe any of them will be
revoked prior to their expiration, modified or will not be renewed, and has made
all registrations and given all notifications that are required under any
applicable Environmental Law.
(b) There is no Environmental Claim pending or, to the knowledge of the
Company, threatened against the Company or any of its subsidiaries under an
Environmental Law.
(c) The Company and its subsidiaries are in compliance with, and have no
liability under, applicable Environmental Laws including, without limitation,
all of their Environmental Permits.
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(d) Neither the Company nor any of its subsidiaries has assumed, by
contract or otherwise, or is subject to any Order which imposes, any liabilities
or obligations arising under any applicable Environmental Laws.
(e) There are no past or present actions, activities, conditions,
occurrences or events, including, without limitation, the Release of any
Hazardous Materials, which could reasonably be expected to prevent compliance by
the Company or any of its subsidiaries with any applicable Environmental Law, or
to result in any liability of the Company or any of its subsidiaries under any
applicable Environmental Law.
(f) No Lien has been recorded under any Environmental Law with respect to
any property, facility or asset currently owned by the Company or any of its
subsidiaries.
(g) Neither the Company nor any of its subsidiaries has received any
notification that any Hazardous Materials that any of them or any of their
respective predecessors in interest has used, generated, stored, treated,
handled, transported or disposed of has been found at any site at which any
person is conducting or plans to conduct any response or other action pursuant
to any Environmental Law.
(h) There is no friable asbestos or asbestos containing material in, on or
at any property, facility or equipment owned, operated or leased by the Company
or any of its subsidiaries.
(i) No property now or previously owned, operated or leased by the Company
or any of its subsidiaries or, to the knowledge of the Company, any of their
respective predecessors in interest is (i) listed or proposed for listing on the
National Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), or (ii) listed in
the Comprehensive Environmental Response, Compensation and Liability Information
System List promulgated pursuant to CERCLA, or on any comparable list
established under any Environmental Law.
(j) No underground or aboveground storage tank or related piping, or any
surface impoundment, lagoon, landfill or other disposal site containing any
Hazardous Material is located at, under or on any property owned, operated or
leased by the Company or any of its subsidiaries or, to the knowledge of the
Company, any of their respective predecessors in interest, nor has any of them
been removed or decommissioned from or at any such property, except in
compliance with applicable Environmental Laws.
(k) The execution and delivery of the Transaction Documents and the
consummation by the Company of the Transactions to be performed by it and the
exercise by Buyer of rights to own and operate the businesses of each of the
Company and its subsidiaries substantially as presently conducted will not
affect the validity or require the transfer of any Environmental Permits held by
the Company or any of its subsidiaries and will not require any notification,
disclosure, registration, reporting, filing, investigation, or remediation under
any Environmental Law.
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(l) Neither the Company nor any of its subsidiaries is currently performing
any response or other corrective action under any Environmental Law at any
location.
(m) The Company has delivered or otherwise made available for inspection to
Buyer copies of any investigations, studies, reports, assessments, evaluations
and audits in its possession, custody or control of Hazardous Materials at, in,
beneath or adjacent to any properties or facilities now or formerly owned,
leased, operated or used by it or any of its subsidiaries or any of their
respective predecessors in interest, or of compliance by any of them with, or
liability of any of them under, applicable Environmental Laws.
For purposes of this Section 3.8:
(i) "Environment" means any surface water, ground water, drinking
water supply, land surface or subsurface strata, ambient air, indoor air
and any indoor location and all natural resources such as flora, fauna and
wetlands;
(ii) "Environmental Claim" means any notice, claim, demand, complaint,
suit or other communication by any person alleging potential liability
(including, without limitation, potential liability for response or
corrective action or damages to any person, property or natural resources,
and any fines or penalties) arising out of or relating to (1) the Release
or threatened Release of any Hazardous Materials or (2) any violation, or
alleged violation, of any applicable Environmental Law;
(iii) "Environmental Laws" means all federal, state and local laws,
statutes, codes, rules, ordinances, regulations, judgments, orders, decrees
and the common law as now or previously in effect relating to pollution or
protection of human health or the Environment, including, without
limitation, those relating to the Release or threatened Release of
Hazardous Materials;
(iv) "Environmental Permit" means a permit, identification number,
license, approval, consent or other written authorization issued pursuant
to any applicable Environmental Law;
(v) "Hazardous Materials" means pollutants, contaminants, hazardous or
toxic substances, constituents, materials or wastes, and any other waste,
substance, material, chemical or constituent subject to regulation, or
which can give rise to liability, under Environmental Laws; and
(vi) "Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the Environment.
Section 3.9 Litigation. There is no (i) claim or action pending or, to the
knowledge of the Company or any of its subsidiaries, threatened against or
relating to the Company or any of its subsidiaries before any Governmental
Authority or arbitration tribunal, or (ii) outstanding Order
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to which the Company, any subsidiary of the Company or any of their respective
assets was or is a party.
Section 3.10 Owned Real Property. Except for Oil and Gas Properties listed
in Section 3.12 of the Disclosure Schedule, neither the Company nor its
subsidiaries owns any outright interest in real property.
Section 3.11 Certain Leases. Section 3.11 of the Disclosure Schedule sets
forth each lease, other than Oil and Gas Leases and leases of fixtures and
personal property related to Oil and Gas Leases, to which the Company or any of
its subsidiaries is a party relating to real property ("Real Property Leases")
or relating to tangible personal property ("Personal Property Leases"). All such
Real Property Leases and Personal Property Leases are valid and subsisting and
in full force and effect and are subject to no default with respect to either
the Company or its subsidiaries, as the case may be, and, to the Company's
knowledge, are in full force and effect and subject to no default with respect
to any other party thereto, and the leased real and personal property is in good
and satisfactory condition.
Section 3.12 Oil and Gas Properties. (a) Section 3.12 of the Disclosure
Schedule sets forth, by percentage and type, all of the interests (collectively,
"Oil and Gas Properties") of the Company and its subsidiaries in (i) oil and gas
leases (collectively, "Oil and Gas Leases"), including, but not limited to,
Operating Rights, Record Title, Working, leasehold, mineral, royalty, overriding
royalty, Net Revenue, net profits or reversionary Interests, other mineral
rights and any other interests of a similar nature, and (ii) each Well and the
fixtures, platforms, pipelines and rights of way located on, appurtenant to or
used in connection with the Oil and Gas Leases and the production status of each
such Well.
(b) (i) Each of the Company and its subsidiaries has Defensible Title to
its Oil and Gas Properties to the extent of claims arising by, through or under
the relevant party, and (ii) all prior assignments in the chain of title to the
interests of the Company and its subsidiaries in Oil and Gas Leases have been
approved by the MMS, to the extent such approval is required.
(c) All rentals, royalties, shut-in royalties, minimum royalties,
overriding royalties, taxes and other payments due pursuant to or with respect
to the Oil and Gas Properties or production therefrom or attributable thereto or
revenue attributable to such production has been properly paid or placed in
suspense.
(d) The Company and its subsidiaries are not obligated, under a take-or-pay
or similar arrangement, or by virtue of an election to non-consent or not
participate in a past or current operation on an Oil and Gas Property pursuant
to the applicable operating agreement, to produce Substances, or allow
Substances to be produced, without receiving full payment at the time of
delivery in an amount that corresponds to the relevant Net Revenue Interest.
None of the Oil and Gas Properties is subject to any Contract or agreement for
the sale of Substances produced from or allocable thereto which is not subject
to termination by the Company or its subsidiaries on no more than thirty days,
advance notice.
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(e) The Company and its subsidiaries are timely receiving their share of
proceeds from the sale of Substances produced from or allocable to the Oil and
Gas Properties without suspense, counterclaim or set-off and there has been no
production of Substances allocable to the Oil and Gas Properties in excess of
allowable production established pursuant to applicable Law or Order that would
result in a restriction of production of Substances from or allocable to the Oil
and Gas Properties.
(f) There has been no material adverse change in the condition of any of
the Oil and Gas Properties since November 1, 2001, except for depletion through
normal production, changes in the rate of production that occur in the ordinary
course of operation, depreciation of equipment through ordinary wear and tear,
and changes in general economic conditions affecting the oil and gas industry
and pricing of Substances generally affecting the offshore Gulf of Mexico oil
and gas industry.
(g) There are no outstanding authorizations for expenditures or any oral or
written commitments or proposals to conduct operations on the Oil and Gas
Properties which are required to be approved by non-operators under the terms of
the applicable joint operating agreement.
(h) No portion of the Oil and Gas Properties was overproduced,
underproduced or otherwise subject to an imbalance or make-up obligation with
respect to Substances produced from or allocated to the interests of the Company
or its subsidiaries, regardless of whether they arise at the platform, wellhead,
pipeline, gathering system or other level and regardless of whether they arise
under a Contract or otherwise.
(i) The interests to be acquired by Buyer pursuant to the Working Interest
Purchase Agreement, the Overriding Royalty Interest Purchase Agreement and the
Employee Royalty Trust Purchase Agreement and Debt Exchange are the only
interests in Oil and Gas Properties in which Affiliates of the Company also have
an interest.
(j) No Well is required, pursuant to applicable Law, Order or Contract and
as of the date of this Agreement, to be plugged and abandoned or is subject to
an exception to a requirement to be plugged and abandoned.
(k) All Contracts which burden or will burden or encumber or are otherwise
material to the ownership, use, maintenance or operation of the Oil and Gas
Properties (i) are described in Section 3.12 of the Disclosure Schedule, (ii)
were entered into in the ordinary course of business, and (iii) are in force
according to their terms. Neither the Company nor its subsidiaries nor, to the
knowledge of the Company, any other person or entity is in breach of any
obligation under any Contract which might adversely affect any of the Oil and
Gas Properties in any material respect.
(l) During the period of ownership by the Company and its subsidiaries, (i)
the Oil and Gas Properties have been drilled, completed, operated, developed and
produced in compliance with all applicable judgments, Orders and Laws, in
accordance with good oilfield practice and (ii) all bonds in favor of the MMS or
any other person or entity, including plugging and abandonment bonds
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and supplemental bonds, required for operation of the Oil and Gas Properties
have been and are in force.
Section 3.13 Compliance with Laws. The business and operations of the
Company and its subsidiaries are in compliance with all applicable Laws and
Orders, including, but not limited to, those of the Federal Energy Regulatory
Commission and the MMS, except where the failure to comply with such Laws or
Orders could not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect.
Section 3.14 Permits. Section 3.14 of the Disclosure Schedule sets forth
all licenses, permits, certifications, authorizations and approvals issued or
granted to the Company (the "Permits") by any Governmental Authority (including,
but not limited to, by the MMS and the U.S. Coast Guard and pursuant to any
Environmental Law). There are no other Permits necessary or useful to the
conduct of the business of the Company as it is now being conducted, other than
Permits the absence of which, individually or in the aggregate, has not had and
could not reasonably be expected to have a Company Material Adverse Effect. The
Company is in substantial compliance with the terms of all such Permits, and no
proceeding is pending or threatened which seeks the revocation or limitation of
any such Permits, and no other suspension or cancellation of any such Permit is
threatened, except, in each case, for Permits the loss, revocation, limitation,
suspension or cancellation of which could not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
Section 3.15 Certain Contracts. Section 3.15 of the Disclosure Schedule
sets forth, as of the date of this Agreement, (i) each employment Contract with
employees of the Company and each other Contract with agents, sales
representatives or consultants of or to the Company employed or retained by the
Company which has a remaining duration in excess of six months after the date of
this Agreement or involves remuneration exceeding $50,000 per annum, (ii) each
note, loan agreement, security agreement or mortgage to which the Company is a
party or by which any of its assets or properties are bound, (iii) each Contract
limiting the Company's ability to conduct its operations, as now being
conducted, anywhere in the world, (iv) each other Contract entered into by the
Company which involves future consideration to be paid by or to the Company in
excess of $100,000, and (v) each other executory Contract to which the Company
is a party or by which any of its assets or properties are bound, the
termination of which could reasonably expected to have a Material Adverse
Effect.
Section 3.16 Employee Matters.
(a) Employee Plans and Documents. Section 3.16 of the Disclosure Schedule
sets forth each "employee benefit plan" (within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and
any other bonus, stock option, stock appreciation, stock purchase, severance,
termination, layoff, leave of absence, disability, workers' compensation,
pension, profit sharing, retirement, vacation or holiday pay, insurance,
deferred compensation or other employee benefit plan, agreement or arrangement
maintained by, or contributed to, since September 30, 1998, by the Company, any
of its subsidiaries or an ERISA Affiliate applicable to the past, present or
future employees employed by the Company or an ERISA Affiliate whether
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written or oral (including such arrangements with any individual), as well as
any "defined benefit plan" (as defined in Section 3(35) of ERISA) ever
maintained by, or contributed to, by the Company, any of its subsidiaries or an
ERISA Affiliate applicable to the past, present or future employees employed by
the Company, any of its subsidiaries or an ERISA Affiliate (collectively, the
"Employee Plans"). For purposes of this Agreement, "ERISA Affiliate" means any
entity (whether or not incorporated) which would be treated as a single employer
with the Company under Section 414(b), (c), (m) or (o) of the Internal Revenue
Code of 1986, as amended (the "Code"), and the regulations promulgated
thereunder. Copies of the documents comprising each of the Employee Plans, and
any other documents, descriptions or other materials related thereto, including
complete copies of the annual reports (Form 5500) which have been filed (or are
in fully completed form for filing) by the Company with the Internal Revenue
Service (the "IRS") with respect to the last three plan years for each such
Employee Plan, and all correspondence with the IRS or the Department of Labor
relating to such Employee Plan or such annual reports have been furnished or
made available to Buyer and Newco. Copies of all Forms 5310 and any related
documents, including any correspondence with the Pension Benefit Guaranty
Corporation, IRS determination letters and annuity contracts, relating to the
termination within the past six years of any Employee Plan subject to Title IV
of ERISA have been furnished or made available to Buyer and Newco.
(b) Employee Plan Compliance. Except for matters which could, individually
or in the aggregate, not reasonably be expected to have a material adverse
effect on any Employee Plan or a Company Material Adverse Effect:
(i) Each Employee Plan and its administration and operation are in
compliance with (A) all applicable statutes, including ERISA and the Code;
and all rules and regulations of governmental agencies interpreting or
applying these statutes; (B) any applicable collective bargaining
agreement; and (C) the terms and conditions of the Employee Plan (except
for those provisions of the Employee Plan which have not been amended to
satisfy the requirements of the Uruguay Round Agreements Act and subsequent
legislation and for which the remedial amendment period under the Code has
not expired);
(ii) There are not any actions, suits or claims (other than routine
claims for benefits) pending or, to the knowledge of the Company,
threatened with respect to any Employee Plan;
(iii) There have not occurred nor are there any continuing nonexempt
prohibited transactions described in Section 406 of ERISA or Section 4975
of the Code which could result in liability to the Company or any of its
subsidiaries;
(iv) All contributions required to be made to date under the Employee
Plans, the Code and ERISA have been made or have been accrued as
liabilities on the Financial Statements;
(v) With respect to each Employee Plan that is a "Multiemployer Plan",
(A) no condition exists and no event has occurred which presents a material
risk of a complete or partial withdrawal under Subtitle E of Title IV of
ERISA and no transaction specified in this
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Agreement will result in a complete or partial withdrawal under Subtitle E
of Title IV of ERISA, and (B) the Company has no knowledge (1) of any
complete or partial termination (whether by mass withdrawal or otherwise)
of such Plan; (2) that the Plan is in reorganization or insolvent; or (3)
of any liability for any withdrawal liability imposed by Subtitle E of
Title IV of ERISA;
(vi) Each Employee Plan that is intended to meet the qualification
requirements of Section 401(a) of the Code has (A) been administered in
compliance with all applicable requirements of the Code, (B) has received a
favorable determination or opinion letter concerning its qualification from
the IRS, and (C) there is no circumstance which could cause the IRS to
revoke such determination letter;
(vii) Each Employee Plan which is a "group health plan" (as defined in
the Code and ERISA) has been operated in compliance with the requirements
of Part 6 of Subtitle B of Title I of ERISA and Section 4980B of the Code;
(viii) None of the Employee Plans (other than any Multiemployer Plan)
are subject to Title IV of ERISA, Part 3 of Subtitle B of Title I of ERISA
or Section 412 of the Code or are "defined benefit plans" (as defined in
Section 3(35) of ERISA);
(ix) No Employee Plan provides benefits, including, without
limitation, death or medical benefits, beyond termination of service or
retirement other than (A) coverage mandated by law, or (B) death or
retirement benefits under any Employee Plan qualifying under Section 401(a)
of the Code;
(x) There are no leased employees within the meaning of Section 414(n)
of the Code who perform services for the Company;
(xi) Neither the Company, any of its subsidiaries nor any ERISA
Affiliate has incurred any liability to the Pension Benefit Guaranty
Corporation (other than for required premiums, which payments have been
made when due);
(xii) The Company does not have and has not had at any time during the
preceding six years any ERISA Affiliates;
(xiii) Neither the Company, any of its subsidiaries nor any ERISA
Affiliate has, within the preceding six years, withdrawn in a complete or
partial withdrawal from any Multiemployer Plan or incurred contingent
liability under Section 4204 of ERISA. The withdrawal liability of the
Company or any of its subsidiaries, if any, computed as if a complete
withdrawal had occurred from each Multiemployer Plan on the date hereof,
could not, if actually incurred, exceed $100,000;
(xiv) Each Employee Plan which is an employee welfare benefit plan
(within the meaning of Section 3(1) of ERISA) may be amended or terminated
by the Company or one of its subsidiaries on or at any time after the
Effective Date;
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(xv) No Employee Plan has applied for, or received, a waiver of the
minimum funding standards imposed by Section 412 of the Code or Part 3 or
Subtitle B of Title I of ERISA; and
(xvi) The execution of the Transaction Documents and the performance
of the Transactions will not, either alone or upon the occurrence of
subsequent events, result in any payments (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with
respect to any employee or former employee of the Company or any of its
subsidiaries.
(c) Unions. Section 3.16 of the Disclosure Schedule sets forth all of the
existing collective bargaining agreements or union contracts covering employees
("Labor Agreements") and the expiration dates thereof. The Company has not
received notice of, and has no knowledge with respect to, demands to be made by
employees party to any Labor Agreement upon the expiration thereof.
(d) Employment Matters. Since September 30, 1998, the Company and its
subsidiaries have not experienced any work stoppage, strike, lockout, material
slowdown, jurisdictional dispute or organization activity and, to the Company's
knowledge, there is no such work stoppage, strike, lockout, material slowdown,
jurisdictional dispute or organization activity threatened against the Company
or any of its subsidiaries. The Company and its subsidiaries are not involved in
or, to the knowledge of the Company, threatened with any labor dispute,
grievance or litigation relating to labor matters involving any employees of the
Company or any of its subsidiaries under the Labor Agreements or otherwise,
including, without limitation, charges of unfair labor practices or
discrimination complaints.
(e) Officers and Other Senior Persons. Section 3.16 of the Disclosure
Schedule sets forth a list of all officers and other employees, agents and
consultants of each of the Company and each subsidiary whose current annual
salary or rate of compensation (including bonus and incentive compensation) is
$100,000 or more or to whom the Company or any subsidiary has loaned $10,000 or
more.
Section 3.17 Intellectual Property. (a) Section 3.17 of the Disclosure
Schedule sets forth (i) a list of the titles of all trade secrets, know-how,
formulas, technologies and processes owned or used by the Company or any of its
subsidiaries on the date of this Agreement (collectively, the "Trade Secrets"),
and (ii) all agreements, including secrecy and confidentiality agreements, to
which the Company or any of its subsidiaries is a party relating to any Trade
Secrets. There are no pending patent applications or patents anywhere of which
the Company or any of its subsidiaries is the beneficial owner, and no patents
or patent applications anywhere to which the Company or any of its subsidiaries
holds any license rights.
(b) Neither the Company nor any of its subsidiaries holds any (i) patents
or patent applications anywhere in the world (the "Patents"), or (ii)
trademarks, service marks, whether registered or unregistered, trade names,
copyrights, trade dress or similar intellectual properties (or
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any registrations and pending applications for any of the foregoing)
(collectively, "Trademarks", and together with the Patents, "Intellectual
Property").
(c) The Company possesses all Intellectual Property, if any, necessary to
operate its business as currently conducted. The Company or one of its
subsidiaries is the sole and exclusive owner of such Intellectual Property and
the holder of the full record title to the registrations and grants and pending
applications for such Intellectual Property, and all the aforesaid are free and
clear of any mortgages, liens and encumbrances, undertakings, consents, security
interests and obligations of whatever kind and character. There are no claims or
demands of any person, firm, corporation or other entity pertaining to any of
the Intellectual Property, and no proceedings have been instituted, are pending
or, to the knowledge of the Company, threatened which challenge the validity
thereof or the rights of the Company and its subsidiaries with respect thereto.
None of the Intellectual Property or operations of the Company and its
subsidiaries as currently conducted infringes upon or otherwise violates the
rights of others, and none of the Intellectual Property is being infringed upon
by others, and the Company has no knowledge that any of the Intellectual
Property may be infringed upon by others, or is subject to any outstanding
Order. All the Intellectual Property applications, registrations, and grants are
in full force and effect.
Section 3.18 Brokers or Finders; Change of Control Payments. Neither the
Company, any of its subsidiaries nor any of its Representatives has taken any
action that, directly or indirectly, would obligate Buyer or the Company to
anyone acting as broker, finder, financial advisor or in any similar capacity in
connection with any Transaction Document or any of the Transactions. There are
no bonuses or other payments to which any officer, employee or director of the
Company or any of its subsidiaries is entitled to receive as a result of the
consummation of the Transactions. The Company has previously furnished to Buyer
true and complete copies of all documentation relating to arrangements required
to be disclosed in Section 3.18 of the Disclosure Schedule and such
documentation is in full force and effect.
Section 3.19 Insurance. The Company and its subsidiaries have, and since
September 30, 1999, have had, insurance covering all standard losses and risks
of their businesses and operations (including, without limitation, claims by
their employees and other parties relating to Environmental Liabilities or
asbestos, supplemental surety and performance bonds, surety and performance
bonds in favor of the MMS, surety and performance bonds to third parties and
plugging and abandonment surety and performance bonds). The Company has made
available to Buyer for review all of the Company's insurance policies which are,
or were, in effect from September 30, 1999, to the date hereof. Section 3.19 of
the Disclosure Schedule sets forth a description of all insurance policies
currently held by the Company and its subsidiaries. All of these policies are in
full force and effect in the respective amounts as set forth in Section 3.19 of
the Disclosure Schedule. There are no outstanding claims under the insurance
policies of the Company and its subsidiaries, and the Company has not received
notice of any increase in the amount of its premiums payable after the date
hereof. There are no outstanding unpaid premiums in respect to any of such
insurance policies which have become due, and no notice of cancellation or
nonrenewal of any existing policies of the Company and its subsidiaries has been
received.
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Section 3.20 Taxes. (i) The Company and each of its subsidiaries have
prepared, or caused to be prepared, and timely filed with the appropriate
governmental agencies all Tax Returns required to be filed, taking into account
any extension of time to file granted to or obtained on behalf of the Company
and/or its subsidiaries, and each such Tax Return is complete and accurate in
all material respects; (ii) all Taxes of the Company and each of its
subsidiaries have been paid in full to the proper authorities, other than such
Taxes as are being contested in good faith by appropriate proceedings and are
adequately reserved for in accordance with generally accepted accounting
principles; (iii) all Tax deficiencies asserted in writing against the Company
or any of its subsidiaries have been paid or finally settled, neither the
Company nor any of its subsidiaries is presently under examination or audit by
any taxing authority, and the Company has not received written notice of any
pending examination or audit of the Company or any of its subsidiaries by any
taxing authority; (iv) no extension of the period for assessment or collection
of any Tax is currently in effect and no extension of time within which to file
any Tax Return has been requested, which Tax Return has not since been filed;
(v) no liens have been filed with respect to any Taxes of the Company or any of
its subsidiaries other than in respect of property taxes that have accrued but
are not yet due and payable; (vi) neither the Company nor any of its
subsidiaries has made, or is required to make, any adjustment by reason of a
change in their accounting methods that could affect the taxable income or
deductions of the Company or any of its subsidiaries for any period (or portion
thereof) ending after the Effective Date; (vii) the Company and its subsidiaries
have made timely payments of all Taxes required to be deducted and withheld from
the wages paid to their employees and from all other amounts paid to third
parties; (viii) neither the Company nor any of its subsidiaries is a party to
any tax sharing or tax matters or similar agreement or is the indemnitor under
any tax indemnification or similar agreement; (ix) neither the Company nor any
of its subsidiaries owns any interest in any "controlled foreign corporation"
(within the meaning of Section 957 of the Code) or "passive foreign investment
company" (within the meaning of Section 1296 of the Code); (x) neither the
Company nor any of its subsidiaries has made an election under Section 341(f) of
the Code; (xi) neither the Company nor any of its subsidiaries is a party to any
agreement or arrangement that provides for the payment of any amount, or the
provision of any other benefit, that could constitute a "parachute payment"
within the meaning of Section 280G of the Code; (xii) no claim has ever been
made by an authority in a jurisdiction where the Company or any of its
subsidiaries does not file Tax Returns that such entity is or may be subject to
taxation by that jurisdiction; (xiii) neither the Company nor any of its
subsidiaries has ever been a member of any affiliated, consolidated, combined or
unitary group for any Tax purpose other than a group of which it is currently a
member; (xiv) neither the Company nor any of its subsidiaries is currently a
"personal holding company" (as defined in Section 542 of the Code), and neither
the Company nor any of its subsidiaries has had any "undistributed personal
holding company income" (as defined in Section 545 of the Code) at any point
during its last three completed taxable years; (xv) none of the assets of the
Company or any of its subsidiaries is "tax-exempt use property" (as defined in
Section 168(h)(1) of the Code) or may be treated as owned by any other person
pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954 (as in effect
immediately prior to the enactment of the Tax Reform Act of 1986); (xvi) neither
the Company nor any of its subsidiaries has been a "United States real property
holding corporation," within the meaning of Section 897 of the Code at any time
during the past five years; (xvii) there are no "excess loss accounts" (as
defined in Treas. Reg. ss. 1.1502-19) with respect to any stock of any
subsidiary; (xviii) neither the Company nor any of its subsidiaries has any (a)
deferred gain or loss (1) arising from any deferred intercompany transactions
(as described in Treas. Reg. ss.ss. 1.1502-13 and 1.1502-13T prior to amendment
by Treasury De-
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cision 8597 (issued July 12, 1995)) or (2) with respect to the stock or
obligations of any other member of any affiliated group (as described in Treas.
Reg. ss.ss. 1.1502-14 and 1.1502-14T prior to amendment by Treasury Decision
8597) or (b) any gain subject to Treas. Reg. ss. 1.1502-13, as amended by
Treasury Decision 8597; (xix) neither the Company nor any of its subsidiaries
has requested a ruling from, or entered into a closing agreement with, the IRS
or any other taxing authority in its current taxable year or at any time during
its last three completed taxable years; and (xx) the Company has previously
delivered to Buyer true and complete copies of (a) all federal, state, local and
foreign income or franchise Tax Returns filed by the Company and/or any of its
subsidiaries for the last three taxable years ending prior to the date hereof
(except for those Tax Returns that have not yet been filed) and (b) any audit
reports issued within the last three years by the IRS or any other taxing
authority.
For all purposes of this Agreement, "Tax" or "Taxes" means (i) all federal,
state, local or foreign taxes, charges, fees, imposts, levies or other
assessments, including, without limitation, all net income, alternative minimum,
gross receipts, capital, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp, occupation,
property and estimated taxes, customs duties, fees, assessments and charges of
any kind whatsoever, (ii) all interest, penalties, fines, additions to tax or
other additional amounts imposed by any taxing authority in connection with any
item described in clause (i) and (iii) all transferee, successor, joint and
several or contractual liability (including, without limitation, liability
pursuant to Treas. Reg. ss. 1.1502-6 (or any similar state, local or foreign
provision)) in respect of any items described in clause (i) or (ii).
For all purposes of this Agreement, "Tax Return" means all returns,
declarations, reports, estimates, information returns and statements required to
be filed in respect of any Taxes.
Section 3.21 Absence of Undisclosed Liabilities. The Company and its
subsidiaries have no liabilities or obligations (whether absolute, accrued,
contingent or otherwise) except liabilities or obligations which (a) are
adequately reflected or reserved against in the September 30, 2001 Balance
Sheet, (b) were incurred after the date of such balance sheet in the ordinary
course of business consistent with past practice, (c) are specifically
contemplated by this Agreement, or (d) do not exceed $100,000 in the aggregate.
Section 3.22 No Affiliate Transactions. The Company and its subsidiaries do
not have any agreement or arrangement with any of the Existing Shareholders, any
holder of Refinanced Debt of the Company or any other Affiliate of the Company,
other than the Transaction Documents.
Section 3.23 Board Recommendation. The Board of Directors of the Company
has, by unanimous vote of the entire Board at a meeting of such Board duly held
on December 14, 2001, approved and authorized the Transaction Documents, the
Merger and the other Transactions, determined that the Merger is fair to the
shareholders of the Company and recommended that the shareholders of the Company
approve and adopt the Transaction Documents to which it is a party, the Merger
and the other Transactions.
Section 3.24 Shareholder Approval; Other Transaction Documents. On or prior
to the date hereof, holders of the requisite percentages of common stock and
preferred stock of the Com-
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pany have approved the Merger, this Agreement, the Transaction Documents and the
Transactions, and the Company and each of the other parties thereto have
executed and delivered (i) the Employee Royalty Trust Purchase Agreement and
Debt Exchange, (ii) the Working Interest Purchase Agreement, (iii) the
Overriding Royalty Interest Purchase Agreement, (iv) the Buyer Registration
Rights Agreement and (v) the Company Principal Shareholder Agreement and each of
such agreements is in full force and effect.
Section 3.25 Accounting Practices. The Company and its subsidiaries each
make and keep accurate books and records reflecting their respective assets and
maintain internal accounting controls that provide reasonable assurance that (i)
transactions are executed with management's authorization, (ii) transactions are
recorded as necessary to permit preparation of the Company's and each
subsidiary's financial statements and to maintain accountability for the assets
of the Company and each subsidiary, (iii) access to the assets of the Company
and each subsidiary is permitted only in accordance with management's
authorization and (iv) the reported accountability of the assets of the Company
and each subsidiary is compared with existing assets at reasonable intervals.
Section 3.26 Minute Books. The Company's and the subsidiaries' minute books
contain complete and accurate records of all meetings and other corporate
actions of their respective stockholders and Boards of Directors and committees
thereof.
Section 3.27 Bank Accounts; Powers of Attorney. Section 3.27 of the
Disclosure Schedule sets forth (i) the name of each bank in which the Company or
any subsidiary has an account or safe deposit box and the names of all persons
authorized to draw thereon or to have access thereto, and (ii) the names of all
persons, if any, holding powers of attorney from the Company or any subsidiary
and a summary statement of the terms thereof.
Section 3.28 Use of Proceeds of Bridge Loans. All proceeds from borrowings
under the Bridge Loans have been used to pay trade payables incurred in the
ordinary course of business.
Section 3.29 Number of Accredited Investors. Of the holders of Company
Capital Stock, Refinanced Debt and Affiliate Interests, no more than 35 persons
are not Accredited Investors.
Section 3.30 No Untrue Statements. No statement by the Company contained in
this Agreement and no written statement furnished by the Company or on behalf of
the Company by any employee, counsel or other agent of the Company to Buyer or
Newco pursuant to or in connection with this Agreement contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary in order to make the statements therein contained not
misleading. There is no fact that has had, or in the future might reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect that is not set forth in this Agreement or the Disclosure Schedule, other
than events that are the effect of economic or political factors affecting the
economy as a whole or events that are the effect of factors generally affecting
the oil and gas industry.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND NEWCO
Each of Buyer and Newco represent and warrant as follows to the Company. An
event or condition shall be deemed to have a "Buyer Material Adverse Effect" if
such event or condition, individually or together with other events or
conditions, qualifies as a change in or has an effect on Buyer or any of its
subsidiaries that is or could reasonably be expected to be materially adverse to
the business, operations, properties (including intangible properties),
condition (financial or otherwise), assets, liabilities or prospects of Buyer
and its subsidiaries, taken as a whole.
Section 4.1 Corporate Existence. Each of Buyer and its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Each of Buyer and its subsidiaries is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or leased or the
nature of its activities makes such qualification necessary, except for failures
to be so qualified or in good standing which do not have and could not
reasonably be expected to, individually or in the aggregate, have a Buyer
Material Adverse Effect. Buyer has delivered to the Company accurate and
complete copies of the certificate or articles of incorporation or organization
(or other applicable charter document) and by-laws, as currently in effect, of
each of Buyer and its subsidiaries. None of Buyer or any of its subsidiaries is
in violation of any of the provisions of its certificate or articles of
incorporation or organization or by-laws.
Section 4.2 Capitalization. (a) As of September 30, 2001, the authorized
and outstanding capital stock of Buyer is as set forth on the SEC Documents. All
of such issued and outstanding shares are validly issued, fully paid and
nonassessable and free of preemptive rights. As of September 30, 2001, except as
disclosed in the SEC Documents, Buyer has no other equity securities of any
class issued, reserved for issuance or outstanding, and there are no outstanding
options, warrants, agreements or rights to subscribe for or to purchase, or
commitments to issue, or other securities of Buyer which, pursuant to their
terms, are convertible into or exchangeable for, equity securities of Buyer.
(b) Other than Newco, the only direct or indirect subsidiaries of Buyer are
those listed in the SEC Documents. Buyer is directly or indirectly the record
(except for directors' qualifying shares) and beneficial owner (including all
qualifying shares owned by directors of such subsidiaries as set forth in the
SEC Documents) of all of the outstanding shares of capital stock of each of its
subsidiaries, except as set forth in the SEC Documents.
Section 4.3 Authorization and Validity of Agreement. Each of Buyer and
Newco has all necessary corporate power and authority to execute, deliver and
perform each of the Transaction Documents to be executed by it, and any other
agreements and instruments to be executed by Buyer and Newco pursuant hereto.
The execution, delivery and performance of each of the Transaction Documents by
Buyer and Newco (if party to such document) and any other agreements and
in-
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struments to be executed by Buyer and Newco pursuant hereto, have been duly
authorized by all necessary corporate action on the part of each of Buyer and
Newco. Each of the Transaction Documents, and such other agreements and
instruments to be executed by the Buyer or Newco, as applicable, pursuant hereto
are, or upon their due execution and delivery will be, the valid and binding
obligations of the Buyer or Newco, as applicable, enforceable against them in
accordance with their respective terms, except to the extent that the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other Laws relating to or affecting creditors' rights generally
and by general principles of equity.
Section 4.4 No Conflict. Neither the execution and delivery by Buyer or
Newco of any of the Transaction Documents, and any other agreements and
instruments to be executed by Buyer and Newco pursuant hereto, nor the
performance by Buyer or Newco of their respective obligations hereunder or
thereunder, will (a) violate or conflict with the provisions of the Articles of
Incorporation or By-Laws of Buyer or Newco, or (b) result in the breach of, or
constitute a default under, (i) any applicable Law or any Order applicable to or
binding upon Buyer or Newco, in a manner which could reasonably be expected to
have a material adverse effect on the ability of Buyer or Newco to perform their
respective obligations hereunder or thereunder, or (ii) any Contract to which
Buyer or Newco is a party or by which any of their respective assets or
properties are bound, the breach of which or default under which could
reasonably be expected to have a material adverse effect on the ability of Buyer
or Newco to perform their respective obligations hereunder or thereunder.
Section 4.5 No Consent Required. No consent, approval, authorization,
notice or filing of any Governmental Authority or any third party is required to
be obtained, made or given in order to permit Buyer or Newco to execute and
deliver any Transaction Document, and to perform their respective obligations
hereunder or thereunder, the absence of which could reasonably be expected to
have a material adverse effect on the ability of Buyer or Newco to perform their
respective obligations under this Agreement and with any Transaction Document.
Section 4.6 Brokers and Finders. Neither Buyer, Newco nor any of their
respective Representatives has taken any action that, directly or indirectly,
would obligate the shareholders of the Company immediately prior to the Closing
or (unless the Closing occurs) the Company to anyone acting as a broker, finder,
financial advisor or in any similar capacity in connection with any Transaction
Document or any of the Transactions.
Section 4.7 Authorization of Transaction Consideration. The Buyer Common
Stock, Buyer Preferred Stock and Buyer Warrants to be issued in the Transactions
and the Buyer Common Stock issuable upon exercise of such Buyer Warrants and
conversion of the Buyer Preferred Stock all have been duly authorized, and when
issued in the Transactions (or when issued upon exercise of the Buyer Warrants
or conversion of the Buyer Preferred Stock, as the case may be), will be validly
issued, fully paid and nonassessable and such issuances will not be subject to
any preemptive or similar rights. The Buyer Senior Subordinated Notes to be
issued in the Transactions have been duly authorized and, when issued and
delivered in the Transactions, will constitute valid and binding obligations of
Buyer, enforceable against Buyer in accordance with their terms, except to the
extent the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other Laws affecting creditors' rights generally
and general principles of equity.
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Section 4.8 Oil and Gas Qualification. Buyer is qualified under applicable
law and regulations, including the rules and regulations of the MMS, to own and
operate federal oil and gas leases in the Outer Continental Shelf, Gulf of
Mexico and is in good standing with all governmental agencies with jurisdiction
or cognizance over operations on the Outer Continental shelf, Gulf of Mexico.
Section 4.9 Investor Qualification. Buyer is a knowledgeable purchaser,
owner and operator of oil and gas properties, has the ability to evaluate the
Company Capital Stock, Refinanced Debt and Affiliate Interests for purchase, and
is acquiring them for its own account and not with the intent to make a
distribution in violation of the Securities Act of 1933, as amended, or any
applicable state securities law.
Section 4.10 Exchange Act Filings. Since December 31, 2000, Buyer has filed
all documents (the "SEC Documents") required to be filed by it with the
Securities and Exchange Commission (the "Commission"), pursuant to the Exchange
Act. As of their respective filing dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act, and none of the SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading except to the extent corrected by a subsequently filed SEC
Document. The financial statements of Buyer included in the SEC Documents
complied as to form in all material respects with then applicable accounting
requirements and with the published rules and regulations of the Commission with
respect thereto, were prepared in accordance with generally accepted accounting
principles during the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q and
Regulation S-X of the Commission) and fairly present the consolidated financial
position of Buyer and its consolidated subsidiaries as at the dates thereof and
the consolidated results of their operations and changes in financial position
for the periods then ended (subject, in the case of unaudited statements, to
normal, recurring audit adjustments). Since December 31, 2000, there has not
been any change which, individually or in the aggregate, could reasonably be
expected to have a Buyer Material Adverse Effect that has not been reflected in
the SEC Documents, publicly announced or otherwise disclosed prior to the
Closing to the Company by Buyer.
ARTICLE V
COVENANTS
Section 5.1 Cooperation (a) Subject to the terms and conditions herein
provided, Buyer, Newco and the Company agree to use 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
as promptly as practicable the Transactions and to cooperate with each other in
connection with the foregoing, including using commercially reasonable efforts
(i) to obtain all necessary waivers, consents and approvals from other parties
to loan agreements, leases and other contracts, (ii) to maintain the Company's
current relations with its suppliers or to establish similar
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relations with suitable replacement suppliers, (iii) to obtain all necessary
consents, approvals and authorizations as are required to be obtained under any
federal, state or foreign law or regulations, (iv) to assist in the preparation
of proxy materials, private placement memoranda, or other materials related to
shareholder approval or securities law requirements with respect to the
Transactions, (v) to defend all lawsuits or other legal proceedings challenging
any Transaction Document or the consummation of the Transactions, (vi) to lift
or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the Transactions, (vii) to
effect all necessary registrations and filings, and submissions of information
requested by governmental authorities, and (viii) to fulfill all conditions to
the Transaction Documents.
(b) Each of the parties hereto agrees to furnish to the other party hereto
such necessary information and reasonable assistance as such other party may
request in connection with its preparation of necessary filings or submissions
to any regulatory or governmental agency or authority, including, without
limitation, any filing necessary under the provisions of any applicable Federal
or state statute.
Section 5.2 Exclusivity. The Company agrees that prior to the Closing,
neither it nor any of its shareholders, directors, officers, employees or agents
shall initiate, solicit, entertain, negotiate, accept or discuss, directly or
indirectly, any proposal or offer (an "Acquisition Proposal") to acquire all or
a significant portion of the Company or any of its business or assets, whether
by merger, purchase of stock, purchase of assets, tender offer or otherwise (a
"Third Party Acquisition"), or provide any nonpublic information to any third
party in connection with an Acquisition Proposal. The Company agrees to (i)
immediately notify Buyer and Newco if any member of the Company Group receives
any indication of interest, request for information or offer in respect of any
Acquisition Proposal, (ii) communicate to Buyer and Newco in reasonable detail
the terms of any such indication, request or proposal and (iii) inform the
persons sending such indications, requests or offers that the Company is bound
by an exclusivity arrangement (without any reference to Buyer and Newco or
potential financing sources or affiliates). The Company represents that neither
it nor any of its shareholders, directors, officers, employees or agents is
party to or bound by any agreement with respect to an Acquisition Proposal other
than under this Agreement.
Section 5.3 Availability of Employees and Records. The Company agrees that,
between the date of execution of this Agreement and the Effective Date, the
Company will fully cooperate with such reasonable investigation of the Company
and its Subsidiaries and the financial and legal condition thereof, as Buyer,
Newco and their financing sources reasonably deem necessary or advisable. In
furtherance of the foregoing, but not in limitation thereof, the Company will
provide full access, and will cause its subsidiaries, employees, officers,
advisors and service providers to provide full access to Buyer and Newco, its
financing sources and their respective authorized agents, actuaries, attorneys,
accountants, and other representatives, at all reasonable times and under
reasonable circumstances, for inspection, examination, copying or verification,
to all of the books, operating records, financial records, investment records,
returns, and reports of every kind, and all working papers pertaining thereto,
of the Company, its advisors and service providers, and to all contracts and
records pertaining to agreements between the Company and any person and of all
properties and assets owned by the Company, or in which the Company has any
interest as Buyer, Newco, their financing sources or their respective agents and
representatives shall reasonably request from time to time, including for
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purposes of satisfying closing conditions for obtaining financing for the
Transactions. The Company will cause the officers and employees of the Company
having material knowledge concerning the operation and/or financing activities
of its business and the business of the subsidiaries to be available and to
cooperate fully in connection with any such investigation at reasonable times
and upon reasonable notice.
Section 5.4 Notification of Changes and Default. Between the date of
execution of this Agreement and the Effective Date, inclusive, the Company, on
one hand, and Buyer and Newco, on the other hand, each agree that it will
promptly give notice to the other party of the occurrence, to its knowledge, of
any of the following: (a) any event or circumstance or the discovery of any
inaccuracy, omission or mistake, which, in any way, would cause the
representations and warranties made by it or the other party or any of the
information or documents theretofore delivered by it or the other party to the
other party or to it, as the case may be, pursuant to any Transaction Document,
to be untrue or inaccurate in any material respect, whether as of the date of
execution of this Agreement or at any time subsequent thereto and prior to the
Effective Date; (b) any events or circumstances that would result in a material
violation or breach of any of the terms and provisions of this Agreement by any
party hereto, including, without limitation, breaches of representations and
warranties, obligatory upon it; and (c) any suit, arbitration, inquiry,
proceeding, audit, claim, demand or investigation known to such person which
might adversely affect the Company's interests in any Oil and Gas Property.
Section 5.5 Financial Statements, Etc. (a) The Company covenants and agrees
to deliver to Buyer and Newco copies of any financial statements or reports,
filings, orders and other communications delivered to or received from
Governmental Authorities by the Company, except for routine filings with or
routine communications received from the MMS, in each case in the ordinary
course of business.
(b) The Company covenants and agrees to deliver to Buyer and Newco copies
of regularly prepared monthly, quarterly and annual financial statements with
respect to the Company from the date hereof until the Effective Date, including
all material information required to be delivered to the Company's creditors.
Section 5.6 Publicity. The Company, Buyer and Newco agree to consult with
each other in issuing any press release and with respect to the general content
of other public statements with respect to the Transaction Documents, the
Transactions, or the identity of the parties, and shall not issue any such press
release or make any such public statement without the prior written approval of
each of such persons as to the making and content of such announcement;
provided, however, that nothing herein will prohibit any party from making such
public announcement to the extent that such party, after receiving advice of
counsel, determines such action to be required by law, in which event the party
making such determination will use all commercially reasonable efforts to allow
the other party reasonable time to comment on such release or announcement in
advance of its issuance.
Section 5.7 Confidentiality of Information. Prior to the Closing, Buyer,
Newco and their respective Representatives shall continue to be bound by the
requirements of the Confidentiality Agreements.
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Section 5.8 Conduct of Business. From the date of this Agreement to the
Closing, except as otherwise expressly contemplated or permitted by this
Agreement, the Company and its subsidiaries shall conduct its business only in
the ordinary course consistent with past practice, shall not make any material
changes in the operation of its business without Buyer's and Newco's prior
written consent, and in any event shall not take any of the following actions
without the prior written consent of Buyer:
(a) incur, create or suffer to exist any Liens;
(b) increase the compensation of or to become payable to any officers,
employees, agents, sales representatives or consultants of the Company or
its subsidiaries (including any such increase pursuant to any bonus,
pension, profit-sharing or other plan or commitment) other than (i)
increases of amounts payable to employees that are not officers of the
Company or its subsidiaries in the ordinary course of business consistent
with past practice or (ii) any distributions from the Employee Royalty
Trust, or enter into any employment Contract with any officer or employee,
or any Contract with any agent, sales representative or consultant, which
is not terminable on or at any time after the Effective Date;
(c) make any declaration, payment or setting aside for payment of any
dividend or other distribution in respect of the capital stock of the
Company or its subsidiaries, or any redemption, purchase or other
acquisition of any shares of the capital stock or other securities of the
Company or its subsidiaries, other than pursuant to the Transaction
Documents;
(d) make any capital expenditures or commitments in excess of $75,000
individually for any addition to property, plant or equipment other than in
connection with operations on Oil and Gas Properties undertaken in response
to an emergency or to avoid a penalty or forfeiture provision of any
applicable agreement, Law or Order which are the subject of an authority
for expenditure listed in Section 3.12 of the Disclosure Schedule or which
are individually estimated to cost no more than $75,000 to the six-sixths
Working Interest or an amount less than that which necessitates
non-operator approval under an applicable operating agreement;
(e) sell, transfer or otherwise dispose of any assets, except for
sales of hydrocarbon production and inventory in the ordinary course of
business consistent with past practice and except in connection with the
Transactions;
(f) incur any obligation or liability (fixed or contingent) relating
to its business, other than in connection with operations on Oil and Gas
Properties undertaken in response to an emergency or to avoid a penalty or
forfeiture provision of any applicable agreement, Law or Order which are
the subject of an authority for expenditure listed in Section 3.12 of the
Disclosure Schedule or which are individually estimated to cost no more
than $75,000 to the six-sixths Working Interest or an amount less than that
which necessitates non-operator approval under an applicable operating
agreement, trade or business obligations incurred in the ordinary course of
business consistent with past practice, and expenses associated with the
Transactions;
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(g) cancel or compromise any debt or claim, or waive or release any
rights of value;
(h) transfer, abandon, fail to maintain in good standing or grant any
rights under or with respect to any leases, licenses, agreements or
Intellectual Property, or enter into any agreement limiting the Company's
ability to conduct its operations;
(i) issue, sell or otherwise dispose of any shares of capital stock or
any evidences of indebtedness or other securities (except extensions or
renewals or replacements of evidences of indebtedness which extensions,
renewals or replacements are issued in the ordinary course of business
consistent with past practice with respect to evidences of indebtedness
reflected in the Financial Statements);
(j) amend its charter or organizational documents or By-laws or
equivalent (except as contemplated by Section 1.4);
(k) introduce any material change with respect to the operation of its
business, including its methods of accounting and tax elections;
(l) enter into any Contract of a kind required to be listed pursuant
to the provisions of Section 3.12 or 3.15;
(m) fail to maintain the material properties and assets of the
business of the Company and its subsidiaries, whether owned or leased, in
their current operating condition and repair, reasonable wear and tear
excepted;
(n) fail to maintain in full force and effect insurance for the
business of the Company and its subsidiaries providing coverage and amounts
of coverage as such is now in force;
(o) merge or consolidate with any other corporation or acquire any
stock, business, or substantially all of the property or assets of any
other person, firm, association, corporation or other business
organization;
(p) write-up the value of any of the assets of the Company or any of
its subsidiaries;
(q) make any loan or advance to, or any investment in, any Person
(including any officer, director, employee, agent, sales representative or
consultant);
(r) terminate or modify any Contract listed on Section 3.12 or 3.15 of
the Disclosure Schedule or do any act which, with or without the giving of
notice or the passage of time, or both, would result in a material breach
of or default under any Contract which is material to the Company and its
subsidiaries;
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(s) enter into any agreement to amend, amend and restate, supplement
or modify any Labor Agreement or enter into negotiations or discussions
with any party relating in any manner to any such amendment, supplement or
modification;
(t) accelerate the collection of its accounts receivable or defer the
payment of its accounts payable out of the ordinary course of business
consistent with past practice;
(u) incur any indebtedness for borrowed money or the equivalent
thereof; or
(v) fail to cause to be paid, in the ordinary course of business and
consistent with past practices, all costs, Taxes and expenses which are
obligated to be paid in connection with the Oil and Gas Property as they
become due;
(w) fail to cause to be paid all rentals and other payments necessary
to maintain the Oil and Gas Leases and other Contracts relating to Oil and
Gas Property in force according to their terms and cause all express and
implied covenants contained in the Oil and Gas Leases and such Contracts to
be complied with;
(x) consent to the abandonment of any Well capable of commercial
production or any related platform, pipeline or other facility;
(y) release all or a portion of any Oil and Gas Lease; or
(z) enter into any agreement or understanding to do any of the
foregoing, other than pursuant to any Transaction Document.
Section 5.9 Restructuring of Working Interest Purchase Agreement. If
requested by Buyer, the Company and Buyer, prior to Closing, shall enter into
documentation with the "Sellers" under the Working Interest Purchase Agreement,
amending and modifying such agreement to provide that: (a) each such Seller will
contribute all of its Affiliate Interests sold under the Working Interest
Purchase Agreement in exchange for a new series of preferred stock to be issued
by the Company ("New Company Preferred Stock"), (b) at the Closing, the New
Company Preferred Stock will be exchanged in the Merger for consideration
identical to the "Cash Purchase Price" and the "Stock Purchase Price" provided
in the Working Interest Purchase Agreement, to be allocated among the holders of
New Company Preferred Stock in the same fashion allocated among the such Sellers
in the Working Interest Purchase Agreement.
Section 5.10 Employee Benefits. Notwithstanding anything in this Agreement
to the contrary, the Company shall terminate its 401(k) Profit Sharing Plan (the
"Company 401(k) Plan") prior to the Closing Date. The Company 401(k) Plan assets
shall be distributed as soon as administratively practicable thereafter.
Employees of the Company who are participants in the Company 401(k) Plan as of
the Closing Date shall be immediately eligible to begin participation in Buyer's
401(k) Profit Sharing Plan (the "Buyer 401(k) Plan") effective as soon as
administratively practicable after the Closing Date. Employment service
recognized under the Company 401(k) Plan shall be considered for eligibility and
vesting purposes in the Buyer 401(k) Plan. To the extent permitted by the
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Buyer 401(k) Plan, the Buyer shall accept rollover contributions and direct
transfers of account balances from employees of the Company who become
participants in the Buyer 401(k) Plan, including for this purpose direct
transfers of outstanding loan balances but excluding assets received upon
conversion of Company Preferred Stock included in the Company 401(k) Plan as
provided for herein.
Section 5.11 Representation Letters. The Company shall use its reasonable
best efforts to obtain executed letters from each holder of Company Capital
Stock (i) representing that such holder either (x) is an Accredited Investor or
(y) has appointed a purchaser representative reasonably satisfactory to Buyer
with respect to the Transactions, (ii) making such other representations as are
customary for an investor in a private placement of securities and (iii) if such
holder holds Company Preferred Stock, waiving any rights to receive unpaid
dividends on and any rights to redemption of the Company Preferred Stock.
Section 5.12 Taking of Necessary Action; Further Action. Each of the
Company, Buyer and Newco, respectively, shall take all action as may be
necessary or appropriate to effectuate the Merger as promptly as possible,
subject to all of the terms and conditions hereof. If, at any time after the
Closing, any further action is necessary or desirable to carry out the purposes
of any Transaction Document and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of either of the Company or Newco, the officers and directors of
the Surviving Corporation are fully authorized in the name of the corporation or
otherwise to take, and shall take, all such action.
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to Obligations of Buyer and Newco. The duty of Buyer
and Newco to perform their respective obligations hereunder that are to be
performed at the Closing shall be subject to the fulfillment or satisfaction, at
or prior to the Closing, of the following conditions (any one or more of which
may be waived in whole or in part by Buyer and Newco in a writing executed by
Buyer and Newco):
6.1.1 Accuracy of Representations and Warranties. The representations
and warranties of the Company contained in this Agreement shall be true and
correct as made, both on the date of this Agreement and at and as of the Closing
(as though such representations and warranties were made anew), except for
representations or warranties made as of a specified date or for a specified
period ending prior to the date of this Agreement, which as of the Closing shall
remain true and correct as of the specified date or for such specified period,
and except with respect to the effect of the Transactions. The Company shall
have the obligation to update the Disclosure Schedule when and to the extent
such updates could reasonably be expected to have a Company Material Adverse
Effect.
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6.1.2 Performance of Covenants and Agreements. The Company shall have
performed or complied with, in all material respects, all covenants and
agreements contemplated by this Agreement to be performed or complied with by
the Company at or prior to the Closing.
6.1.3 No Injunction; Consents. There shall not be in effect any injunction
or other Order restraining or prohibiting consummation of the Transactions nor
shall any Action seeking to restrain or prohibit the consummation thereof, or
seeking damages in connection therewith, be pending, nor shall any such
injunction, other Order or Action be threatened (except for any Action brought
or threatened by a Person other than a Governmental Authority (a) seeking money
damages only and (b) which, if successful, could not reasonably be expected to
have a Material Adverse Effect). All authorizations, orders, consents and
approvals of any Person necessary for the consummation of the Transactions shall
have been obtained.
6.1.4 Debt Retirement. Holders of at least 80% of the outstanding principal
amount of Refinanced Debt (other than Refinanced Debt held by the Employee
Royalty Trust) shall have entered into the Debt Exchange Agreement.
6.1.5 Employment Agreements. Each of Gary L. Hall, Bruce R. Sidner and John
H. Peper shall have entered into employment agreements with Buyer on
substantially similar terms and conditions previously agreed to between Buyer
and such person.
6.1.6 Dissenting Shareholders. Holders of no more than 10% of the
outstanding Company Preferred Stock shall have indicated an intention to
exercise dissenter's rights under the TBCA.
6.1.7 Fairness Opinion. Buyer shall have received, at its expense, an
opinion of Merrill Lynch & Co. to the effect that the Merger Consideration is
fair from a financial point of view to stockholders of Buyer, and Merrill Lynch
& Co. shall not have rescinded or modified such opinion.
6.1.8 Financing. Buyer shall have entered into a new or amended credit
facility supported by a borrowing base of at least $100 million consisting of
all of the proved reserves of Buyer, the Company and their respective
subsidiaries (including acquired Affiliate Interests).
6.1.9 Company Material Adverse Effect. The Company and its subsidiaries
shall not have experienced any change which, individually or in the aggregate,
could reasonably be expected to have a Company Material Adverse Effect.
6.1.10 Transaction Documents. Each of the Transaction Documents shall have
been fully executed, not modified or amended since its execution (except
amendments and modifications contemplated by Section 5.9) and remain in full
force and effect.
6.1.11 Release of Liens. The Company shall have delivered releases and
other instruments, in form and substance reasonably satisfactory to Buyer, as
shall be necessary or appropriate to release all Liens other than Permitted
Liens filed of record against any Oil and Gas Property, or to the extent not of
record, those Liens known to the Company.
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6.1.12 Deliveries by the Company. The Company shall have delivered to
Buyer and Newco, as applicable, the items set forth in Section 7.2.
Section 6.2 Conditions to Obligations of the Company. The duty of the
Company to perform its obligations hereunder that are to be performed at the
Closing shall be subject to the fulfillment or satisfaction, at or prior to the
Closing, of the following conditions (any one or more of which may be waived in
whole or in part by the Company in a writing executed by the Company):
6.2.1 Accuracy of Representations and Warranties. The representations and
warranties of Buyer and Newco contained in this Agreement shall be true and
correct as made, both on the date of this Agreement and at and as of the Closing
(as though such representations and warranties were made anew), except for
representations or warranties made as of a specified date or for a specified
period ending prior to the date of this Agreement, which as of the Closing shall
remain true and correct as of the specified date or for such specified period,
and except with respect to the effect of the Transactions. Buyer shall have the
obligation to update the Disclosure Schedule when and to the extent such updates
could reasonably be expected to have a Buyer Material Adverse Effect.
6.2.2 Performance of Covenants and Agreements. Buyer and Newco shall have
performed or complied with, in all material respects, all covenants and
agreements contemplated by this Agreement to be performed or complied with by
Buyer and Newco at or prior to the Closing.
6.2.3 No Injunction; Consents. There shall not be in effect any injunction
or Order restraining or prohibiting consummation of the Transactions nor shall
any Action seeking to restrain or prohibit the consummation thereof, or seeking
damages in connection therewith, be pending (except for any Action brought by a
Person other than a Governmental Authority (a) seeking money damages only and
(b) which, if successful, could not reasonably be expected to have a Material
Adverse Effect). All authorizations, orders, consents and approvals of any
Person necessary for the consummation of the Transactions shall have been
obtained.
6.2.4 Buyer Stockholder Agreement. The Buyer Stockholder Agreement shall
have been amended to provide the Company Designee with similar ongoing rights to
election to Buyer's Board of Directors as Energy Income Fund, L.P.
6.2.5 Shareholder Voting Agreement. Holders of a majority of Buyer Common
Stock outstanding immediately prior to the Merger shall have executed an
agreement, in form and substance reasonably satisfactory to the Company,
committing such holders to vote in favor of the Merger and other Transactions at
any meeting of holders of Buyer Common Stock.
6.2.6 Buyer Material Adverse Effect. Buyer and its subsidiaries shall not
have experienced any change which, individually or in the aggregate, could
reasonably be expected to have a Buyer Material Adverse Effect.
6.2.7 Deliveries by Buyer and Newco. Buyer and Newco shall have delivered
to the Company the items set forth in Section 7.3.
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ARTICLE VII
CLOSING
Section 7.1 The Closing. Subject to satisfaction or waiver of all
conditions precedent set forth in Article VI hereof, the Closing shall take
place at a location mutually agreed to by Buyer and the Company at 9:00 A.M.,
local time, on January 8, 2002, or such later date as the parties may agree
after the conditions set forth in Article VI have been satisfied. If any
condition in Article VI hereof is not satisfied (or is not duly waived) at the
Closing, the party whose obligations are subject to such condition may extend
the date of the Closing (during which extension the other parties shall use
their respective reasonable efforts to cause all such conditions to be
satisfied). If all conditions are determined to be satisfied (or are duly
waived) at the Closing (whether or not delayed), the Closing shall be
consummated by the making of all necessary filings with the Secretary of State
of the State of Texas under the TBCA. At the Closing, no transaction shall be
deemed to have been completed and no document, instrument or certificate shall
be deemed to have been delivered until all deliveries referred to in Sections
7.2 and 7.3 hereof have been made.
Section 7.2 The Company's Obligations. At the Closing, the Company shall
deliver or cause to be delivered to Buyer and Newco the following:
(a) a certificate of the President of the Company, to the effect that
the conditions set forth in Sections 6.1.1, 6.1.2 and 6.1.3 have been
satisfied; provided, however, that if the Company has proposed to
supplement or amend any Disclosure Schedule pursuant to Section 6.1.1
hereof, and Buyer has not consented to such action, then the foregoing
certificate may be qualified by the Company to reflect such supplement,
amendment or addition to the Disclosure Schedule, at which time the Buyer
and Newco may either (i) refuse to accept such certificate and refuse to
consummate the Transactions, or (ii) accept such certificate as qualified,
which acceptance shall be deemed to constitute an acceptance of such
supplement, amendment or addition to the Disclosure Schedule;
(b) the Articles of Incorporation of the Company, certified in a
Certificate of Existence by the Secretary of State of Texas;
(c) a Good Standing Certificate for the Company, issued by the
Comptroller of the State of Texas;
(d) the By-Laws of the Company, certified by the Secretary of the
Company;
(e) the resolutions of the Board of Directors of the Company approving
and authorizing the Transaction Documents and the Transactions, certified
by the Secretary of the Company;
(f) Certificates representing all of the outstanding Company Capital
Stock, promissory notes or other instruments representing the Refinanced
Debt and instruments con-
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veying the Affiliate Interests to be acquired (or appropriate lost
instrument affidavits of the foregoing reasonably acceptable to Buyer); and
(g) all other documents and instruments incidental to the Transactions
and reasonably requested by Buyer.
Section 7.3 Buyer's and Newco's Obligations. At the Closing, Buyer and
Newco, as applicable, shall deliver or cause to be delivered to the Company (or
the Exchange Agent, if applicable) the following:
(a) a certificate of the President or a Vice President of Buyer, to
the effect that the conditions set forth in Sections 6.2.1, 6.2.2 and 6.2.3
hereof have been satisfied;
(b) the Articles of Incorporation of Buyer, certified by the Secretary
of State of Delaware;
(c) a Good Standing Certificate for Buyer, issued by the Secretary of
State of Delaware;
(d) the By-laws of Buyer, certified by the Secretary or an Assistant
Secretary of Buyer;
(e) the resolutions of the Board of Directors of Buyer approving and
authorizing the Transaction Documents and the Transactions, certified by
the Secretary or an Assistant Secretary of Buyer;
(f) a certificate of the President of Newco, to the effect that the
conditions set forth in Sections 6.2.1, 6.2.2 and 6.2.3 hereof have been
satisfied;
(g) the Articles of Incorporation of Newco, certified in a Certificate
of Existence by the Secretary of State of Texas;
(h) a Good Standing Certificate for Newco, issued by the Comptroller
of the State of Texas;
(i) the By-Laws of Newco, certified by the Secretary of Newco;
(j) the resolutions of the shareholder and Directors of Newco
approving and authorizing the Transaction Documents and the Transactions,
certified by the Secretary of Newco;
(k) the Merger Consideration pursuant to the provisions of Section 2.2
hereof and consideration sufficient to retire the Refinanced Debt and
acquire the Affiliate Interests to be acquired, as described in Sections
6.1.4 and 6.1.5; and
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(l) all other documents and instruments incidental to the Transactions
and reasonably requested by the Company.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. Anything herein to the contrary notwithstanding,
this Agreement may be terminated and the Transactions abandoned at any time
prior to the Effective Date (the earliest such date to be referred to as the
"Termination Date") only:
(a) By mutual written consent of the Company, Buyer and Newco;
(b) By Buyer and Newco upon giving written notice to the Company, if
any one or more of the conditions to their respective obligations to close
as contained in Section 6.1 hereof has not been satisfied or waived as of
the Effective Date;
(c) By the Company upon giving written notice to Buyer and Newco, if
any one or more of the conditions to its obligation to close as contained
in Section 6.2 hereof has not been satisfied or waived as of the Effective
Date; and
(d) By the Company upon giving written notice to Buyer and Newco, or
by Buyer and Newco upon giving written notice to the Company, if the
Effective Date does not occur on or before January 31, 2002.
Section 8.2 Effect of Termination. Except as otherwise separately agreed
between Buyer and the Company, if this Agreement is terminated pursuant to
Section 8.1 hereof, all obligations of the parties hereto shall terminate and
there shall be no liability or obligation of any party hereto or its
Representatives; provided, however, that nothing in this Section 8.2 shall
relieve any party from liability for its default under or breach of this
Agreement prior to its termination.
ARTICLE IX
DEFINITIONS
Section 9.1 Definitions. As used in this Agreement, the following terms
shall have the meanings set forth below:
"1996 EDF Royalty Trust" means the Hall-Houston 1996 Exploration and
Development Facility Overriding Royalty Trust created by a Trust Agreement dated
November 1, 1996 by and among the Company, Gary L. Hall, Wayne P. Hall and
certain other parties thereto.
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"2000 EDF Royalty Trust" means the Hall-Houston Oil Company 2000
Exploration and Development Facility Overriding Royalty Trust created by a Trust
Agreement dated as of September 1, 2000 by and among the Company, Gary L. Hall,
Wayne P. Hall and certain other parties thereto.
"AAA" as defined in Section 10.10.
"Accredited Investor" as defined in Rule 501 under Regulation D of the
Securities Act of 1933, as amended.
"Acquisition Proposal" as defined in Section 5.2.
"Action" means any action, suit, or legal, administrative or arbitral
proceeding or investigation before or by any Governmental Authority.
"Affiliate" as defined in the regulations promulgated under the Exchange
Act.
"Affiliate Interests" means all interests, including, but not limited to,
overriding royalties, royalties, Operating Rights, Record Title, Working
Interests and other rights held by third parties who are Affiliates of the
Company relating to exploitation, production and/or operation of oil and gas
leases and related assets in which the Company or any of its subsidiaries is a
co-owner.
"Agreement" means this Agreement and Plan of Merger, including all
schedules, exhibits and certificates to be delivered at the Closing.
"Bridge Loans" means the $5,000,000 Promissory Note dated November 29, 2001
made by the Company to Candies Family Investments L.L.C. and the $4,500,000
Promissory Note dated November 21, 2000 made by the Company to Bank of America,
N.A.
"Buyer" as defined in the Preamble.
"Buyer Common Stock" means Common Stock, par value $0.01 per share, of
Buyer.
"Buyer 401(k) Plan" as defined in Section 5.10.
"Buyer Material Adverse Effect" as defined in the introduction to Article
IV.
"Buyer Preferred Stock" means Exchangeable Redeemable Convertible Preferred
Stock, par value $1.00 per share, to be authorized and issued by Buyer pursuant
to a Certificate of Designation, substantially in the form set forth on Exhibit
E-1, which is exchangeable for an Exchange Note substantially in the form set
forth on Exhibit E-2.
"Buyer Registration Rights Agreement" means the Registration Rights
Agreement to be entered into by and between Buyer and the Company, for the
benefit of holders (other than Principal Shareholders) of Company Capital Stock,
Refinanced Debt and Affiliate Interests to be acquired
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(other than the Buyer Warrants) who will be receiving equity or equity-linked
securities of Buyer in the Merger, substantially in the form set forth on
Exhibit I.
"Buyer Senior Subordinated Notes" means 11% Senior Subordinated Notes due
2009, to be issued by Buyer pursuant to a Promissory Note, substantially in the
form set forth on Exhibit F.
"Buyer Stockholder Agreement" means the Stockholder Agreement by and among
Buyer and certain shareholders of Buyer dated as of November 17, 1999, as it may
be amended from time to time up to the Effective Date.
"Buyer Warrants" means the $11 Buyer Warrants and the $9 Buyer Warrants.
"CERCLA" as defined in Section 3.8.
"Certificate of Merger" as defined in Section 1.2.
"Closing" as defined in Section 1.3.
"Code" as defined in Section 3.16.
"Commission" as defined in Section 4.10.
"Common Stock Merger Consideration" as defined in Section 2.2.
"Company" as defined in the Preamble.
"Company Capital Stock" means, collectively, Company Common Stock and
Company Preferred Stock.
"Company Common Stock" means, collectively, Series A Common Stock, par
value $0.01 per share, of the Company and Series B Nonvoting Common Stock, par
value $0.01 per share, of the Company.
"Company Designee" as defined in Section 1.6.
"Company 401(k) Plan" as defined in Section 5.10.
"Company Material Adverse Effect" as defined in introduction to Article
III.
"Company Preferred Stock" means the Redeemable Preferred Stock, par value
$0.01 per share, of the Company.
"Company Principal Shareholder Agreement" means the Principal Shareholder
Agreement dated the date of this Agreement by and among Buyer and the Principal
Shareholders, in the form set forth on Exhibit H.
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"Confidentiality Agreements" means the Confidentiality Agreements by and
between the Company and Buyer dated July 6, 2001, July 5, 2001 and June 12, 2001
(amended on June 22, 2001).
"Contracts" means any note, debt instrument, security agreement, mortgage,
commitment, contract, agreement, license, lease or other instrument, including
any trust agreements and other documents relating to the formation of any
trusts.
"Debt Exchange Agreement" means the Debt Exchange Agreement, substantially
in the form set forth on Exhibit D, to be entered into between Buyer and holders
of Refinanced Debt other than the Employee Royalty Trust.
"Defensible Title" means such title and ownership of the Company and its
subsidiaries (pursuant to instruments filed with and, if required, approved by
the MMS and filed of record in the appropriate county or parish records or, in
the case of those instruments not yet approved by the MMS or not in approvable
form and listed in Schedule 3.12 of the Disclosure Schedule or Oil and Gas
Leases not subject to regulation by the MMS, pursuant to instruments filed with
the MMS, if required, and filed of record in the appropriate county or parish
records) that in each case (i) will entitle Buyer, as the successor to the
Company and its subsidiaries, to receive and retain now and, except as the
result of any action taken subsequent to the Closing, in the future, without
suspension, reduction or termination, not less than the relevant Net Revenue
Interest of the Company and its subsidiaries of Substances produced under the
terms of the relevant Oil and Gas Lease and proceeds from the sale thereof
through plugging, abandonment and salvage of all Wells comprising or included in
such Oil and Gas Property and all Wells now or hereafter producing from or
attributable to such Oil and Gas Property; (ii) will obligate Buyer, as the
successor to the Company and its subsidiaries, to bear, now and, except as the
result of any action taken subsequent to the Closing, in the future, a
percentage of costs and expenses related to the maintenance, operation and
development of the Oil and Gas Property not greater than the relevant Working
Interest of the Company and its subsidiaries, through plugging, abandonment and
salvage of all Wells comprising or included in such Oil and Gas Property and all
Wells now or hereafter producing from or attributable to such Oil and Gas
Property, unless the circumstances causing the Working Interest to be greater
will cause the corresponding Net Revenue Interest to increase in the same
proportion; and (iii) is free of all Liens, except for Permitted Liens.
"Disclosure Schedule" as defined in the introduction to Article III.
"Earnout" as defined in the Term Sheet attached as Exhibit B.
"Earnout Agreement" means the Earnout Agreement to be entered into between
Buyer and the Company, on terms and conditions substantially similar to those
set forth on the Term Sheet set forth on Exhibit B.
"Effective Date" as defined in Section 1.3.
"$11 Buyer Warrants" means the warrants exercisable for Buyer Common Stock
at an exercise price of $11 per share, substantially in the form set forth on
Exhibit C-1.
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"Employee Plans" as defined in Section 3.16.
"Employee Royalty Trust" means the Hall-Houston Oil Company Employee
Royalty Trust created by a Trust Agreement by and between the Company, Gary L.
Hall and Wayne P. Hall on February 29, 1988.
"Employee Royalty Trust Purchase Agreement and Debt Exchange" means the
Purchase and Sale Agreement and Debt Exchange dated the date of this Agreement
by and between Buyer and the Employee Royalty Trust, in the form set forth on
Exhibit G-3.
"Environment" as defined in Section 3.8.
"Environmental Claim" as defined in Section 3.8.
"Environmental Laws" as defined in Section 3.8.
"Environmental Permit" as defined in Section 3.8.
"ERISA" as defined in Section 3.16.
"ERISA Affiliate" as defined in Section 3.16.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Existing Shareholders" as defined in Section 3.2.
"Financial Statements" as defined in Section 3.6.
"GAAP" means generally accepted accounting principles in the United States,
consistently applied.
"Governmental Authority" means any federal, state, local or foreign
government or any subdivision, agency, instrumentality, authority, department,
commission, board or bureau thereof or any federal, state, local or foreign
court or arbitrator.
"Hazardous Materials" as defined in Section 3.8.
"Intellectual Property" as defined in Section 3.17.
"IRS" as defined in Section 3.16.
"Labor Agreements" as defined in Section 3.16.
"Laws" means any laws, statutes, codes, ordinances, rules, regulations or
other requirements of any Governmental Authority.
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"Lien" means any lien, pledge, mortgage, security interest, charge, option,
adverse claim or other similar encumbrance.
"Merger" as defined in Section 1.1.
"Merger Consideration" as defined in Section 2.2.
"MMS" means the Minerals Management Service of the U.S. Department of
Interior.
"Multiemployer Plan" as defined in Section 3(37) of ERISA.
"Net Revenue Interest" means (a) as to an Oil and Gas Lease, the ownership
percentage of all Substances produced from the Oil and Gas Lease to which it
applies, and (b) as to a Well, the ownership percentage of all Substances
produced from the Well to which it applies. The Net Revenue Interest
attributable to an Oil and Gas Lease or Well that is pooled or unitized shall be
the percentage of Substances produced from the pool or unit and allocated to the
interest of the Company in the Lease or Well in question. Each such Net Revenue
Interest shall be the relevant ownership percentage net of all royalties,
overriding royalties, production payments and other burdens measured by or
payable out of Substances produced from or attributable to the relevant Oil and
Gas Lease, Well, pool or unit. The Net Revenue Interest shall include overriding
royalty interests measured by or payable out of Substances produced from or
attributable to the relevant Oil and Gas Lease, Well, pool or unit.
"Newco" as defined in the Preamble.
"New Company Preferred Stock", as defined in Section 5.9.
"$9 Buyer Warrants" means the warrants exercisable for Buyer Common Stock
at an exercise price of $9 per share, substantially in the form set forth on
Exhibit C-2.
"Nominal Overriding Royalty Interest" as defined in the documentation
relating to certain of the Refinanced Debt.
"Oil and Gas Leases" as defined in Section 3.12.
"Oil and Gas Properties" as defined in Section 3.12.
"Operating Rights" means, consistent with the definition of such term found
in 30 CFR Section 250.105, the interest created out of the record title
ownership of an Oil and Gas Lease authorizing the holder of that right to enter
upon the lands covered by the Oil and Gas Lease to conduct drilling and related
operations, including production of oil or gas from such lands, in accordance
with the terms of the Oil and Gas Lease, and the obligation to bear the expense
and cost associated with such operations.
"Order" means any order, judgment, injunction, award, decree or writ of any
Governmental Authority.
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"Overriding Royalty Interest Purchase Agreement" means the Purchase and
Sale Agreement dated the date of this Agreement by and between Buyer and the
Royalty Trusts other than the Employee Royalty Trust, in the form set forth on
Exhibit G-2.
"Patents" as defined in Section 3.16.
"Permits" as defined in Section 3.13.
"Permitted Liens" are (a) lessor's royalties, overriding royalties,
production payments, net profits interests, reversionary interests and similar
burdens measured by or payable out of production of Substances or proceeds from
the sale thereof and other obligations that, in any case, do not, and will not,
reduce, now or, except as the result of any action taken subsequent to the
Closing, in the future, the relevant Net Revenue Interest of Buyer, as the
successor in title to the Company and its subsidiaries, below the relevant Net
Revenue Interest of the Company and its subsidiaries or increase, now or, except
as the result any action taken subsequent to the Closing, in the future, the
relevant Working Interest of Buyer, as the successor in title to the Company and
its subsidiaries, above the relevant Working Interest of the Company and its
subsidiaries (unless the circumstance causing such Working Interest of the
Company and its subsidiaries to increase will cause the corresponding Net
Revenue Interest of the Company and its subsidiaries to increase at least in the
same proportion), (b) third-party consents which are obtained prior to the
Closing from the appropriate person or entity, (c) mechanics', materialmen's,
operator's and non-operators', tax and similar Liens or charges arising in the
ordinary course of business related to Oil and Gas Properties, if such Liens or
charges secure payments not yet due, (d) rights of a Governmental Authority to
control or regulate the Oil and Gas Property, together with all applicable laws,
rules and regulations, and (e) easements, rights-of-way, surface leases and
other surface use restrictions if such restrictions will not materially
adversely affect the use, value or operation of the Oil and Gas Property.
"Person" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated organization,
Governmental Authority or other entity.
"Personal Property Leases" as defined in Section 3.11.
"Preferred Stock Merger Consideration" as defined in Section 2.2.
"Principal Shareholders" as defined in the Company Principal Shareholder
Agreement.
"Real Property Leases" as defined in Section 3.11.
"Record Title" as defined in 30 CFR Section 256.62 with respect to Oil and
Gas Leases.
"Refinanced Debt" means, collectively, all of the Company's outstanding
2000 12% Senior Exploration and Development Facility Notes, East Cameron Block
263 12% Senior Secured Term Loan Facility Notes, East Cameron Block 161 12%
Senior Secured Term Loan Facility Notes, West Cameron Block 431 12% Senior
Secured Term Loan Facility Notes, South Timbalier Block 185
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12% Senior Secured Term Loan Facility Notes, the $2,500,000 Promissory Note
dated July 31, 2000 from the Company to the Employee Royalty Trust, the
$1,500,000 Promissory Note dated November 1, 2000 from the Company to the
Employee Royalty Trust and the $1,800,000 Promissory Note dated November 16,
2000 from the Company to the Employee Royalty Trust.
"Release" as defined in Section 3.8.
"Representatives" means the officers, directors, employees, attorneys,
accountants, consultants or other authorized agents or advisors of any Person.
"Royalty Trusts" mean, collectively, the Employee Royalty Trust, the 2000
EDF Royalty Trust, and the 1996 EDF Royalty Trust.
"SEC Documents" as defined in Section 4.10.
"September 30, 2001 Balance Sheet" as defined in Section 3.6.
"Substances" means oil, gas, condensate, natural gas liquids, related
hydrocarbons and other minerals produced from or attributable to Oil and Gas
Leases in which the Company or any of its subsidiaries owns an interest.
"Surviving Corporation" as defined in Section 1.1.
"Taxes" as defined in Section 3.20.
"Tax Return" as defined in Section 3.20.
"TBCA" means the Texas Business Corporation Act, as amended.
"Termination Date" as defined in Section 8.1.
"Third Party Acquisition" as defined in Section 5.2.
"Third Party Claim" as defined in Section 9.4.
"Trade Secrets" as defined in Section 3.17.
"Trademarks" as defined in Section 3.17.
"Transaction Documents" means this Agreement, the Earnout Agreement, the
Debt Exchange Agreement, the Employee Royalty Trust Purchase Agreement and Debt
Exchange, the Working Interest Purchase Agreement, the Overriding Royalty
Interest Purchase Agreement, the Company Principal Shareholder Agreement and the
Buyer Registration Rights Agreement.
"Transactions" mean the Merger and the other transactions contemplated by
the Transaction Documents.
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"Well" means an oil, gas, injection or disposal well.
"Working Interest" means, as to an Oil and Gas Lease, the right to exploit,
produce and operate the mineral rights covered by such Oil and Gas Lease and the
obligation to bear the expense and cost associated with such exploitation,
production and operation, whether or not such rights or obligations are derived
from Record Title or Operating Rights.
"Working Interest Purchase Agreement" means the Purchase and Sale Agreement
dated the date of this Agreement by and between Buyer and the holders of certain
Affiliate Interests other than the Royalty Trusts, in the form set forth on
Exhibit G-1.
ARTICLE X
MISCELLANEOUS
Section 10.1 Notices. All notices, requests, consents or other
communications hereunder shall be in writing and shall be deemed to have been
duly given or delivered (a) when received if delivered by hand or telecopy, (b)
within one day after being sent by recognized overnight delivery service, or (c)
within three business days after being mailed by first-class mail, postage
prepaid, and in each case addressed as follows:
(i) if to the Company, to:
Hall-Houston Oil Company
700 Louisiana
Suite 2100
Houston, Texas 77002
Telecopy No.: (713) 225-7600
Attention: John H. Peper
Senior Vice President
with a copy to:
Jackson Walker L.L.P.
1100 Louisiana
Suite 4200
Houston, Texas 77002
Telecopy No.: (713) 752-4221
Attention: David G. Dunlap, Esq.
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(ii) if to Buyer, to:
Energy Partners, Ltd.
201 St. Charles Avenue
Suite 3400
New Orleans, Louisiana 70170
Telecopy No.: (504) 569-1874
Attention: General Counsel
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Telecopy No.: (212) 269-5420
Attention: John Schuster, Esq.
(iii) if to Newco, to:
Saints Acquisition Subsidiary, Inc.
c/o Energy Partners, Ltd.
201 St. Charles Avenue
Suite 3400
New Orleans, Louisiana 70170
Telecopy No.: (504) 569-1874
Attention: General Counsel
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Telecopy No.: (212) 269-5420
Attention: John Schuster, Esq.
provided, however, that if any party shall have designated a different address
by notice to the other, then to the last address so designated.
Section 10.2 Assignment. This Agreement and the rights and duties hereunder
shall be binding upon and inure to the benefit of the parties hereto and the
successors and assigns of
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each of the parties to this Agreement, but no party may assign or delegate,
whether voluntarily or by operation of law, any of its rights, obligations or
liabilities hereunder without the prior written consent of the others; provided,
however, that Buyer and Newco may assign or delegate any of their respective
rights, obligations or liabilities hereunder without the prior written consent
of the Company to any wholly owned subsidiary of Buyer so long as Buyer and
Newco remain primarily liable under this Agreement.
Section 10.3 Entire Agreement. This Agreement (including the Schedules and
Exhibits to this Agreement), the Agreement of Merger and the other documents
executed and delivered in connection herewith, together with the Confidentiality
Agreement, set forth the entire understanding of the parties to this Agreement
with respect to the subject matter hereof and supersede all prior agreements,
covenants, arrangements, communications, representations or warranties, whether
oral or written, by either party or any Representatives of either party.
Section 10.4 Construction. The headings of the Articles and Sections of
this Agreement and in the Schedules and Exhibits to this Agreement are inserted
for convenience of reference only and shall not be used in interpreting this
Agreement. Unless specifically stated otherwise, references to Articles Sections
of and Schedules and Exhibits refer to the Articles and Sections of and
Schedules and Exhibits to this Agreement. Terms which are defined in this
Agreement shall have the same meanings when used in the Schedules and Exhibits
to this Agreement.
Section 10.5 Amendment. This Agreement may be amended or modified only by
an instrument in writing duly executed by the parties to this Agreement.
Section 10.6 Waivers. Any waiver by the Company, Buyer or Newco of any
breach of or failure to comply with any provision of this Agreement by any other
party hereto shall be in writing and shall not be construed as, or constitute, a
continuing waiver of such provision, or a waiver of any other breach of, or
failure to comply with, any other provision of this Agreement.
Section 10.7 Fees and Expenses of Transactions. Except to the extent that
such costs and expenses represent Damages (as defined in the Company Principal
Shareholder Agreement) suffered by one party by reason of a breach of this
Agreement by another party, each party to this Agreement shall bear its own
costs and expenses in connection with the Transaction Documents and the
Transactions.
Section 10.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute a single instrument.
Section 10.9 Governing Law. This Agreement shall be construed and enforced
in accordance with and governed by the internal substantive laws of the State of
Delaware without giving effect to the principles of conflicts of laws thereof.
Section 10.10 Arbitration. Any dispute, controversy or claim arising out of
or in relation to or in connection with this Agreement, including without
limitation any dispute as to the
-45-
construction, validity, interpretation, enforceability or breach of this
Agreement, shall be exclusively and finally settled by arbitration in accordance
with this Section 10.10. Either party may submit such a dispute, controversy or
claim to arbitration by notice to the other party and the administrator for the
American Arbitration Association ("AAA"). The arbitration proceedings shall be
conducted in New Orleans, Louisiana, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association as in effect on the
date hereof. The arbitration shall be heard and determined by three arbitrators.
Each side shall appoint an arbitrator of its choice within twenty (20) days of
the submission of the notice of arbitration. The party-appointed arbitrators
shall in turn appoint a presiding arbitrator for the tribunal within twenty (20)
days following the appointment of the second party-appointed arbitrator. If the
party-appointed arbitrators cannot reach agreement on a presiding arbitrator for
the tribunal and/or one party fails to appoint its party-appointed arbitrator
within the applicable period, the AAA shall act as appointing authority to
appoint an independent arbitrator with at least ten (10) years experience in the
legal and/or commercial aspects of the petroleum exploration and production
industry. None of the arbitrators shall have been an employee or consultant to
either party to this Agreement or any of their respective Affiliates, or have
any financial interest in the dispute, controversy or claim. All decisions of
the arbitral tribunal shall be by majority vote. The arbitrators may not award
consequential, punitive or similar damages except those claimed by persons other
than Buyer, Newco and the Company for which responsibility is being allocated
among the parties. Expenses in connection with the arbitration and the
compensation and expenses of the arbitrators shall be borne in such manner as
may be specified in the arbitral award. Privileges protecting attorney-client
communications and attorney work product from compelled disclosure or use in
evidence, as recognized by and under the Federal Rules of Civil Procedure, shall
apply to and be binding in any arbitration proceeding conducted under this
Section 10.10. This Section 10.10 does not apply to any dispute, controversy or
claim in which the claimant seeks injunctive, declaratory or other equitable
relief, and each of Buyer, Newco and the Company reserve its right to bring such
action in court, which Buyer, Newco and the Company agree shall be exclusively
the U.S. Federal Courts sitting in the Eastern District of Louisiana and each
party irrevocably consents to personal jurisdiction in any and all such
tribunals.
[Signature Pages Follow]
S-1
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
THE COMPANY:
HALL-HOUSTON OIL COMPANY
By: /s/ Wayne P. Hall
------------------------------------------
Name: Wayne P. Hall
Title: President
S-2
BUYER:
ENERGY PARTNERS, LTD.
By: /s/ Suzanne V. Baer
------------------------------------------
Name: Suzanne V. Baer
Title: Executive Vice President
NEWCO:
SAINTS ACQUISITION SUBSIDIARY, INC.
By: /s/ Suzanne V. Baer
------------------------------------------
Name: Suzanne V. Baer
Title: Executive Vice President
Exhibit A-1
to Merger Agreement
Executive Officers of Buyer upon the Closing
Richard A. Bachmann Chairman, President and Chief Executive Officer
Gary L. Hall Vice Chairman
Suzanne Baer Executive Vice President and Chief Financial Officer
Clint Coldren Executive Vice President and Chief Operating Officer
John H. Peper Executive Vice President of Law and Business Development
Bruce R. Sidner Executive Vice President of Exploration
Exhibit A-2
to Merger Agreement
Officers of Surviving Corporation upon the Closing
Richard A. Bachmann Chairman and Chief Executive Officer
Gary L. Hall Vice Chairman
Wayne P. Hall President
Suzanne Baer Executive Vice President and Chief Financial Officer
Clint Coldren Executive Vice President and Chief Operating Officer
Bruce R. Sidner Vice President - Exploration
John H. Peper Sr. Vice President, General Counsel and Corporate
Secretary
Bennett A. Thomas Executive Vice President
James M. Hackedorn Vice President - Operations
Kelly D. Fry Vice President - Land
Roger M. Burkholder Vice President - Compensation and Benefits
William A. Bernhardt Treasurer
Leslie D. Moore Assistant Secretary
Exhibit B
to Merger Agreement
[EARNOUT TERMSHEET]
EARN OUT TERM SHEET
(Contingent Consideration)
Provider of Earn Out Consideration: Energy Partners, Ltd. ("EPL")
Recipients of Earn Out: As provided in the Merger Agreement and related documents
Earn Out Representative: Bruce R. Sidner (or such other person as shall be designated
by Gary L. Hall or in his absence in order of designation,
Wayne P. Hall or John H. Peper)
Maximum Earn Out Value: $50 million
Form of Payment: Subject to EPL shareholder approval (if required and for
which EPL agrees to seek approval), registered shares of EPL
Common Stock, valued as of the Calculation Date to which
such payment relates, or at EPL's option, cash; provided,
however, that a minimum of 20% of each such payment to each
recipient shall be paid in cash, subject to limitations
should there exist a default under EPL's then current bank
credit facility terms (the aggregate value of all payments
made as of each Earn Out Payment Date shall be referred to
as the "Earn Out Payment" attributable to that Earn Out
Payment Date)
Earn Out Term: January 1, 2002 through December 31, 2005
Earn Out Calculation Dates: March 1 (or the first business day thereafter) of each year
commencing with 2003 and ending with 2007 (in each instance,
as applicable, the "Earn Out Calculation Date")
Earn Out Payment Dates: Ten (10) business days following each Earn Out Calculation Date
Ring Fenced Properties: Those Oil and Gas Properties listed in Section 3.12 (a) to
the Disclosure Schedule (the "Ring Fenced Properties").
Other oil and gas interests (within which oil and/or gas
prospect drilling opportunities have been identified) may be
acquired and will thereafter be included in the Ring Fenced
Properties at the request of the Earn Out Representative,
provided that such interest is acquired by utilizing as
trade consideration an interest in one or more of the then
existing Ring Fenced Properties, and provided further that
any such exchange shall be subject to the sole discretion of
EPL after taking into account all drilling opportunities
then available to EPL
Reserves Included in Earn Out
Calculation: Those net proved reserves (all categories) attributable to
the Ring Fenced Properties (the "Earn Out Reserves") that
are not associated with the reservoirs and fault blocks
reflected in the Ryder Scott Company reserve report prepared
as of November 1, 2001 for Hall-Houston Oil Company and
furnished to EPL (the "Excluded Reserves"), including any
such net proved reserves as might be sold subsequent to
their discovery
Earn Out Reserves Valuation: On or before each Earn Out Calculation Date, EPL will cause
the Earn Out Reserves booked during the period from January
1, 2002 through December 31 of the calendar year preceding
such Earn Out Calculation Date and the pre-tax income
attributable thereto from January 1, 2002 forward to be
estimated by the Independent Reservoir Engineering Firm
(defined as the independent reservoir engineering firm
initially selected by EPL and the Earn Out Representative,
which shall be selected upon the closing of the Merger, or
such other independent reservoir engineering firm as may be
mutually agreed upon between EPL and the Earn Out
Representative) using, except as otherwise provided under
the heading "Earn Out Specific Valuation Criteria", the same
criteria and methodology as are used in preparing such
reserve estimates for SEC reporting purposes (the "Reserves
Valuation") combined with prices and cost escalations as
defined in the following section
Earn Out Specific Valuation Criteria: The portion of the Earn Out Reserves attributable to each well
included in the Reserves Valuation will be discounted back to January
1 of the year in which the initial capital expenditures for such well
were recorded in the accounting records of EPL
The before tax net present value attributable to each such well will be
calculated using mid-year discounting and a 30% per annum discount rate
In the event a dry hole or non-commercial well is
drilled to test potential Earn Out Reserves, the cost
of such well will be included in the Reserves Valuation for the year in
which the initial capital expenditures for such well
were recorded in the accounting records of EPL
All historical cost and revenue information attributable to the Ring
Fenced Properties, including revenue from the sale of Earn Out Reserves
in place, through December 31 of the calendar year
preceding the Earn Out Calculation Date as recorded in the general
ledger of EPL, where available, will be used in each Reserves Valuation
Oil/condensate and natural gas prices used in each Reserves Valuation for
periods subsequent to December 31 of the calendar
year preceding the Earn Out Calculation Date to which
it relates will equal the arithmetic average of:
a) NYMEX Settlements, which are defined as the
arithmetic average of the settlement prices for
each calendar year for West Texas Intermediate
(WTI) light sweet crude oil or Henry Hub natural
gas, as applicable, as published by the New York
Mercantile Exchange ("NYMEX"), in each instance for
the last three trading days of the then prompt
NYMEX January natural gas contract during the month
of December preceding such Earn Out Calculation
Date for which prices are quoted and
b) The oil and natural gas price forecast of the
agent under EPL's then existing credit facility
(the "Bank Facility Price Forecast") most
recently available as of December 31
of the calendar year preceding the Earn Out
Calculation Date for such year
To the extent that annual prices are not quoted by the NYMEX or set forth in
the Bank Facility Price Forecast, then the monthly or quarterly prices so
quoted or set forth for such calendar year will be converted to the
appropriate arithmetic averages that comprise an annual average to be used
in the aforementioned price computations, and calendar years for which there
are no prices quoted by the NYMEX or set forth in the Bank Facility Price
Forecast, the price for the preceding calendar year, escalated as provided
below
Oil/condensate and natural gas prices used in each Reserves Valuation for
periods subsequent to December 31 of the calendar year preceding the Earn Out
Calculation Date to which it relates will be adjusted
to account for reasonable estimates of transportation and basis adjustment
charges to reflect the difference between NYMEX prices and prices received
at the sales meter for the reserves in question
Future costs and, to the extent provided above, future oil and natural gas
prices will be adjusted for the Bank Facility Inflation Forecast (defined
as the inflation price forecast of the agent under EPL's then
existing credit facility most recently available as of December 31 of the
calendar year preceding the Earn Out Calculation Date
or, in the absence of such inflation price forecast, 3% per annum)
When applicable, operating costs will include a portion of general and
administrative expenses allocated directly to the leases and wells under the
terms of applicable operating agreements or, in the absence of an operating
agreement, under standard COPAS provisions similar to those found
in operating agreements applicable to the Ring Fenced Properties
for which there are operating agreements (in either instance, "Standard
COPAS Provisions"); no deduction will be made for indirect costs such as
indirect general administration and overhead expenses other than those
provided for under Standard COPAS Provisions.
All assumptions furnished to the Independent Reservoir Engineering Firm
for purposes of calculating each Reserves Valuation provided for herein shall
be determined in good faith and on a basis considered reasonable by EPL, after
consultation with the Earn Out Representative or his agents
Future lease operating expenses attributable to a structure with more than
one well shall be allocated on an active, well-count basis, unless otherwise
provided under Standard COPAS Provisions, and no well shall be charged with
any existing infrastructure cost, such as facility capital, previously
attributable to any other well or wells in which EPL or its subsidiaries
(including Hall-Houston Oil Company) have an interest
Earn Out Payment Amount as of Each
Earn Out Calculation Date: The percentage of the Reserves Valuation set forth below as
of the Earn Out Valuation Date in question, less the
amounts, if any, of all prior Earn Out Payments made in
respect of the Earn Out, shall be paid to each recipient of
the Earn Out Consideration as of the Earn Out Payment Date
to which it relates:
----------------------------------- ----------------------------
Earn Out Calculation Date Earn Out Percentage
----------------------------------- ----------------------------
----------------------------------- ----------------------------
March 3, 2003 20%
----------------------------------- ----------------------------
----------------------------------- ----------------------------
March 1, 2004 30%
----------------------------------- ----------------------------
----------------------------------- ----------------------------
March 1, 2005 35%
----------------------------------- ----------------------------
----------------------------------- ----------------------------
March 1, 2006 40%
----------------------------------- ----------------------------
----------------------------------- ----------------------------
March 1, 2007 50%
----------------------------------- ----------------------------
Capital Commitment to
Ring Fenced Properties: Notwithstanding anything herein to the contrary, EPL will
agree to commit $13 million of capital (the "Capital
Commitment Amount") for the drilling and evaluation of
HHOC's interest in four wells to be drilled as designated by
the Earn Out Representative to test the oil and gas prospect
potential associated with HHOC's current leasehold interest
in Green Canyon Blocks 9 and 10 (two wells), East Cameron
378 (one well) and Eugene Island 376 (one well), such
capital to be provided so as to permit the drilling of all
of such wells to commence on or before June 30, 2003;
provided, however, the drilling of any of such wells may be
delayed for such period of time as the Earn Out
Representative shall determine in his sole discretion but
not to extend past December 31, 2005.
Drilling Decision Criteria: Except for the drilling of the wells provided for above with
the Capital Commitment Amount, EPL's obligation to drill any
wells to test any prospect potential associated with the
Ring Fenced Properties and develop any reserves associated
therewith will be subject to the following non-exclusive
list of criteria (provided that decisions with respect
thereto will be made consistent with the criteria used in
evaluating all exploration and development opportunities
then being considered by EPL, acting through its Investment
Advisory Committee):
A minimum projected after tax rate of return
to EPL (before giving consideration to
the Earn Out)
A maximum projected finding & development cost
Notwithstanding the foregoing, EPL may elect to
include projects that do not meet the above
criteria. Further, all parties recognize that the
establishment and interim adjustment, if any, of
EPL's annual capital budget shall in all events remain
subject to approval by EPL's Board of Directors.
Investment Advisory Committee EPL will include on its Investment Advisory Committee the Earn Out
Representative for any and all decisions related to the Ring Fenced
Properties
Exhibit C-1
to Merger Agreement
[FORM OF $11 BUYER WARRANT]
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE
SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED
UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE ISSUER
RECEIVES AN OPINION OF COUNSEL (WHO MAY BE AN EMPLOYEE OF THE HOLDER) REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION, QUALIFICATION OR OTHER SUCH
ACTIONS ARE NOT REQUIRED UNDER SAID ACT. THE OFFERING OF THIS SECURITY HAS NOT
BEEN REVIEWED OR APPROVED BY ANY STATE SECURITIES ADMINISTRATOR.
[THIS SECURITY IS ALSO SUBJECT TO RESTRICTIONS ON TRANSFER CONTAINED IN AN
AGREEMENT BETWEEN THE ISSUER AND SUCH HOLDER.]
Dated: January , 2002
WARRANT
To Purchase ____ Shares of Common Stock
ENERGY PARTNERS, LTD.
EXPIRING JANUARY , 2007.
THIS IS TO CERTIFY THAT, for value received, , or registered
assigns (the "Holder"), is entitled to purchase from Energy Partners, Ltd., a
Delaware corporation (the "Company"), at any time or from time to time after the
later of (i) the Shareholder Approval Date and (ii) January , 2003 and prior to
5:00 p.m., New York City time, on January , 2007, at the place where a Warrant
Agency (as hereinafter defined) is located, at the Exercise Price (as
hereinafter defined), the number of shares of Common Stock, par value $0.01 per
share (the "Common Stock"), of the Company shown above, all subject to
adjustment and upon the terms and conditions as hereinafter provided, and is
entitled also to exercise the other appurtenant rights, powers and privileges
hereinafter described. This Warrant is one of one or more warrants (the
"Warrants") of the same form and having the same terms as this Warrant.
Certain terms used in this Warrant are defined in Article IV.
-2-
ARTICLE I
EXERCISE OF WARRANTS
1.1 Method of Exercise. To exercise this Warrant in whole or in part, the
Holder shall deliver to the Company, at the Warrant Agency, (a) this Warrant,
(b) a written notice, in substantially the form of the Subscription Notice
attached hereto, of such Holder's election to exercise this Warrant, which
notice shall specify the number of shares of Common Stock to be purchased, the
denominations of the share certificate or certificates desired and the name or
names in which such certificates are to be registered and (c) payment of the
Exercise Price with respect to such shares. Payment made pursuant to clause (c)
above may be made, at the option of the Holder: (x) by cash, money order,
certified or bank cashier's check or wire transfer, (y) the surrender to the
Company of securities of the Company having a Fair Market Value equal to the
aggregate Exercise Price or (z) the delivery of a notice to the Company that the
Holder is exercising this Warrant by authorizing the Company to reduce the
number of shares of Common Stock subject to this Warrant by the number of shares
having an aggregate Fair Market Value equal to the aggregate Exercise Price.
The Company shall, as promptly as practicable thereafter, execute and
deliver or cause to be executed and delivered, in accordance with such notice, a
certificate or certificates representing the aggregate number and type of shares
of Common Stock specified in said notice. The share certificate or certificates
so delivered shall be in such denominations as may be specified in such notice
or, if such notice shall not specify denominations, shall be in the number of
shares of Common Stock for which the Warrant is being exercised, and shall be
issued in the name of the Holder or such other name or names as shall be
designated in such notice, subject to Section 1.4. Such certificate or
certificates shall be deemed to have been issued, and such Holder or any other
Person so designated to be named therein shall be deemed for all purposes to
have become a holder of record of such shares, as of the date the aforementioned
notice is received by the Company. If this Warrant shall have been exercised
only in part, the Company shall, at the time of delivery of the certificate or
certificates, deliver to the Holder a new Warrant evidencing the rights to
purchase the remaining shares of Common Stock called for by this Warrant, which
new Warrant shall in all other respects be identical with this Warrant, or, at
the request of the Holder, appropriate notation may be made on this Warrant
which shall then be returned to the Holder. The Company shall pay all expenses,
taxes and other charges payable in connection with the preparation, issuance and
delivery of share certificates and new Warrants, except that, if share
certificates or new Warrants shall be registered in a name or names other than
the name of the Holder, funds sufficient to pay all transfer taxes payable as a
result of such transfer shall be paid by the Holder at the time of delivering
the Subscription Notice or promptly upon receipt of a written request of the
Company for payment.
1.2 Shares To Be Fully Paid and Nonassessable; Registration and Listing.
All shares of Common Stock issued upon the exercise of this Warrant shall be
validly issued, fully paid and nonassessable and free from all preemptive rights
of any stockholder, and from all taxes, liens and charges with respect to the
issue thereof (other than transfer taxes). If any shares of Common Stock
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any Federal or
state or other applicable law or listing subject to
-3-
issuance on the national securities exchange on which the Common Stock is quoted
or listed, in each case before such Common Stock may be issued or delivered upon
exercise, the Company will in good faith and as expeditiously as possible
endeavor to cause such Common Stock to be duly registered, approved or listed,
as the case may be.
1.3 No Fractional Shares To Be Issued. The Company shall not be required to
issue fractions of shares of Common Stock upon exercise of this Warrant. If any
fraction of a share would, but for this Section 1.3, be issuable upon any
exercise of this Warrant, in lieu of such fractional share the Company shall pay
to the Holder, in cash, an amount equal to such fraction of the Fair Market
Value per share of outstanding Common Stock of the Company on the Business Day
immediately prior to the date of such exercise.
1.4 Share Legends. Each certificate for shares of Common Stock issued upon
exercise of this Warrant, unless at the time of exercise such shares are
registered under the Securities Act, shall bear the following legend, and such
Holder agrees to comply with such legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE
TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR UNLESS THE ISSUER RECEIVES AN
OPINION OF COUNSEL (WHO MAY BE AN EMPLOYEE OF THE HOLDER) REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION, QUALIFICATION OR OTHER
SUCH ACTIONS ARE NOT REQUIRED UNDER SAID ACT. THE OFFERING OF THIS
SECURITY HAS NOT BEEN REVIEWED OR APPROVED BY ANY STATE SECURITIES
ADMINISTRATOR."
If the Holder is a an executive officer of the Company or any of its
subsidiaries on the date of initial issuance, then this Warrant and each
certificate for Common Stock issued upon exercise of this Warrant shall bear a
legend substantially as follows, and such Holder agrees to comply with such
legend:
"THIS SECURITY IS ALSO SUBJECT TO RESTRICTIONS ON TRANSFER CONTAINED IN
AN AGREEMENT BETWEEN THE ISSUER AND SUCH HOLDER."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legends (except a new certificate issued upon
completion of a public distribution pursuant to a registration statement under
the Securities Act) shall also bear such legends unless, in the opinion of
counsel selected by the holder of such certificate (who may be an employee of
such holder) reasonably satisfactory to the Company, the securities represented
thereby are no longer subject to restrictions on resale under the Securities
Act.
-4-
1.5 Maintenance of Authorized Shares. The Company shall at all times
reserve authorized shares of Common Stock sufficient to permit the exercise of
this Warrant in accordance with the terms hereof.
ARTICLE II
WARRANT AGENCY; TRANSFER, EXCHANGE
AND REPLACEMENT OF WARRANTS
2.1 Warrant Agency. The Company may, but shall not be required to, appoint,
at its own expense, an agency, which agency may be the Company's then existing
transfer agent (the "Warrant Agency"), for certain purposes specified herein,
and shall give prompt notice of such appointment (and appointment of any
successor Warrant Agency) to all holders of Warrants. Until an independent
Warrant Agency is so appointed, the Company shall perform the obligations of the
Warrant Agency provided herein at its address set forth in Section 5.1 or such
other address as the Company shall specify by notice to all Holders.
2.2 Ownership of Warrant. The Company may deem and treat the Person in
whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any Person
other than the Warrant Agency) for all purposes and shall not be affected by any
notice to the contrary, until presentation of this Warrant for registration of
transfer as provided in this Article II.
2.3 Transfer of Warrant. The Company agrees to maintain at the Warrant
Agency books for the registration of transfers of the Warrants, and transfer of
this Warrant and all rights hereunder shall be registered, in whole or in part,
on such books, upon surrender of this Warrant at the Warrant Agency, together
with a written assignment of this Warrant duly executed by the Holder or his
duly authorized agent or attorney, with signatures guaranteed by a bank or trust
company or a broker or dealer registered with the NASD, and funds sufficient to
pay any transfer taxes payable upon such transfer. Upon surrender the Company
shall execute and deliver a new Warrant or Warrants in the name of the assignee
or assignees and in the denominations specified in the instrument of assignment,
and this Warrant shall promptly be canceled. Notwithstanding the foregoing, a
Warrant may be exercised by a new holder in accordance with the procedures set
forth herein without having a new Warrant issued. The Warrant Agency shall not
be required to register any transfers if the Holder fails to furnish to the
Company, after a request therefor, an opinion of counsel reasonably satisfactory
to the Company that such transfer is exempt from the registration requirements
of the Securities Act.
2.4 Division or Combination of Warrants. This Warrant may be divided or
combined with other Warrants upon surrender hereof and of any Warrant or
Warrants with which this Warrant is to be combined at the Warrant Agency,
together with a written notice specifying the names and denominations in which
the new Warrant or Warrants are to be issued, signed by the holders hereof and
thereof or their respective duly authorized agents or attorneys. Subject to
compliance with Section 2.3 as to any transfer which may be involved in the
division or combination, the Company shall exe-
-5-
cute and deliver a new Warrant or Warrants in exchange for the Warrant or
Warrants to be divided or combined in accordance with such notice.
2.5 Loss, Theft, Destruction or Mutilation of Warrants. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security reasonably satisfactory to
the Company or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Company will make and deliver, in lieu of such
lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and
representing the right to purchase the same aggregate number of shares of Common
Stock as provided for in such lost, stolen, destroyed or mutilated Warrant.
ARTICLE III
CERTAIN RIGHTS
3.1 Financial Statements. At any time that the Company is not subject to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the
Company shall deliver to each Holder:
(a) as soon as available, but not later than 100 days after the end of each
fiscal year of the Company, a copy of the audited consolidated balance sheet of
the Company and its subsidiaries as of the end of such year and the related
consolidated statements of income and cash flows for such fiscal year, setting
forth in each case in comparative form the figures for the previous year, all in
reasonable detail and accompanied by a management summary and analysis of the
operations of the Company and its subsidiaries for such fiscal year and by the
opinion of KPMG LLP (or any successor thereto) or another nationally recognized
independent public accounting firm, which report shall state that such
consolidated financial statements present fairly the financial position for the
periods indicated in conformity with generally accepted accounting principles,
applied on a basis consistent with prior years;
(b) as soon as available, but in any event not later than 50 days after the
end of each of the first three fiscal quarters of each year, the unaudited
consolidated balance sheet of the Company and its subsidiaries, and the related
consolidated statements of income and cash flow for such quarter and for the
period commencing on the first day of the fiscal year and ending on the last day
of such quarter, all certified by the Company's Chief Financial Officer; and
(c) to the extent not covered above, as soon as practicable any materials
delivered to all stockholders of the Company.
3.2 Adjustments to Conversion Price for Subdivisions and Combinations. In
case at any time or from time to time the Company shall (i) subdivide its
outstanding shares of Common Stock into a larger number of shares of Common
Stock (whether by distribution of shares of Common Stock or otherwise) or (ii)
combine its outstanding shares of Common Stock into a smaller number of
-6-
shares of Common Stock, then the Exercise Price in effect and the number of
shares of Common Stock subject to purchase upon exercise of this Warrant
immediately after the happening of any such event shall be proportionately
decreased and increased, respectively, in case of the happening of events
described in subparagraph (i) above, or proportionately increased and decreased,
respectively, in case of the happening of events described in subparagraph (ii)
above. In case at any time or from time to time the Company shall declare a
dividend or make a distribution on the Common Stock payable in shares of its
capital stock (other than shares of Common Stock) or capital stock of any
subsidiary of the Company or any other assets (other than cash), then the
Company shall make appropriate provision to provide the Holder, upon exercise of
this Warrant, of the aggregate number and kind of shares which the Holder would
have received if the Holder had exercised this Warrant immediately prior to the
record date for such dividend or distribution; provided that no adjustment shall
be made if such dividend or distribution is not actually made.
3.3 Merger, Consolidation or Disposition of Assets. In case the Company
shall merge or consolidate into another corporation, or shall sell, transfer or
otherwise dispose of all or substantially all of its property, assets or
business to another corporation, then each Holder of a Warrant shall have the
right thereafter to exercise such Warrant only for the kind and amount of shares
of stock and other securities and property receivable upon or deemed to be held
following such merger, consolidation, sale, transfer or disposition of assets by
a holder of a number of shares of the Common Stock of the Company into which
such Warrant could have been converted immediately prior to such merger,
consolidation, sale, transfer or disposition of assets. In case of any such
merger, consolidation, sale, transfer or disposition of assets, the successor
acquiring corporation shall expressly assume the due and punctual observance and
performance of each and every covenant and condition hereof to be performed and
observed by the Company and all of the obligations and liabilities hereunder,
subject to such modification as shall be necessary to provide for adjustments to
the Exercise Price which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 3.3. The foregoing provisions of this
Section 3.3 shall similarly apply to successive mergers, consolidations, sales,
transfers or other dispositions of assets.
3.4 The Company agrees to call a stockholder meeting to consider the Merger
Agreement and the transactions contemplated thereby on or before the first
anniversary of the initial issuance of this Warrant and to use its best efforts
to obtain stockholder approval thereof.
ARTICLE IV
DEFINITIONS
The following terms, as used in this Warrant, have the following respective
meanings:
"Business Day" means (a) if any class of Common Stock is listed or admitted
to trading on a national securities exchange (including Nasdaq), a day on which
the principal national securities exchange on which such class of Common Stock
is listed or admitted to trading is open for
-7-
business or (b) if no class of Common Stock is so listed or admitted to trading,
a day on which any New York Stock Exchange member firm is open for business.
"Common Stock" has the meaning set forth in the first paragraph of this
Warrant.
"Company" has the meaning set forth in the first paragraph of this Warrant.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
any similar or successor federal statute, and the rules and regulations of the
Securities and Exchange Commission (or its successor) thereunder, all as the
same shall be in effect at the time.
"Exercise Price" means $11.00 per share of Common Stock purchased pursuant
to the exercise of this Warrant.
"Fair Market Value" with respect to a share of Common Stock on any day
means (a) if the Common Stock is listed or admitted for trading on a national
securities exchange, the reported last sales price regular way or, if no such
reported sale occurs on such day, the average of the closing bid and asked
prices regular way on such day, in each case as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading, (b) if the Common Stock is not listed or admitted to
trading on any national securities exchange, the last quoted sales price, or, if
not so quoted, the average of the high bid and low asked prices in the
over-the-counter market on such day as reported by Nasdaq or any comparable
system then in use or, if not so reported, as reported by any New York Stock
Exchange member firm selected by the Company for such purpose or (c) if not so
reported, the fair market value of the Common Stock, as determined in good faith
by the Board of Directors of the Company.
"Holder" has the meaning set forth in the first paragraph of this Warrant.
"Merger Agreement" means the Agreement and Plan of Merger by and among the
Company, Hall-Houston Oil Company, and Saints Acquisition Subsidiary, Inc. dated
as of December 16, 2001.
"NASD" means The National Association of Securities Dealers, Inc.
"Nasdaq" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar or successor federal statute, and the rules and regulations of the
Securities and Exchange Commission (or its successor) thereunder, all as the
same shall be in effect at the time.
"Shareholder Approval Date" means the date on which the holders of the
Common Stock of the Company holding a majority of the voting power of the
Company shall have approved the Merger contemplated the Merger Agreement.
-8-
"Warrant Agency" has the meaning set forth in Section 2.1.
"Warrants" has the meaning set forth in the first paragraph of this
Warrant.
ARTICLE V
MISCELLANEOUS
5.1 Notices. All notices, requests, consents or other communications
hereunder shall be in writing and shall be deemed to have been duly given or
delivered (a) when received if delivered by hand or telecopy, (b) within one day
after being sent by recognized overnight delivery service, or (c) within three
business days after being mailed by first-class mail, postage prepaid, and in
each case addressed as follows:
(i) if to an initial Holder of Warrants, to such Holder at such
address as may have been furnished to the Company in writing by such
Holder;
(ii) if to the Company, to:
Energy Partners , Ltd.
201 St. Charles Avenue, Suite 3400
New Orleans, Louisiana 70170
Telecopy No.: (504) 569-1874
Attention: General Counsel
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Telecopy No.: (212) 269-5420
Attention: John Schuster, Esq.
5.2 Amendment; Waiver. (a) This Warrant may be amended or modified only by
an instrument in writing duly executed by the Company and those Holders, voting
as a single class, entitled to purchase a majority of the Common Stock subject
to purchase upon exercise of such Warrants at the time outstanding (exclusive of
Warrants then owned by the Company or any subsidiary thereof), and (b) any
waiver by any Holder of any breach of or failure to comply with any provision of
this Warrant by any other party hereto shall be in writing and shall not be
construed as, or constitute, a continuing waiver of such provision, or a waiver
of any other breach of, or failure to comply with, any other provision of this
Warrant; provided, however, that no such amendment, modification or waiver
- -9-
shall, without the written consent of each Holder whose interest might be
adversely affected by such amendment, modification or waiver, change the number
of shares of Common Stock subject to purchase upon exercise of this Warrant, the
Exercise Price or provisions for payment thereof.
Any such amendment, modification or waiver effected pursuant to this
Section 5.2 shall be binding upon the holders of all Warrants and shares of
Common Stock issuable upon exercise thereof, upon each future holder thereof and
upon the Company. In the event of any such amendment, modification or waiver,
the Company shall give prompt notice thereof to all Holders and, if appropriate,
notation thereof shall be made on all Warrants thereafter surrendered for
registration of transfer or exchange.
5.3 Governing Law. This Warrant shall be construed and enforced in
accordance with and governed by the internal substantive laws of the State of
Delaware without giving effect to the principles of conflicts of laws thereof.
5.4 Covenants to Bind Successor and Assigns. All covenants, stipulations,
promises and agreements in this Warrant contained by or on behalf of the Company
shall bind its successors and assigns, whether so expressed or not.
5.5 Severability. In case any one or more of the provisions contained in
this Warrant shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid, legal and enforceable provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
5.6 Construction. The headings of the Articles and Sections of this Warrant
are inserted for convenience of reference only and shall not be used in
interpreting this Warrant. Unless specifically stated otherwise, references to
Articles and Sections refer to the Articles and Sections of this Warrant.
5.7 No Rights as Stockholder. This Warrant shall not, prior to exercise,
entitle the Holder to any rights as a stockholder of the Company.
IN WITNESS WHEREOF, Energy Partners, Ltd. has caused this Warrant to be
executed in its corporate name by one of its officers thereunto duly authorized,
as of the day and year first above written.
ENERGY PARTNERS, LTD.
By:
--------------------------------------
Name:
Title:
SUBSCRIPTION NOTICE
(To be executed upon exercise of Warrant)
TO :
The undersigned hereby irrevocably elects to exercise the right to purchase
represented by the attached Warrant for, and to purchase thereunder,
_________________ shares of Common Stock, as provided for therein, and tenders
herewith payment of the Exercise Price in full in accordance with the terms of
the attached Warrant.
Please issue a certificate or certificates for such shares of Common Stock
in the following name or names and denominations:
If said number of shares shall not be all the shares issuable upon exercise
of the attached Warrant, a new Warrant is to be issued in the name of the
undersigned for the balance remaining of such shares less any fraction of a
share paid in cash.
Dated: _____________, 20__
-----------------------------------------------------
Note: The above signature should
correspond exactly with the name on the
face of the attached Warrant or with the
name of the assignee appearing in the
assignment form below.
ASSIGNMENT
(To be executed upon assignment of Warrant)
For value received, ______________________________ hereby sells, assigns
and transfers unto __________________ % of the Holder's interest in the attached
Warrant, together with all rights, title and interest therein, and does hereby
irrevocably constitute and appoint _________________ attorney to transfer said
Warrant on the books of ____________________, with full power of substitution in
the premises.
------------------------------------------------
Note: The above signature should
correspond exactly with the name on
the face of the attached Warrant.
Exhibit C-2
to Merger Agreement
[FORM OF $9 BUYER WARRANT]
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE
SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED
UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE ISSUER
RECEIVES AN OPINION OF COUNSEL (WHO MAY BE AN EMPLOYEE OF THE HOLDER) REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION, QUALIFICATION OR OTHER SUCH
ACTIONS ARE NOT REQUIRED UNDER SAID ACT. THE OFFERING OF THIS SECURITY HAS NOT
BEEN REVIEWED OR APPROVED BY ANY STATE SECURITIES ADMINISTRATOR.
[THIS SECURITY IS ALSO SUBJECT TO RESTRICTIONS ON TRANSFER CONTAINED IN AN
AGREEMENT BETWEEN THE ISSUER AND SUCH HOLDER.]
Dated: January , 2002
WARRANT
To Purchase ____ Shares of Common Stock
ENERGY PARTNERS, LTD.
EXPIRING JANUARY , 2007.
THIS IS TO CERTIFY THAT, for value received, , or registered assigns (the
"Holder"), is entitled to purchase from Energy Partners, Ltd., a Delaware
corporation (the "Company"), at any time or from time to time after the later of
(i) the Shareholder Approval Date and (ii) January , 2003 and prior to 5:00
p.m., New York City time, on January , 2007, at the place where a Warrant Agency
(as hereinafter defined) is located, at the Exercise Price (as hereinafter
defined), the number of shares of Common Stock, par value $0.01 per share (the
"Common Stock"), of the Company shown above, all subject to adjustment and upon
the terms and conditions as hereinafter provided, and is entitled also to
exercise the other appurtenant rights, powers and privileges hereinafter
described. This Warrant is one of one or more warrants (the "Warrants") of the
same form and having the same terms as this Warrant.
Certain terms used in this Warrant are defined in Article IV.
-2-
ARTICLE I
EXERCISE OF WARRANTS
1.1 Method of Exercise. To exercise this Warrant in whole or in part, the
Holder shall deliver to the Company, at the Warrant Agency, (a) this Warrant,
(b) a written notice, in substantially the form of the Subscription Notice
attached hereto, of such Holder's election to exercise this Warrant, which
notice shall specify the number of shares of Common Stock to be purchased, the
denominations of the share certificate or certificates desired and the name or
names in which such certificates are to be registered and (c) payment of the
Exercise Price with respect to such shares. Payment made pursuant to clause (c)
above may be made, at the option of the Holder: (x) by cash, money order,
certified or bank cashier's check or wire transfer, (y) the surrender to the
Company of securities of the Company having a Fair Market Value equal to the
aggregate Exercise Price or (z) the delivery of a notice to the Company that the
Holder is exercising this Warrant by authorizing the Company to reduce the
number of shares of Common Stock subject to this Warrant by the number of shares
having an aggregate Fair Market Value equal to the aggregate Exercise Price.
The Company shall, as promptly as practicable thereafter, execute and
deliver or cause to be executed and delivered, in accordance with such notice, a
certificate or certificates representing the aggregate number and type of shares
of Common Stock specified in said notice. The share certificate or certificates
so delivered shall be in such denominations as may be specified in such notice
or, if such notice shall not specify denominations, shall be in the number of
shares of Common Stock for which the Warrant is being exercised, and shall be
issued in the name of the Holder or such other name or names as shall be
designated in such notice, subject to Section 1.4. Such certificate or
certificates shall be deemed to have been issued, and such Holder or any other
Person so designated to be named therein shall be deemed for all purposes to
have become a holder of record of such shares, as of the date the aforementioned
notice is received by the Company. If this Warrant shall have been exercised
only in part, the Company shall, at the time of delivery of the certificate or
certificates, deliver to the Holder a new Warrant evidencing the rights to
purchase the remaining shares of Common Stock called for by this Warrant, which
new Warrant shall in all other respects be identical with this Warrant, or, at
the request of the Holder, appropriate notation may be made on this Warrant
which shall then be returned to the Holder. The Company shall pay all expenses,
taxes and other charges payable in connection with the preparation, issuance and
delivery of share certificates and new Warrants, except that, if share
certificates or new Warrants shall be registered in a name or names other than
the name of the Holder, funds sufficient to pay all transfer taxes payable as a
result of such transfer shall be paid by the Holder at the time of delivering
the Subscription Notice or promptly upon receipt of a written request of the
Company for payment.
1.2 Shares To Be Fully Paid and Nonassessable; Registration and Listing.
All shares of Common Stock issued upon the exercise of this Warrant shall be
validly issued, fully paid and nonassessable and free from all preemptive rights
of any stockholder, and from all taxes, liens and charges with respect to the
issue thereof (other than transfer taxes). If any shares of Common Stock
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any Federal or
state or other applicable law or listing subject to
-3-
issuance on the national securities exchange on which the Common Stock is quoted
or listed, in each case before such Common Stock may be issued or delivered upon
exercise, the Company will in good faith and as expeditiously as possible
endeavor to cause such Common Stock to be duly registered, approved or listed,
as the case may be.
1.3 No Fractional Shares To Be Issued. The Company shall not be required to
issue fractions of shares of Common Stock upon exercise of this Warrant. If any
fraction of a share would, but for this Section 1.3, be issuable upon any
exercise of this Warrant, in lieu of such fractional share the Company shall pay
to the Holder, in cash, an amount equal to such fraction of the Fair Market
Value per share of outstanding Common Stock of the Company on the Business Day
immediately prior to the date of such exercise.
1.4 Share Legends. Each certificate for shares of Common Stock issued upon
exercise of this Warrant, unless at the time of exercise such shares are
registered under the Securities Act, shall bear the following legend, and such
Holder agrees to comply with such legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE
TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR UNLESS THE ISSUER RECEIVES AN
OPINION OF COUNSEL (WHO MAY BE AN EMPLOYEE OF THE HOLDER) REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION, QUALIFICATION OR OTHER
SUCH ACTIONS ARE NOT REQUIRED UNDER SAID ACT. THE OFFERING OF THIS
SECURITY HAS NOT BEEN REVIEWED OR APPROVED BY ANY STATE SECURITIES
ADMINISTRATOR."
If the Holder is a an executive officer of the Company or any of its
subsidiaries on the date of initial issuance, then this Warrant and each
certificate for Common Stock issued upon exercise of this Warrant shall bear a
legend substantially as follows, and such Holder agrees to comply with such
legend:
"THIS SECURITY IS ALSO SUBJECT TO RESTRICTIONS ON TRANSFER CONTAINED IN
AN AGREEMENT BETWEEN THE ISSUER AND SUCH HOLDER."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legends (except a new certificate issued upon
completion of a public distribution pursuant to a registration statement under
the Securities Act) shall also bear such legends unless, in the opinion of
counsel selected by the holder of such certificate (who may be an employee of
such holder) reasonably satisfactory to the Company, the securities represented
thereby are no longer subject to restrictions on resale under the Securities
Act.
-4-
1.5 Maintenance of Authorized Shares. The Company shall at all times
reserve authorized shares of Common Stock sufficient to permit the exercise of
this Warrant in accordance with the terms hereof.
ARTICLE II
WARRANT AGENCY; TRANSFER, EXCHANGE
AND REPLACEMENT OF WARRANTS
2.1 Warrant Agency. The Company may, but shall not be required to, appoint,
at its own expense, an agency, which agency may be the Company's then existing
transfer agent (the "Warrant Agency"), for certain purposes specified herein,
and shall give prompt notice of such appointment (and appointment of any
successor Warrant Agency) to all holders of Warrants. Until an independent
Warrant Agency is so appointed, the Company shall perform the obligations of the
Warrant Agency provided herein at its address set forth in Section 5.1 or such
other address as the Company shall specify by notice to all Holders.
2.2 Ownership of Warrant. The Company may deem and treat the Person in
whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any Person
other than the Warrant Agency) for all purposes and shall not be affected by any
notice to the contrary, until presentation of this Warrant for registration of
transfer as provided in this Article II.
2.3 Transfer of Warrant. The Company agrees to maintain at the Warrant
Agency books for the registration of transfers of the Warrants, and transfer of
this Warrant and all rights hereunder shall be registered, in whole or in part,
on such books, upon surrender of this Warrant at the Warrant Agency, together
with a written assignment of this Warrant duly executed by the Holder or his
duly authorized agent or attorney, with signatures guaranteed by a bank or trust
company or a broker or dealer registered with the NASD, and funds sufficient to
pay any transfer taxes payable upon such transfer. Upon surrender the Company
shall execute and deliver a new Warrant or Warrants in the name of the assignee
or assignees and in the denominations specified in the instrument of assignment,
and this Warrant shall promptly be canceled. Notwithstanding the foregoing, a
Warrant may be exercised by a new holder in accordance with the procedures set
forth herein without having a new Warrant issued. The Warrant Agency shall not
be required to register any transfers if the Holder fails to furnish to the
Company, after a request therefor, an opinion of counsel reasonably satisfactory
to the Company that such transfer is exempt from the registration requirements
of the Securities Act.
2.4 Division or Combination of Warrants. This Warrant may be divided or
combined with other Warrants upon surrender hereof and of any Warrant or
Warrants with which this Warrant is to be combined at the Warrant Agency,
together with a written notice specifying the names and denominations in which
the new Warrant or Warrants are to be issued, signed by the holders hereof and
thereof or their respective duly authorized agents or attorneys. Subject to
compliance with Section 2.3 as to any transfer which may be involved in the
division or combination, the Company shall exe-
-5-
cute and deliver a new Warrant or Warrants in exchange for the Warrant or
Warrants to be divided or combined in accordance with such notice.
2.5 Loss, Theft, Destruction or Mutilation of Warrants. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security reasonably satisfactory to
the Company or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Company will make and deliver, in lieu of such
lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and
representing the right to purchase the same aggregate number of shares of Common
Stock as provided for in such lost, stolen, destroyed or mutilated Warrant.
ARTICLE III
CERTAIN RIGHTS
3.1 Financial Statements. At any time that the Company is not subject to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the
Company shall deliver to each Holder:
(a) as soon as available, but not later than 100 days after the end of each
fiscal year of the Company, a copy of the audited consolidated balance sheet of
the Company and its subsidiaries as of the end of such year and the related
consolidated statements of income and cash flows for such fiscal year, setting
forth in each case in comparative form the figures for the previous year, all in
reasonable detail and accompanied by a management summary and analysis of the
operations of the Company and its subsidiaries for such fiscal year and by the
opinion of KPMG LLP (or any successor thereto) or another nationally recognized
independent public accounting firm, which report shall state that such
consolidated financial statements present fairly the financial position for the
periods indicated in conformity with generally accepted accounting principles,
applied on a basis consistent with prior years;
(b) as soon as available, but in any event not later than 50 days after the
end of each of the first three fiscal quarters of each year, the unaudited
consolidated balance sheet of the Company and its subsidiaries, and the related
consolidated statements of income and cash flow for such quarter and for the
period commencing on the first day of the fiscal year and ending on the last day
of such quarter, all certified by the Company's Chief Financial Officer; and
(c) to the extent not covered above, as soon as practicable any materials
delivered to all stockholders of the Company.
3.2 Adjustments to Conversion Price for Subdivisions and Combinations. In
case at any time or from time to time the Company shall (i) subdivide its
outstanding shares of Common Stock into a larger number of shares of Common
Stock (whether by distribution of shares of Common Stock or otherwise) or (ii)
combine its outstanding shares of Common Stock into a smaller number of
-6-
shares of Common Stock, then the Exercise Price in effect and the number of
shares of Common Stock subject to purchase upon exercise of this Warrant
immediately after the happening of any such event shall be proportionately
decreased and increased, respectively, in case of the happening of events
described in subparagraph (i) above, or proportionately increased and decreased,
respectively, in case of the happening of events described in subparagraph (ii)
above. In case at any time or from time to time the Company shall declare a
dividend or make a distribution on the Common Stock payable in shares of its
capital stock (other than shares of Common Stock) or capital stock of any
subsidiary of the Company or any other assets (other than cash), then the
Company shall make appropriate provision to provide the Holder, upon exercise of
this Warrant, of the aggregate number and kind of shares which the Holder would
have received if the Holder had exercised this Warrant immediately prior to the
record date for such dividend or distribution; provided that no adjustment shall
be made if such dividend or distribution is not actually made.
3.3 Merger, Consolidation or Disposition of Assets. In case the Company
shall merge or consolidate into another corporation, or shall sell, transfer or
otherwise dispose of all or substantially all of its property, assets or
business to another corporation, then each Holder of a Warrant shall have the
right thereafter to exercise such Warrant only for the kind and amount of shares
of stock and other securities and property receivable upon or deemed to be held
following such merger, consolidation, sale, transfer or disposition of assets by
a holder of a number of shares of the Common Stock of the Company into which
such Warrant could have been converted immediately prior to such merger,
consolidation, sale, transfer or disposition of assets. In case of any such
merger, consolidation, sale, transfer or disposition of assets, the successor
acquiring corporation shall expressly assume the due and punctual observance and
performance of each and every covenant and condition hereof to be performed and
observed by the Company and all of the obligations and liabilities hereunder,
subject to such modification as shall be necessary to provide for adjustments to
the Exercise Price which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 3.3. The foregoing provisions of this
Section 3.3 shall similarly apply to successive mergers, consolidations, sales,
transfers or other dispositions of assets.
3.4 The Company agrees to call a stockholder meeting to consider the Merger
Agreement and the transactions contemplated thereby on or before the first
anniversary of the initial issuance of this Warrant and to use its best efforts
to obtain stockholder approval thereof.
ARTICLE IV
DEFINITIONS
The following terms, as used in this Warrant, have the following respective
meanings:
"Business Day" means (a) if any class of Common Stock is listed or admitted
to trading on a national securities exchange (including Nasdaq), a day on which
the principal national securities exchange on which such class of Common Stock
is listed or admitted to trading is open for
-7-
business or (b) if no class of Common Stock is so listed or admitted to trading,
a day on which any New York Stock Exchange member firm is open for business.
"Common Stock" has the meaning set forth in the first paragraph of this
Warrant.
"Company" has the meaning set forth in the first paragraph of this Warrant.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
any similar or successor federal statute, and the rules and regulations of the
Securities and Exchange Commission (or its successor) thereunder, all as the
same shall be in effect at the time.
"Exercise Price" means $9.00 per share of Common Stock purchased pursuant
to the exercise of this Warrant.
"Fair Market Value" with respect to a share of Common Stock on any day
means (a) if the Common Stock is listed or admitted for trading on a national
securities exchange, the reported last sales price regular way or, if no such
reported sale occurs on such day, the average of the closing bid and asked
prices regular way on such day, in each case as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading, (b) if the Common Stock is not listed or admitted to
trading on any national securities exchange, the last quoted sales price, or, if
not so quoted, the average of the high bid and low asked prices in the
over-the-counter market on such day as reported by Nasdaq or any comparable
system then in use or, if not so reported, as reported by any New York Stock
Exchange member firm selected by the Company for such purpose or (c) if not so
reported, the fair market value of the Common Stock, as determined in good faith
by the Board of Directors of the Company.
"Holder" has the meaning set forth in the first paragraph of this Warrant.
"Merger Agreement" means the Agreement and Plan of Merger by and among the
Company, Hall-Houston Oil Company, and Saints Acquisition Subsidiary, Inc. dated
as of December 16, 2001.
"NASD" means The National Association of Securities Dealers, Inc.
"Nasdaq" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar or successor federal statute, and the rules and regulations of the
Securities and Exchange Commission (or its successor) thereunder, all as the
same shall be in effect at the time.
"Shareholder Approval Date" means the date on which the holders of the
Common Stock of the Company holding a majority of the voting power of the
Company shall have approved the Merger contemplated the Merger Agreement.
-8-
"Warrant Agency" has the meaning set forth in Section 2.1.
"Warrants" has the meaning set forth in the first paragraph of this
Warrant.
ARTICLE V
MISCELLANEOUS
5.1 Notices. All notices, requests, consents or other communications
hereunder shall be in writing and shall be deemed to have been duly given or
delivered (a) when received if delivered by hand or telecopy, (b) within one day
after being sent by recognized overnight delivery service, or (c) within three
business days after being mailed by first-class mail, postage prepaid, and in
each case addressed as follows:
(i) if to an initial Holder of Warrants, to such Holder at such
address as may have been furnished to the Company in writing by such
Holder;
(ii) if to the Company, to:
Energy Partners , Ltd.
201 St. Charles Avenue, Suite 3400
New Orleans, Louisiana 70170
Telecopy No.: (504) 569-1874
Attention: General Counsel
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Telecopy No.: (212) 269-5420
Attention: John Schuster, Esq.
5.2 Amendment; Waiver. (a) This Warrant may be amended or modified only by
an instrument in writing duly executed by the Company and those Holders, voting
as a single class, entitled to purchase a majority of the Common Stock subject
to purchase upon exercise of such Warrants at the time outstanding (exclusive of
Warrants then owned by the Company or any subsidiary thereof), and (b) any
waiver by any Holder of any breach of or failure to comply with any provision of
this Warrant by any other party hereto shall be in writing and shall not be
construed as, or constitute, a continuing waiver of such provision, or a waiver
of any other breach of, or failure to comply with, any other provision of this
Warrant; provided, however, that no such amendment, modification or waiver
-9-
shall, without the written consent of each Holder whose interest might be
adversely affected by such amendment, modification or waiver, change the number
of shares of Common Stock subject to purchase upon exercise of this Warrant, the
Exercise Price or provisions for payment thereof.
Any such amendment, modification or waiver effected pursuant to this
Section 5.2 shall be binding upon the holders of all Warrants and shares of
Common Stock issuable upon exercise thereof, upon each future holder thereof and
upon the Company. In the event of any such amendment, modification or waiver,
the Company shall give prompt notice thereof to all Holders and, if appropriate,
notation thereof shall be made on all Warrants thereafter surrendered for
registration of transfer or exchange.
5.3 Governing Law. This Warrant shall be construed and enforced in
accordance with and governed by the internal substantive laws of the State of
Delaware without giving effect to the principles of conflicts of laws thereof.
5.4 Covenants to Bind Successor and Assigns. All covenants, stipulations,
promises and agreements in this Warrant contained by or on behalf of the Company
shall bind its successors and assigns, whether so expressed or not.
5.5 Severability. In case any one or more of the provisions contained in
this Warrant shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid, legal and enforceable provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
5.6 Construction. The headings of the Articles and Sections of this Warrant
are inserted for convenience of reference only and shall not be used in
interpreting this Warrant. Unless specifically stated otherwise, references to
Articles and Sections refer to the Articles and Sections of this Warrant.
5.7 No Rights as Stockholder. This Warrant shall not, prior to exercise,
entitle the Holder to any rights as a stockholder of the Company.
IN WITNESS WHEREOF, Energy Partners, Ltd. has caused this Warrant to be
executed in its corporate name by one of its officers thereunto duly authorized,
as of the day and year first above written.
ENERGY PARTNERS, LTD.
By:
--------------------------------------------
Name:
Title:
SUBSCRIPTION NOTICE
(To be executed upon exercise of Warrant)
TO :
The undersigned hereby irrevocably elects to exercise the right to purchase
represented by the attached Warrant for, and to purchase thereunder,
_________________ shares of Common Stock, as provided for therein, and tenders
herewith payment of the Exercise Price in full in accordance with the terms of
the attached Warrant.
Please issue a certificate or certificates for such shares of Common Stock
in the following name or names and denominations:
If said number of shares shall not be all the shares issuable upon exercise
of the attached Warrant, a new Warrant is to be issued in the name of the
undersigned for the balance remaining of such shares less any fraction of a
share paid in cash.
Dated: _____________, 20__
-------------------------------------------------
Note: The above signature should
correspond exactly with the name on the
face of the attached Warrant or with the
name of the assignee appearing in the
assignment form below.
ASSIGNMENT
(To be executed upon assignment of Warrant)
For value received, ______________________________ hereby sells, assigns
and transfers unto __________________ % of the Holder's interest in the attached
Warrant, together with all rights, title and interest therein, and does hereby
irrevocably constitute and appoint _________________ attorney to transfer said
Warrant on the books of ____________________, with full power of substitution in
the premises.
-------------------------------------------------------
Note: The above signature should
correspond exactly with the name on the
face of the
attached Warrant.
Exhibit D
to Merger Agreement
[FORM OF DEBT EXCHANGE AGREEMENT]
DEBT EXCHANGE AGREEMENT (this "Agreement"), dated as of December 16, 2001,
is by and among Energy Partners, Ltd., a Delaware corporation ("Buyer"), and
each of the parties listed on Schedule I to this Agreement (each, a "Holder" and
together, the "Holders").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, each Holder is a holder of an evidence of indebtedness of
Hall-Houston Oil Company (the "Company"), bearing interest and with the maturity
or maturities set forth opposite such Holder's name on Schedule I (each a "Note"
and collectively the "Notes");
WHEREAS, together the Holders hold $80,155,618 in principal amount of such
indebtedness of the Company;
WHEREAS, pursuant to the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of December 16, 2001, by and among Buyer, a wholly owned
subsidiary of Buyer and the Company, a copy of which is attached hereto as Annex
I, it is a condition to the consummation of the Merger (as defined in the Merger
Agreement) that Buyer enter into this Agreement with Holders of at least 80% of
the Note Indebtedness (as defined below) to exchange such Holders' Notes and all
related interest, fees and penalties, if any, accrued and unpaid thereon to the
Effective Date (as defined in the Merger Agreement) (together, the "Note
Indebtedness") for (i) 5 shares of Series D Exchangeable Convertible Preferred
Stock liquidation value $100 per share (the "Preferred Stock"), of Buyer, per
$1,000 principal amount of Notes; (ii) $500 aggregate principal amount of
Buyer's 11% Senior Subordinated Notes due 2009 (the "Exchange Notes") per $1,000
principal amount of Notes; (iii) cash in full payment of "Nominal Overriding
Royalty Interests" provided for in documentation relating to certain series of
Notes; and (iv) cash in an amount equal to the accrued and unpaid interest to
the Closing (as defined below) on the Notes (such cash amounts provided for in
(iii) and (iv), the "Cash Consideration" and, together with the Exchange Notes
and the Preferred Stock, the "Exchange Consideration").
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and promises herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Exchange of Note Indebtedness for the Exchange Consideration. Each
Holder shall acquire from Buyer at the Closing (as defined below), and Buyer
shall issue and deliver to each Holder, the Exchange Consideration applicable to
such Holder's Note Indebtedness in exchange for all Notes representing Note
Indebtedness. The failure of any Holder to execute this Agreement or to perform
its obligations hereunder shall not affect the performance obligations hereunder
of any other Holder. Buyer may pay cash in lieu of issuing Preferred Stock and
Exchange Notes in amounts less than $500.
2. The Closing. The closing of the exchange of the Note Indebtedness for
the Exchange Consideration contemplated hereby (the "Closing") shall take place
at a location mutually
-2-
agreeable to Buyer and Company, at 9:00 a.m. local time on January 8, 2002 or
such later time and date determined by Buyer, which shall be immediately prior
to the closing pursuant to the Merger Agreement (the "Closing Date"). Prior to
the Closing each Holder shall have delivered to the Custodian (the "Custodian")
specified in the Custody Agreement and Power of Attorney in the form attached
hereto as Annex II (the "Custody Agreement") the Notes held by such Holder in
accordance with the provisions of the Custody Agreement. At the Closing Buyer
shall deliver to the Custodian, for the benefit of each Holder, (i)
certificates, in the name of such Holder or its successors, assigns or
designees, evidencing the acquisition by such Holder of the Preferred Stock
allocable to such Holder; (ii) the Exchange Notes made payable to such Holder or
its successors, assigns or designees, allocable to such Holder; and (iii) by
check or wire transfer of immediately available funds, cash in an amount equal
to the Cash Consideration allocable to such Holder. Simultaneously at the
Closing the Custodian shall deliver to Buyer the Notes held by each Holder with
the appropriate notation that such Notes have been canceled. Upon the exchange
of the Exchange Consideration for the Notes, such Holder hereby releases, fully
acquits and forever discharges the Company, its subsidiaries, stockholders,
officers, directors, successors and assigns from any and all debt, late fees,
prepayment fees, penalties, interest and causes of action with respect to the
Note Indebtedness.
3. Representations and Warranties of Buyer. The representations and
warranties of Buyer in Article IV of the Merger Agreement are incorporated
herein for the benefit of the Holders.
4. Post-Closing Covenants of Buyer.
4.1. Maintenance of Authorized Shares. Buyer shall at all times reserve
authorized shares of Common Stock sufficient to permit the conversion of all
shares of Preferred Stock in accordance with the terms thereof.
4.2. Registration and Listing. If any shares of Common Stock required to be
reserved for purposes of conversion of the shares of Preferred Stock as provided
in the Certificate of Designation of the Preferred Stock require registration
with or approval of any governmental authority under any Federal or state or
other applicable law or listing subject to issuance on the national securities
exchange on which the Common Stock is quoted or listed, in each case before such
Common Stock may be issued or delivered upon conversion, Buyer will in good
faith and as expeditiously as possible endeavor to cause such Common Stock to be
duly registered, approved or listed, as the case may be.
4.3. Financial Statements. At any time that Buyer is not subject to Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended, Buyer shall
deliver to each Holder:
(a) as soon as available, but not later than 100 days after the end of
each fiscal year of Buyer, a copy of the audited consolidated balance sheet
of Buyer and its subsidiaries as of the end of such year and the related
consolidated statements of income and cash flows for such fiscal year,
setting forth in each case in comparative form the figures for the previous
year, all in reasonable detail and accompanied by a management summary and
analysis of the operations of Buyer and its subsidiaries for such fiscal
year and by the opinion of KPMG LLP (or any successor thereto) or another
nationally recognized independent public accounting firm, which report
shall state that such consolidated financial statements present fairly the
fi-
-3-
nancial position for the periods indicated in conformity with generally
accepted accounting principles, applied on a basis consistent with prior
years;
(b) as soon as available, but in any event not later than 50 days
after the end of each of the first three fiscal quarters of each year, the
unaudited consolidated balance sheet of Buyer and its subsidiaries, and the
related consolidated statements of income and cash flow for such quarter
and for the period commencing on the first day of the fiscal year and
ending on the last day of such quarter, all certified by Buyer's Chief
Financial Officer; and
(c) to the extent not covered above, as soon as practicable any
materials delivered to all stockholders of Buyer.
5. Representations and Warranties of the Holders. Each Holder, severally
and not jointly, represents and warrants to Buyer as follows:
5.1. Ownership. Such Holder is the sole owner of such Holder's Notes free
and clear of any lien, claim, security interest, or other encumbrance of any
kind or nature whatsoever and has the complete power to transfer and deliver
such Holder's Notes to Buyer, as contemplated by this Agreement, free and clear
of all liens, claims, security interests, mortgages, charges, options, pledges
and encumbrances (collectively, "Encumbrances"). Upon transfer to Buyer by such
Holder of its Notes, Buyer will have good and marketable title to such Notes,
free and clear of all Encumbrances.
5.2. Holder Status. Such Holder is an Accredited Investor within the
meaning of Rule 501(a) under the Securities Act of 1933, as amended (the
"Securities Act"), and the shares of Preferred Stock, the shares of Common Stock
issuable upon conversion of the Preferred Stock, and the Exchange Notes
(together, the "Securities") to be acquired by such Holder pursuant to this
Agreement are being acquired for its own account without a view toward
distribution and such Holder will not offer, sell, transfer, pledge, hypothecate
or otherwise dispose of the Securities unless pursuant to a transaction either
registered under, or exempt from registration under, the Securities Act.
5.3. Private Placement. (a) Such Holder understands that (i) the exchange
of the Securities hereby is intended to be exempt from registration under the
Securities Act and (ii) there is only a limited market for the Securities, and
there can be no assurance that any Holder will be able to sell or dispose of the
Securities to be acquired by such Holder.
(b) Such Holder's financial situation is such that such Holder can afford
to bear the economic risk of holding the Securities acquired hereunder for an
indefinite period of time, and such Holder can afford to suffer the complete
loss of the investment in the Securities.
(c) Such Holder's knowledge and experience in financial and business
matters is such that it is capable of evaluating the merits and risks of the
investment in the Securities, or such Holder has been advised by a
representative possessing such knowledge and experience.
(d) Such Holder understands that the Securities acquired hereunder are a
speculative investment which involves a high degree of risk of loss of the
entire investment therein, and that
-4-
for an indefinite period following the date hereof there will be no public
market for the Securities and that, accordingly, it may not be possible for such
Holder to sell the Securities in case of emergency or otherwise.
(e) Such Holder and its representatives, including to the extent it deems
appropriate its professional, financial, tax and other advisors, have reviewed
all documents provided to them in connection with its investment in the
Securities, and such Holder understands and is aware of the risk related to such
investment.
(f) Such Holder and its representatives have been given the opportunity to
examine all documents and to ask questions of, and to receive answers from,
Buyer and its representatives concerning the terms and conditions of the
acquisition of the Securities and related matters and to obtain all additional
information which such Holder or its representatives deem necessary.
(g) (i) Such Holder understands that the Securities have not been
registered under the Securities Act. Such Holder acknowledges that the
Securities are "restricted securities" as defined in Rule 144 under the
Securities Act and must be held indefinitely unless subsequently registered
under the Securities Act (and any applicable state blue sky laws) or unless an
exemption from such registration is available. Such Holder acknowledges that the
certificates representing the Securities shall bear a legend substantially as
follows, and agrees to comply with such legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE
TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR UNLESS THE ISSUER RECEIVES AN
OPINION OF COUNSEL (WHO MAY BE AN EMPLOYEE OF THE HOLDER) REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION, QUALIFICATION OR OTHER
SUCH ACTIONS ARE NOT REQUIRED UNDER SAID ACT. THE OFFERING OF THIS
SECURITY HAS NOT BEEN REVIEWED OR APPROVED BY ANY STATE SECURITIES
ADMINISTRATOR."
(ii) Such Holder, if an executive officer of the Company or one of its
subsidiaries on the Closing Date, acknowledges that the shares of Preferred
Stock to be acquired by such Holder pursuant to this Agreement and the shares of
Common Stock issuable upon conversion of such Preferred Stock shall bear a
legend substantially as follows, and agrees to comply with such legend:
"THIS SECURITY IS ALSO SUBJECT TO RESTRICTIONS ON TRANSFER CONTAINED IN
AN AGREEMENT BETWEEN THE ISSUER AND SUCH HOLDER."
5.4. Authorization. Such Holder, having full right, power and authority to
do so, has duly executed and delivered this Agreement and, assuming due
execution and delivery hereof by Buyer, this Agreement is the valid and binding
obligation of such Holder, enforceable against such
-5-
Holder in accordance with its terms, except to the extent the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting creditors' rights generally and by general
principles of equity.
6. Other Provisions.
6.1. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, sent by
facsimile transmission or sent by certified, registered or express mail, postage
prepaid or by overnight delivery service. Any such notice shall be deemed given
when so delivered personally, or sent by facsimile transmission or, if mailed,
five days after the date of deposit in the United States mail, or, if sent by
any other means, when delivered at the address specified herein, in each such
case, as follows:
(i) if to Buyer, to:
Energy Partners, Ltd.
201 St. Charles Avenue, Suite 3400
New Orleans, LA. 70170
Attention: General Counsel
Facsimile: (504) 569-1874
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attention: John Schuster, Esq.
Facsimile: (212) 269-5420
(ii) if to any Holder, to the address specified on the signature page
of such Holder.
Any Holder may change its address for notice hereunder by notice to Buyer
and the Buyer may change its address for notice hereunder by notice to the
Holders.
6.2. Entire Agreement. This Agreement contains, together with the Merger
Agreement, the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements, written or oral, with respect
thereto.
Notwithstanding the foregoing, the definitions set forth in the Merger
Agreement shall remain in full force and effect and shall not be affected by
this Agreement or the transactions contemplated hereby.
6.3. Waivers and Amendments. This Agreement may be amended or modified, and
the terms and conditions hereof may be waived, only by a written instrument
signed by the parties or, in the case of a waiver, by the party waiving
compliance. No delay on the part of any party in exer-
-6-
cising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any right, power or
privilege hereunder, nor any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder.
6.4. Further Assurances. The parties hereto, will, upon reasonable request
of another party, execute and deliver any additional documents necessary or
desirable to complete the transactions described herein.
6.5. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State.
6.6. Counterparts. This Agreement may be executed in multiple counterparts
with respect to each Holder, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument evidencing the
agreement between Buyer and the Holders.
6.7. Headings. The headings in this Agreement are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.
6.8. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties named herein and their respective successors and
permitted assigns. Buyer may not assign its rights or obligations hereunder
without the prior written consent of each Holder.
6.9. Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
6.10. Termination. This Agreement shall automatically terminate and be of
no further force or effect upon the termination of the Merger Agreement in
accordance with its terms prior to the Closing. This Agreement shall also
terminate with respect to any Holder upon the mutual written consent of Buyer
and such Holder.
6.11. Expenses. Each of the parties will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.
6.12. Variations in Pronouns. All pronouns and any variations thereof refer
to the masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.
[Signature Page Follows]
S-1
Debt Exchange Agreement Signature Page
IN WITNESS WHEREOF, Buyer and the Holders have executed this Agreement as
of the date first written above.
Energy Partners, Ltd.
By:
----------------------------------------------
Name:
Title:
S-2
Debt Exchange Agreement Signature Page
IN WITNESS WHEREOF, Buyer and the Holders have executed this Agreement as
of the date first written above.
--------------------------------------
(Name of Holder, if not a natural person)
By:
-----------------------------------------
Name:
Title:
Address for Notices to Holder:
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
Attention:
Facsimile:
-2-
Schedule I
2000
Exploration South East
and Timbalier Cameron 161
Holder Development 185 Loan Loan
----- Facility Due Facility Due Facility Due
12/31/2004 12/31/2003 12/31/2003
---------- ---------- ----------
ABMH INVESTMENTS LTD., LLP .......................................... $ 102,000 -- $ 92,305
ABMH MANAGEMENT TRUST 1993 - BLAKE .................................. -- -- --
ABMH MANAGEMENT TRUST 1993 - SUE .................................... -- -- --
ALICE H. SALLEE FAMILY PROPERTIES LTD ............................... 153,000 109,639 138,458
ALLEN LOVELACE MOORE AND BLANCHE DAVIS MOORE ........................ -- -- --
FOUNDATION .......................................................... 510,000 365,464 461,527
ANNE C. PLANT FAMILY PROPERTIES LTD ................................. -- 146,186 --
BARRETT D. HALL ..................................................... 102,000 -- --
BJ SERVICES COMPANY, U.S.A .......................................... 1,530,000 -- --
BRUCE R. SIDNER ..................................................... 204,000 -- 92,305
BYPASS TRUST CREATED UNDER 1992 PLANT MANAGEMENT TRUST DTD 3/6/92 ... 204,000 -- --
CANDIES FAMILY INVESTMENTS LLC ...................................... 8,160,000 5,847,427 4,615,274
CELIKA STORM MANAGEMENT TRUST - 1996 ................................ -- 182,732 --
COMPASS BANK TRUSTEE L.E. SIMMONS AND ASSOCIATES PSP FBO L.E. SIMMONS 255,000 -- --
DANIEL A. PEDROTTI .................................................. 255,000 -- --
DANIEL A. PEDROTTI FAMILY INVESTMENTS LTD ........................... -- 146,186 --
DAVID A. SMITH AND ANNA RUTH SMITH .................................. 204,000 146,186 --
DIAMOND SERVICES CORPORATION ........................................ 408,000 -- --
EDWARD J. MURPHY .................................................... -- -- --
ELIZABETH A. NISBET ................................................. -- -- --
EMMETT C. WELLS AND SARA P. WELLS ................................... 51,000 146,186 92,305
ERIC ROBERT SIDNER BRS/NFB TRUST .................................... 25,500 -- 23,076
ETHYLE M. AUSTIN FAMILY PROPERTIES LTD .............................. 102,000 73,093 92,305
EVELYN PEARSON FAMILY PROPERTIES LTD ................................ 153,000 109,639 138,458
EVELYNN B. HACKEDORN ................................................ 102,000 -- --
FRANK'S CASING CREW & RENTAL TOOLS, INC ............................. 2,040,000 -- --
GARY L. HALL AND OLLABELLE D. HALL .................................. 255,000 -- 161,535
GEORGE S. HAWN ...................................................... -- 511,650 461,527
GEORGE S. HAWN PROPERTIES ........................................... 1,020,000 511,650 461,527
GEORGE STRAIT ....................................................... 3,060,000 1,461,857 1,384,582
HALL EQUITIES INC ................................................... 255,000 109,639 299,993
East West
Cameron 263 Cameron 431
Holder Loan Loan Facility
Facility Due Due
3/31/2004 3/31/2004 Total
--------- --------- -----
ABMH INVESTMENTS LTD., LLP .......................................... -- -- $ 194,305
ABMH MANAGEMENT TRUST 1993 - BLAKE .................................. -- 102,000 102,000
ABMH MANAGEMENT TRUST 1993 - SUE .................................... -- 102,000 102,000
ALICE H. SALLEE FAMILY PROPERTIES LTD ............................... -- -- 401,097
ALLEN LOVELACE MOORE AND BLANCHE DAVIS MOORE ........................ -- -- --
FOUNDATION .......................................................... 495,056 306,000 2,138,047
ANNE C. PLANT FAMILY PROPERTIES LTD ................................. -- -- 146,186
BARRETT D. HALL ..................................................... -- -- 102,000
BJ SERVICES COMPANY, U.S.A .......................................... -- -- 1,530,000
BRUCE R. SIDNER ..................................................... -- -- 296,305
BYPASS TRUST CREATED UNDER 1992 PLANT MANAGEMENT TRUST DTD 3/6/92 ... -- -- 204,000
CANDIES FAMILY INVESTMENTS LLC ...................................... 1,901,015 4,080,000 24,603,715
CELIKA STORM MANAGEMENT TRUST - 1996 ................................ 99,011 153,000 434,743
COMPASS BANK TRUSTEE L.E. SIMMONS AND ASSOCIATES PSP FBO L.E. SIMMONS -- -- 255,000
DANIEL A. PEDROTTI .................................................. -- -- 255,000
DANIEL A. PEDROTTI FAMILY INVESTMENTS LTD ........................... -- -- 146,186
DAVID A. SMITH AND ANNA RUTH SMITH .................................. 99,011 -- 449,197
DIAMOND SERVICES CORPORATION ........................................ -- -- 408,000
EDWARD J. MURPHY .................................................... 198,022 -- 198,022
ELIZABETH A. NISBET ................................................. 49,506 -- 49,506
EMMETT C. WELLS AND SARA P. WELLS ................................... 198,022 102,000 589,514
ERIC ROBERT SIDNER BRS/NFB TRUST .................................... -- -- 48,576
ETHYLE M. AUSTIN FAMILY PROPERTIES LTD .............................. 99,011 -- 366,409
EVELYN PEARSON FAMILY PROPERTIES LTD ................................ 148,517 102,000 651,614
EVELYNN B. HACKEDORN ................................................ -- -- 102,000
FRANK'S CASING CREW & RENTAL TOOLS, INC ............................. -- -- 2,040,000
GARY L. HALL AND OLLABELLE D. HALL .................................. -- -- 416,535
GEORGE S. HAWN ...................................................... 495,056 204,000 1,672,233
GEORGE S. HAWN PROPERTIES ........................................... 495,056 510,000 2,998,233
GEORGE STRAIT ....................................................... 1,089,123 1,020,000 8,015,562
HALL EQUITIES INC ................................................... -- -- 664,632
2000
Exploration South East
and Timbalier Cameron 161
Holder Development 185 Loan Loan
----- Facility Due Facility Due Facility Due
12/31/2004 12/31/2003 12/31/2003
---------- ---------- ----------
HALL FAMILY TRUST ...................................... 255,000 146,186 299,993
HALL PARTNERS, L.P. .................................... 255,000 146,186 738,444
HAWN INTERESTS, LTD .................................... 204,000 146,186 92,305
HB&F PROPERTIES LTD., LLP .............................. -- 146,186 --
HM&F PROPERTIES LTD., LLP .............................. 102,000 -- 92,305
HOOK INVESTMENTS LLC ................................... 2,040,000 730,928 461,527
HOUSTON EXPLORER GROUP L.P. ............................ 153,000 -- 115,382
JAMES M. HACKEDORN ..................................... 51,000 -- --
JOHN H. PEPER .......................................... 204,000 -- --
JOSEPH P. MUELLER ...................................... -- 73,093 --
JOSEPH P. MUELLER AND PATTY P. MUELLER ................. -- 73,093 --
KENNETH N. DURHAM AND MARY ANN DURHAM .................. 204,000 -- --
LARRY MARTIN ........................................... 102,000 -- --
LAURA M. DESKINS ....................................... -- -- --
LAUREN COLLEEN SIDNER BRS/NFB TRUST .................... 25,500 -- 23,076
MARCIA H. MODESETT ..................................... -- 182,732 92,305
MICHAEL J. ROSINSKI .................................... -- -- --
MICHAEL N. JAFFE ....................................... 204,000 73,093 184,611
MYRON J. RODRIGUE AND JUDY L. RODRIGUE ................. 1,020,000 365,464 461,527
NANCY K. GOLDBERG DECLARATION OF TRUST DATED 4/10/91 ... -- -- --
NYTEX CORPORATION ...................................... 51,000 -- --
O'CONNOR TRUST ......................................... 510,000 365,464 --
OLLABELLE D. HALL ...................................... -- 73,093 --
PATRICK R. HALL ........................................ 102,000 73,093 46,153
PEARSON FAMILY TRUST #2 - 1980 ......................... 102,000 -- 92,305
PEDROTTI FAMILY PROPERTIES LTD. PARTNERSHIP ............ 255,000 -- --
PETER A. GERARD ........................................ 102,000 -- --
PETROLEUM PROFESSIONALS INTERNATIONAL (GULF COAST), LTD 255,000 -- --
PHILLIP M. PLANT ....................................... 153,000 109,639 --
PLPB INVESTMENTS, LTD .................................. -- -- --
PLPB INVESTMENTS II, LTD ............................... -- -- --
PM OPERATING SUBSIDIARY LTD ............................ 1,020,000 730,928 461,527
POSGATE MANAGEMENT COMPANY LTD ......................... -- 73,093 --
PRESTON R. HALL ........................................ 102,000 73,093 46,153
R. MORGAN PROPERTIES LTD., LLP ......................... 153,000 -- 138,458
ROBERT D. MURPHY AND REBECCA MURPHY .................... 306,000 146,186 184,611
East West
Cameron 263 Cameron 431
Holder Loan Loan Facility
------ Facility Due Due
3/31/2004 3/31/2004 Total
--------- --------- -----
HALL FAMILY TRUST ...................................... -- -- 701,178
HALL PARTNERS, L.P. .................................... -- -- 1,139,629
HAWN INTERESTS, LTD .................................... -- 102,000 544,491
HB&F PROPERTIES LTD., LLP .............................. -- -- 146,186
HM&F PROPERTIES LTD., LLP .............................. 99,011 -- 293,317
HOOK INVESTMENTS LLC ................................... 990,112 1,020,000 5,242,567
HOUSTON EXPLORER GROUP L.P. ............................ -- -- 268,382
JAMES M. HACKEDORN ..................................... -- -- 51,000
JOHN H. PEPER .......................................... -- -- 204,000
JOSEPH P. MUELLER ...................................... -- -- 73,093
JOSEPH P. MUELLER AND PATTY P. MUELLER ................. -- -- 73,093
KENNETH N. DURHAM AND MARY ANN DURHAM .................. -- -- 204,000
LARRY MARTIN ........................................... -- -- 102,000
LAURA M. DESKINS ....................................... 99,011 -- 99,011
LAUREN COLLEEN SIDNER BRS/NFB TRUST .................... -- -- 48,576
MARCIA H. MODESETT ..................................... 247,528 102,000 624,566
MICHAEL J. ROSINSKI .................................... -- 51,000 51,000
MICHAEL N. JAFFE ....................................... 198,022 102,000 761,726
MYRON J. RODRIGUE AND JUDY L. RODRIGUE ................. 495,056 510,000 2,852,047
NANCY K. GOLDBERG DECLARATION OF TRUST DATED 4/10/91 ... 99,011 -- 99,011
NYTEX CORPORATION ...................................... -- -- 51,000
O'CONNOR TRUST ......................................... -- -- 875,464
OLLABELLE D. HALL ...................................... -- -- 73,093
PATRICK R. HALL ........................................ -- -- 221,246
PEARSON FAMILY TRUST #2 - 1980 ......................... 49,506 51,000 294,811
PEDROTTI FAMILY PROPERTIES LTD. PARTNERSHIP ............ 198,022 102,000 555,022
PETER A. GERARD ........................................ -- -- 102,000
PETROLEUM PROFESSIONALS INTERNATIONAL (GULF COAST), LTD -- -- 255,000
PHILLIP M. PLANT ....................................... -- -- 262,639
PLPB INVESTMENTS, LTD .................................. 1,168,332 -- 1,168,332
PLPB INVESTMENTS II, LTD ............................... -- 229,500 229,500
PM OPERATING SUBSIDIARY LTD ............................ 495,056 510,000 3,217,512
POSGATE MANAGEMENT COMPANY LTD ......................... -- -- 73,093
PRESTON R. HALL ........................................ -- -- 221,246
R. MORGAN PROPERTIES LTD., LLP ......................... 148,517 102,000 541,975
ROBERT D. MURPHY AND REBECCA MURPHY .................... 99,011 102,000 837,808
2000
Exploration South East
and Timbalier Cameron 161
Holder Development 185 Loan Loan
------ Facility Due Facility Due Facility Due
12/31/2004 12/31/2003 12/31/2003
---------- ---------- ----------
ROBERT H. BROWN, JR ..................... 102,000 73,093 --
ROBERT M. KENDRICK ...................... -- -- 230,764
ROBERT M. TABONE AND HELEN M. TABONE .... 1,020,000 511,650 --
SARAH E. HALL ........................... 102,000 -- --
SHIRLEY SPITZER ......................... 102,000 -- --
STEPHEN D. SPENCER ...................... 1,020,000 -- --
STERLING TRUST COMPANY .................. -- 36,546 --
TABONE CHARITABLE REMAINDER UNITRUST .... -- -- 646,138
TONY ALLISON ............................ -- -- --
VALERIE A. HALL ......................... 102,000 -- --
W.P. DILLARD ............................ 255,000 182,732 923,055
WAYNE P. HALL ........................... 102,000 -- --
WILLIAM A. GOLDBERG ..................... 204,000 -- --
WILLIAM B. MILLER FAMILY INVESTMENTS LTD 510,000 146,186 --
WILLIAM GOLDBERG ........................ -- 73,093 --
TOTAL ................................... $30,600,000 $14,618,567 $13,845,821
=========== =========== ===========
East West
Cameron 263 Cameron 431
Holder Loan Loan Facility
------ Facility Due Due
3/31/2004 3/31/2004 Total
--------- --------- -----
ROBERT H. BROWN, JR ..................... -- -- 175,093
ROBERT M. KENDRICK ...................... -- -- 230,764
ROBERT M. TABONE AND HELEN M. TABONE .... -- -- 1,531,650
SARAH E. HALL ........................... -- -- 102,000
SHIRLEY SPITZER ......................... -- -- 102,000
STEPHEN D. SPENCER ...................... 297,034 -- 1,317,034
STERLING TRUST COMPANY .................. -- -- 36,546
TABONE CHARITABLE REMAINDER UNITRUST .... 742,584 510,000 1,898,722
TONY ALLISON ............................ -- 25,500 25,500
VALERIE A. HALL ......................... -- -- 102,000
W.P. DILLARD ............................ -- -- 1,360,787
WAYNE P. HALL ........................... -- -- 102,000
WILLIAM A. GOLDBERG ..................... -- -- 204,000
WILLIAM B. MILLER FAMILY INVESTMENTS LTD 99,011 -- 755,197
WILLIAM GOLDBERG ........................ -- -- 73,093
----------------------------------------- -----------
TOTAL ................................... $10,891,229 $10,200,000 $80,155,618
=========== =========== ===========
Exhibit E-1
to Merger Agreement
[FORM OF BUYER PREFERRED STOCK]
CERTIFICATE OF DESIGNATION
of the
SERIES D EXCHANGEABLE CONVERTIBLE PREFERRED STOCK
of
ENERGY PARTNERS, LTD.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
ENERGY PARTNERS, LTD., a Delaware corporation (the "Company"), HEREBY
CERTIFIES that, pursuant to authority conferred upon the Board of Directors of
the Company by the Restated Certificate of Incorporation of the Company and in
accordance with the provisions of Section 151 of the General Corporation Law of
the State of Delaware, the Board of Directors of the Company duly adopted a
resolution providing for the issuance of a new series of preferred stock
designated as the Series D Exchangeable Convertible Preferred Stock, which
resolution is as follows:
RESOLVED, that a series of the Company's preferred stock, par value $1.00
per share, designated as the Series D Exchangeable Convertible Preferred Stock
be and hereby is created and that the voting powers, designations, preferences,
and relative, participating, optional or other special rights thereof, and the
qualifications, limitations or restrictions thereof be as follows:
Series D Exchangeable Convertible Preferred Stock
SECTION 1. Certain Definitions. The following terms shall have the
following meanings:
"Closing Date" means the date of the closing of the first issuance of the
Preferred Stock.
"Common Stock" means the Company's Common Stock, $0.01 par value per share.
"Conversion Price" means $8.54, as adjusted from time to time as set forth
in Section 7.2.
"Dividend Accrual Date" has the meaning given such term in Section 3.1(a).
-2-
"Dividend Payment Date" has the meaning given such term in Section 3.1(a).
"Dividend Period" has the meaning given such term in Section 3.1(a).
"Dividend Rate" means, for any Dividend Period, the rate per annum set
forth opposite the date on which such Dividend Period ends in the table below.
Dividend Period Ending Rate
---------------------- ----
July 15, 2002 7%
January 15, 2003 7%
July 15, 2003 7%
January 15, 2004 7%
July 15, 2004 7%
January 15, 2005 7%
July 15, 2005 8%
January 15, 2006 8%
July 15, 2006 9%
January 15, 2007 9%
July 15, 2007 and thereafter 10%
"Dividend Shares" means fully paid and nonassessable shares, or fractions
thereof, of Preferred Stock paid as dividends on Preferred Stock pursuant to
Section 3.2(b).
"Exchange Notes" means the subordinated convertible notes of the Company in
the form attached to the Merger Agreement dated as of December 16, 2001 among
the Company, Hall-Houston Oil Company and Saints Acquisition Subsidiary, Inc.,
issued in exchange for the Preferred Stock in accordance with this Certificate
of Designation, including additional Exchange Notes issued as interest on
outstanding Exchange Notes pursuant to the terms thereof.
"Junior Stock" means the Common Stock and any and all classes or series of
capital stock of the Company over which shares of Preferred Stock have a
preference as to distribution of assets on any liquidation of the Company.
"Parity Stock" means any and all other classes or series of capital stock
of the Company ranking as to distribution of assets on any liquidation of the
Company on parity with the Preferred Stock.
"Preferred Stock" has the meaning given such term in Section 2 hereof.
"Senior Stock" means any and all classes or series of capital stock of the
Company that have a preference over the Preferred Stock as to distributions of
assets on any liquidation of the Company.
SECTION 2. Designation, Amount and Ranking of the Preferred Stock. The
designation of the series of preferred stock created by this resolution shall be
"Series D Exchangeable
-3-
Convertible Preferred Stock" (the "Preferred Stock"), and
the number of shares constituting this series of Preferred Stock shall be
550,000. Shares of Preferred Stock shall have the stated value of $100 per
share. The Preferred Stock shall in all respects rank senior in right and
priority to the Junior Stock and equal in right and priority to the Parity Stock
with respect to the right to receive dividends or other distributions on
liquidation, dissolution or winding-up of the Company.
SECTION 3. Dividends; Restricted Payments.
3.1 Dividend Payment.
(a) Payment Dates. The holders of the Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available for such purpose, dividends payable in accordance with this Section 3.
Dividends on the Preferred Stock shall be cumulative and shall accrue
semiannually in arrears on June 30 and December 31 (each, a "Dividend Accrual
Date") of each year (each six-month period (or such period from the date of
original issue until July 15, 2002) expiring on a Dividend Accrual Date being
referred to herein as a "Dividend Period"). Dividends on any shares of the
Preferred Stock shall be cumulative and shall accrue (whether or not declared
and whether or not there shall be funds legally available for the payment of
dividends) on and from the date of issue of such shares of the Preferred Stock;
provided, however, that dividends in Dividend Shares paid in accordance with
Section 3.2 shall be cumulative and shall accrue on and from the Dividend
Accrual Date in the Dividend Period in which such dividend accrued, regardless
of when such Dividend Shares were actually issued. Dividends payable on the
Preferred Stock for any period less than a full Dividend Period shall be
computed on the basis of the ratio of the number of days in such partial period
to the actual number of days in such full Dividend Period. The date that any
dividend shall be paid pursuant to this Section 3.1 is referred to herein as a
"Dividend Payment Date."
(b) Arrearages. Additional dividends shall accrue with respect to any
dividends (including dividends payable pursuant to this sentence) not paid by
the Dividend Accrual Date on which such dividend accrues or in the manner
provided in Section 3.2. Such additional dividends shall accrue whether or not
declared, at the Dividend Rate compounded semiannually, and shall be payable in
the same manner and at such times as provided in Section 3.1 and 3.2 hereof with
respect to dividends on each outstanding share of Preferred Stock.
(c) Fractional Shares. Each fractional share of Preferred Stock outstanding
or accrued as a Dividend Share shall be entitled to a ratably proportionate
amount of all dividends accruing with respect to each outstanding share of
Preferred Stock pursuant to Section 3.1 hereof, and all dividends with respect
to such fractional shares shall be fully cumulative and shall accrue (whether or
not declared and whether or not there shall be funds legally available for the
payment of dividends) and shall be payable in the same manner and at such times
as provided for in Sections 3.1 and 3.2 hereof with respect to dividends on each
outstanding share of Preferred Stock.
3.2 Form of Payment.
-4-
(a) Cash. Any dividends accrued on the Preferred Stock on or prior to
January 15, 2006 shall when declared be payable in cash at the Dividend Rate per
share of Preferred Stock on the stated value of $100.
(b) Dividend Shares. Any dividends accrued on the Preferred Stock after
January 15, 2006 and on or before January 14, 2009 shall when declared be
payable, at the option of the Company, either in cash at the Dividend Rate per
share of Preferred Stock on the stated value of $100, or by issuing Dividend
Shares having an aggregate stated value equal to the Dividend Rate per share of
Preferred Stock on the stated value of $100.
3.3 Record Date. To the extent permitted by applicable law, the Board of
Directors shall fix a record date for the determination of holders of the
Preferred Stock entitled to receive payment of a dividend declared thereon,
which record date shall be not more than 30 days prior to the applicable
Dividend Payment Date.
3.4 Restricted Payments.
(a) No dividends shall be declared or paid or set apart for payment on the
Preferred Stock for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for such payment on the outstanding Parity Stock for
all dividend periods for the Parity Stock terminating on or prior to the date of
payment of such dividends. No full dividends shall be declared or paid or set
aside for payment on any Parity Stock for any period unless full cumulative
dividends have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for such payment on the
Preferred Stock for all Dividend Periods terminating on or prior to the date of
payment of such full cumulative dividends. When dividends are not paid in full,
as aforesaid, upon the shares of Preferred Stock and of any other series of
Parity Stock, all dividends declared upon shares of Preferred Stock and of any
other series of Parity Stock shall be declared pro rata so that the amount of
dividends declared per share on the Preferred Stock and such other series of
Parity Stock shall in all cases bear to each other the same ratio that accrued
dividends per share on the shares of the Preferred Stock and such other series
of Parity Stock bear to each other.
(b) Unless full cumulative dividends on the Preferred Stock have been paid
prior to or on the date of the declaration of dividends on Junior Stock, no
dividend shall be declared or paid or set aside for payment or other
distribution declared or made upon the Junior Stock.
3.5 Failure to Pay Dividends. If and whenever two consecutive or three
total semiannual dividends payable on Preferred Stock have not been paid in
full, the number of directors then constituting the Board of Directors shall be
increased by one and the holders of a majority of the outstanding shares of
Preferred Stock, voting as a single class, shall be entitled to elect the
additional director to serve on the Board of Directors at any annual meeting of
stockholders or special meeting held in place thereof, or at a special meeting
of the holders of the Preferred Stock called as hereinafter provided. Whenever
all arrears in dividends on the Preferred Stock then outstanding shall have been
paid, then the right of the holders of the Preferred Stock to elect such
additional director shall cease
-5-
(but subject always to the same provisions for the vesting of such voting rights
in the case of any similar future arrearage in two consecutive or three total
semiannual dividends) and the terms of office of the person elected as director
by the holders of the Preferred Stock shall forthwith terminate and the number
of the Board of Directors shall be reduced accordingly. At any time after such
voting power shall have been so vested in the holders of shares of Preferred
Stock, the secretary of the Company may, and upon the written request of any
holder of Preferred Stock (addressed to the secretary at the principal office of
the Company) shall, call a special meeting of the holders of the Preferred Stock
of the Company for the election of the director to be elected by them as herein
provided, such call to be made by notice similar to that provided in the Bylaws
of the Company for a special meeting of the stockholders or as required by law.
If any such special meeting required to be called as above provided shall not be
called by the secretary within 20 days after receipt of any such request, then
any holder of shares of Preferred Stock may call such meeting, upon the notice
above provided, and for that purpose shall have access to the stock books of the
Company. The director elected at any such special meeting shall hold office
until the next annual meeting of the stockholders or special meeting held in
lieu thereof if such office shall not have previously terminated as above
provided. If any vacancy shall occur of the director elected by the holders of
the Preferred Stock, a successor shall be elected by the Board of Directors,
upon the nomination of the holders of the Preferred Stock, to serve until the
next annual meeting of the stockholders or special meeting held in place thereof
if such office shall not have previously terminated as provided above.
SECTION 4. Redemption.
4.1 Optional Redemption. The Company may, at its option on or after January
15, 2005, redeem shares of Preferred Stock, in whole but not in part, at any
time, at a redemption price per share equal to $100 plus accrued and unpaid
dividends to the date of redemption.
4.2 Redemption Mechanics.
(a) Notice. At such time as the Company shall redeem shares of Preferred
Stock, notice of such redemption shall be given by first class mail, postage
prepaid, mailed not less than 15 nor more than 60 days prior to the redemption
date, to each holder of record of the shares to be redeemed, at such holder's
address as the same appears on the stock register of the Company. Each such
notice shall state: (i) the redemption date; (ii) the number of shares of
Preferred Stock to be redeemed; (iii) the redemption price; (iv) the place or
places where certificates for such shares are to be surrendered for payment of
the redemption price; (v) that dividends on the shares to be redeemed will cease
to accrue on such redemption date; and (vi) a description of the conversion
rights of the Preferred Stock.
(b) Surrender. Notice having been mailed as aforesaid, from and after the
redemption date (unless default shall be made by the Company in providing money
for the payment of the redemption price) dividends on the shares of Preferred
Stock so called for redemption shall cease to accrue, said shares shall no
longer be deemed to be outstanding, and all rights of the holders thereof as
stockholders of the Company (except the right to receive from the Company the
redemption price
-6-
plus accrued and unpaid dividends to the redemption date) shall cease. Upon
surrender in accordance with said notice of the certificates for any shares so
redeemed (properly endorsed or assigned for transfer, if the Board shall so
require and the notice shall so state), such shares shall be redeemed by the
Company at the redemption price aforesaid.
4.3 Status of Preferred Stock After Redemption. Any shares of Preferred
Stock that shall at any time have been redeemed or purchased by the Company
shall, after such redemption, have the status of authorized but unissued shares
of preferred stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board.
SECTION 5. Exchange.
5.1 Exchange of Preferred Stock for Exchange Notes. The Company may, at its
option, subject to the conditions set forth below, on any scheduled Dividend
Payment Date, exchange the Preferred Stock, in whole but not in part, together
with any accrued and unpaid dividends, for an equal principal amount of Exchange
Notes; provided that on the date of such exchange there is no contractual
impediment to such exchange.
5.2 Form of Exchange Notes. Upon any exchange pursuant to Section 5.1,
holders of outstanding shares of Preferred Stock will be entitled to receive
$100 principal amount of Exchange Notes for each $100 stated value of Preferred
Stock and accrued and unpaid dividends thereon held by them. The Exchange Notes
will be issued in registered form, without coupons. Exchange Notes issued in
exchange for Preferred Stock and accrued and unpaid dividends thereon will be
issued in principal amounts of $1,000 and integral multiples thereof to the
extent possible, and will also be issued in principal amounts less than $1,000
so that each holder of Preferred Stock will receive certificates representing
the entire amount of Exchange Notes to which such holder's shares of Preferred
Stock and accrued and unpaid dividends thereon entitle such holder; provided
that the Company may pay cash in lieu of issuing an Exchange Note in a principal
amount less than $1,000. The person entitled to receive the Exchange Notes
issuable upon such exchange will be treated for all purposes as the registered
holder of such Exchange Notes.
5.3 Exchange Mechanics.
(a) Notice. At such time as the Company shall exchange shares of Preferred
Stock, notice of such exchange shall be given by first class mail, postage
prepaid, mailed not less than 15 nor more than 60 days prior to the exchange
date, to each holder of record of the shares to be exchanged, at such holder's
address as the same appears on the stock register of the Company. Each such
notice shall state: (i) the exchange date; (ii) the number of shares of
Preferred Stock to be exchanged; (iii) the place or places where certificates
for such shares are to be surrendered for exchange; (iv) that dividends on the
shares to be exchanged will cease to accrue on such exchange date; and (v) a
description of the conversion rights of the Preferred Stock.
(b) Surrender. Notice having been mailed as aforesaid, from and after the
exchange date, dividends on the shares of Preferred Stock so called for exchange
shall cease to accrue, said shares shall no longer be deemed to be outstanding,
and all rights of the holders thereof as stock-
-7-
holders of the Company (except the right to receive from the Company the
Exchange Notes) shall cease. Upon surrender in accordance with said notice of
the certificates for any shares so exchanged (properly endorsed or assigned for
transfer, if the Board shall so require and the notice shall so state), such
shares shall be exchanged by the Company.
5.4 Status of Preferred Stock After Exchange. Any shares of Preferred Stock
that shall at any time have been exchanged or purchased by the Company shall,
after such exchange, have the status of authorized but unissued shares of
preferred stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board.
SECTION 6. Liquidation. In the event of any complete liquidation,
dissolution or winding-up of the Company, whether voluntary or involuntary, the
holders of shares of Preferred Stock shall each be entitled to receive out of
the assets of the Company legally available for distribution to its stockholders
before any distribution shall be made to the holders of Junior Stock of the
Company, for each share of Preferred Stock an amount equal to $100 plus accrued
and unpaid dividends to the date of payment. If, upon any liquidation,
dissolution or winding up of the Company, the assets of the Company, or the
proceeds thereof, shall be insufficient to pay in full the preferential amounts
as to which the Preferred Stock and any other series of Parity Stock would be
entitled, then such assets or the proceeds thereof shall be distributed among
holders of Preferred Stock and the holders of any Parity Stock ratably in
accordance with the respective amounts that would be payable on such shares if
all amounts payable thereon were paid in full.
SECTION 7. Conversion.
7.1 (a) Right of Holder to Convert. Provided that full cumulative dividends
on the Preferred Stock have been or contemporaneously are declared and paid to
the date of conversion, each share of Preferred Stock shall be convertible at
the option of the record holder thereof at any time prior to the close of
business on the date prior to the redemption date for such share, into the
number of shares of fully paid and nonassessable shares of Common Stock
determined by dividing $100 by the Conversion Price in effect at the time of
conversion.
(b) Mechanics of Conversion by Holders of Preferred Stock. In order for any
holder of the Preferred Stock to convert the same into Common Stock, such holder
shall present in person or by registered mail, return receipt requested with
postage prepaid thereon, at the principal office of the Company, the certificate
representing such share to the Company by the close of business on the date
prior to the redemption date accompanied by written notice to the Company that
such holder elects to convert all or a specified number of shares and stating
therein its name or the name or names of its nominees in which such holder
wishes the certificate or certificates for Common Stock to be issued. The
Company shall, as soon as practicable thereafter, issue and deliver to such
holder of the Preferred Stock, or to its nominee or nominees, a certificate or
certificates representing the number of shares of Common Stock to which such
holder shall be entitled as aforesaid, and if less than the full number of
shares of the Preferred Stock evidenced by such surrendered certificate or
certificates are being converted, a new certificate or certificates, of like
tenor, for the number of shares of the Preferred Stock evidenced by such
surrendered certificate less the number of such shares being converted.
-8-
7.2 Adjustments to Conversion Price for Stock Dividends, Subdivisions and
Combinations. In case at any time or from time to time the Company shall (i)
subdivide its outstanding shares of Common Stock into a larger number of shares
of Common Stock (whether by distribution of Common Stock or otherwise) or (ii)
combine its outstanding shares of Common Stock into a smaller number of shares
of Common Stock, then the Conversion Price in effect immediately after the
happening of any such event shall be proportionately decreased, in case of the
happening of events described in subparagraph (i) above, or proportionately
increased, in case of the happening of events described in subparagraph (ii)
above. In case at any time or from time to time the Company shall declare a
dividend or make a distribution on the Common Stock payable in shares of its
capital stock (other than shares of Common Stock) or capital stock of any
subsidiary of the Company or any other assets (other than cash), then the
Company shall make appropriate provision to provide the Holder, upon exercise of
this Warrant, of the aggregate number and kind of shares which the Holder would
have received if the Holder had exercised this Warrant immediately prior to the
record date for such dividend or distribution; provided that no adjustment shall
be made if such dividend or distribution is not actually made.
7.3 Merger, Consolidation or Disposition of Assets. In case the Company
shall merge or consolidate into another corporation, or shall sell, transfer or
otherwise dispose of all or substantially all of its property, assets or
business to another corporation, then each holder of a share of the Preferred
Stock shall have the right thereafter to convert such shares only into the kind
and amount of shares of stock and other securities and property receivable upon
or deemed to be held following such merger, consolidation, sale, transfer or
other disposition of assets by a holder of a number of shares of the Common
Stock of the Company into which such shares of Preferred Stock could have been
converted immediately prior to such merger, consolidation, sale, transfer or
other disposition of assets. In case of any such merger, consolidation, sale,
transfer or other disposition of assets, the successor acquiring corporation
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition hereof to be performed and observed by the
Company and all of the obligations and liabilities hereunder, subject to such
modification as shall be necessary to provide for adjustments to the Conversion
Price which shall be as nearly equivalent as practicable to the adjustments
provided for in this Section 7.3. The foregoing provisions of this Section 7.3
shall similarly apply to successive mergers, consolidations, sales, transfers or
other dispositions of assets.
7.4 No Impairment. The Company (i) will not permit the par value of any
shares of stock at the time receivable upon the conversion of the Preferred
Stock to exceed the Conversion Price then in effect, (ii) will take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid nonassessable shares of Common Stock on the
conversion of the Preferred Stock and (iii) will not issue any Common Stock or
Convertible Securities or take any action which results in any adjustment of the
Conversion Price if the total number of shares of Common Stock issuable after
such issuance or action upon the conversion or redemption of, or payment of all
outstanding dividends on, all of the then outstanding shares of Preferred Stock
will exceed the total number of shares of Common Stock then authorized by the
Company's Certificate of Incorporation and available for the purpose of issue
upon such conversion or redemption or payment of such dividend.
-9-
7.5 Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment of the Conversion Price pursuant to Section 7.2, the Company at
its expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to each holder of the Preferred Stock a
certificate setting forth such adjustment and showing in reasonable detail the
facts upon which such adjustment is based.
7.6 Notices of Record Date. In the event of any taking by the Company of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right, the Company shall use commercially reasonable efforts to mail
to each holder of the Preferred Stock at least ten days prior to the date
specified therein, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend or distribution.
7.7 Reservation of Shares. The Company covenants that it will at all times
reserve and keep available, out of its authorized and unissued Common Stock
solely for the purpose of issuance upon conversion of Preferred Stock as herein
provided, free from preemptive rights or any other actual or contingent purchase
rights of persons other than the holders of shares of Preferred Stock, such
number of shares of Common Stock as shall then be issuable upon the conversion
of all outstanding shares of Preferred Stock. The Company covenants that all
shares of Common Stock that shall be so issuable shall upon issue be duly and
validly issued and fully paid and nonassessable.
SECTION 8. Voting Rights of Preferred Stock.
8.1 General Voting Rights. Holders of Preferred Stock shall not be entitled
to any voting rights except as may be required by Delaware law, other than the
voting rights provided in Section 3.5.
8.2 Vote of Series Required. So long as any shares of Preferred Stock are
outstanding, the affirmative vote of the holders of a majority of the shares of
Preferred Stock outstanding at the time shall be necessary to permit, effect or
validate
(a) the authorization, creation or issuance, or any increase in the
authorized or issued amount, of any class or series of Senior Stock; and
(b) the amendment, alteration or repeal of any of the provisions of
the Restated Certificate of Incorporation which would adversely affect the
voting powers, designations, preferences, redemption rights, and relative
participating, optional or other rights and the qualifications, limitations
or restrictions of the Preferred Stock.
8.3 Conflicts. To the extent permitted by applicable law, in the event of
any conflict or inconsistency between (i) any of the provisions of this Section
8 or any other provision in this Certificate and (ii) the Restated Certificate
of Incorporation or the Bylaws of the Company, as may be amended from time to
time, the terms of this Certificate shall supersede such conflicting or
inconsistent provision and shall control.
S-1
IN WITNESS WHEREOF, ENERGY PARTNERS, LTD. has caused its corporate seal to
be hereunto affixed and this certificate to be executed this day of January,
2002.
ENERGY PARTNERS, LTD.
By:
---------------------------------------
Name:
Title:
Exhibit E-2
to Merger Agreement
[FORM OF EXCHANGE NOTE]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY
NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR
QUALIFIED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE
ISSUER RECEIVES AN OPINION OF COUNSEL (WHO MAY BE AN EMPLOYEE OF THE HOLDER)
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION, QUALIFICATION OR OTHER
SUCH ACTIONS ARE NOT REQUIRED UNDER SAID ACT. THE OFFERING OF THIS SECURITY HAS
NOT BEEN REVIEWED OR APPROVED BY ANY STATE SECURITIES ADMINISTRATOR.
ENERGY PARTNERS, LTD.
Subordinated Exchange Note
$ New Orleans, Louisiana
January , 2002
The undersigned, ENERGY PARTNERS, LTD., a Delaware corporation (the
"Company"), for value received hereby promises to pay to , the principal sum of
DOLLARS ($ ) on January , 2009 (the "Maturity Date"). Interest (computed on the
basis of a 360-day year consisting of twelve 30-day months) shall accrue and be
payable semi-annually on each January 15 and July 15, commencing , 200 , to the
person in whose name this Note was registered at the close of business on the
preceding January 1 and July 1, respectively, from the most recent date to which
interest has been paid (or, if no interest has been paid, from the date hereof)
to the Maturity Date on the unpaid principal amount hereof at the rate per annum
set forth in the table below:
Interest Period Ending Rate
---------------------- ----
July 15, 2002 7%
January 15, 2003 7%
July 15, 2003 7%
January 15, 2004 7%
July 15, 2004 7%
January 15, 2005 7%
July 15, 2005 8%
January 15, 2006 8%
July 15, 2006 9%
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January 15, 2007 9%
July 15, 2007 until January 15, 2009 10%
All payments of principal and interest on this Note on or prior to January
15, 2006 shall be in such coin or currency of the United States of America as at
the time of payment shall be legal tender for payment of public and private
debts, and shall be made by check mailed to the person deemed the holder hereof
in accordance with Section 5 at the address for such person appearing in the
register maintained pursuant to Section 3. All payments of interest on this Note
after January 15, 2006 shall, at the option of the Company, be either (a) in
such coin or currency of the United States of America as at the time of payment
shall be legal tender for payment of public and private debts, and shall be made
by check mailed to the person deemed the holder hereof in accordance with
Section 5 at the address for such person appearing in the register maintained
pursuant to Section 3 or (b) though the issuance by the Company of additional
Notes. Payments of principal and accrued and unpaid interest at maturity or upon
earlier payment will be made in cash only against surrender of this Note to the
office or agency of the Company maintained pursuant to paragraph (a) Section 11.
1. Notes. This Note is one of a duly authorized issue of Notes (herein
called the "Notes") designated "Subordinated Exchange Notes" to be issued upon
exchange by any holder of the Company's Series D Exchangeable Convertible
Preferred Stock (the "Preferred Stock") pursuant to the certificate of
designations of the Preferred Stock, in the aggregate principal amount of up to
$55,000,000 and bearing interest payable at the same rate and on the same dates
as the interest on the principal amount of this Note.
2. Conversion
(a) (i) Right of Holder to Convert. Each Note shall be convertible at
the option of the record holder thereof at any time prior to the close of
business on the date prior to the redemption or maturity date for such
note, into the number of shares of fully paid and nonassessable shares of
common stock of the Company, par value $0.01 per share ("Common Stock"),
determined by dividing the principal amount of the Note by $8.54, as
adjusted from time to time as set forth in paragraph (b) of this Section 2
(the "Conversion Price") in effect at the time of conversion.
(ii) Mechanics of Conversion by Holders of Note. In order for any
holder of a Note to convert the same into Common Stock, such holder shall
present in person or by registered mail, return receipt requested with
postage prepaid thereon, at the principal office of the Company, such Note
to the Company by the close of business on the date prior to the redemption
or maturity date for such Note accompanied by written notice to the Company
that such holder elects to convert all or a specified aggregate principal
amount of such Note and stating therein its name or the name or names of
its nominees in which such holder wishes the certificate or certificates
for Common Stock to be issued. The Company shall, as soon as practicable
thereafter, issue and deliver to such holder of the Note, or to its nominee
or nominees, a certificate or certificates representing the number of
shares of Common Stock to which such holder shall be entitled as aforesaid,
and if less than the entire aggregate amount of such
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Note is being converted, a new Note, in the same form and having the same
terms as this Note, for the aggregate principal amount of the Note
evidenced by such Note less the aggregate principal amount being converted.
(b) Adjustments to Conversion Price for Stock Dividends, Subdivisions
and Combinations. In case at any time or from time to time the Company
shall (i) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock (whether by distribution of Common Stock
or otherwise) or (ii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock, then the Conversion Price in
effect immediately after the happening of any such event shall be
proportionately decreased, in case of the happening of events described in
subparagraph (i) above, or proportionately increased, in case of the
happening of events described in subparagraph (ii) above. In case at any
time or from time to time the Company shall declare a dividend or make a
distribution on the Common Stock payable in shares of its capital stock
(other than shares of Common Stock) or capital stock of any subsidiary of
the Company or any other assets (other than cash), then the Company shall
make appropriate provision to provide the Holder, upon exercise of this
Warrant, of the aggregate number and kind of shares which the Holder would
have received if the Holder had exercised this Warrant immediately prior to
the record date for such dividend or distribution; provided that no
adjustment shall be made if such dividend or distribution is not actually
made.
(c) Merger, Consolidation or Disposition of Assets. In case the
Company shall merge or consolidate into another corporation, or shall sell,
transfer or otherwise dispose of all or substantially all of its property,
assets or business to another corporation, then each holder of a Note shall
have the right thereafter to convert such Note only into the kind and
amount of shares of stock and other securities and property receivable upon
or deemed to be held following such merger, consolidation, sale, transfer
or other disposition of assets by a holder of a number of shares of the
Common Stock of the Company into which such Note could have been converted
immediately prior to such merger, consolidation, sale, transfer or other
disposition of assets. In case of any such merger, consolidation, sale,
transfer or other disposition of assets, the successor acquiring
corporation shall expressly assume the due and punctual observance and
performance of each and every covenant and condition hereof to be performed
and observed by the Company and all of the obligations and liabilities
hereunder, subject to such modification as shall be necessary to provide
for adjustments to the Conversion Price which shall be as nearly equivalent
as practicable to the adjustments provided for in this paragraph (c) of
Section 2. The foregoing provisions of this paragraph (c) of Section 2
shall similarly apply to successive mergers, consolidations, sales,
transfers or other dispositions of assets.
(d) No Impairment. The Company (i) will not permit the par value of
any shares of stock at the time receivable upon the conversion of a Note to
exceed the Conversion Price then in effect, (ii) will take all such action
as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid nonassessable shares of Common Stock on the
conversion of a Note and (iii) will not issue any Common Stock or
Convertible Securities or take any action which results in any adjustment
of the Conversion Price if the total number
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of shares of Common Stock issuable after such issuance or action upon the
conversion of all outstanding Notes will exceed the total number of shares
of Common Stock then authorized by the Company's Certificate of
Incorporation and available for the purpose of issue upon such conversion.
(e) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to paragraph
(b) of this Section 2, the Company at its expense shall promptly compute
such adjustment or readjustment in accordance with the terms hereof and
furnish to each holder of a Note a certificate setting forth such
adjustment and showing in reasonable detail the facts upon which such
adjustment is based.
(f) Notices of Record Date. In the event of any taking by the Company
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or
property, or to receive any other right, the Company shall use commercially
reasonable efforts to mail to each holder of a Note at least ten days prior
to the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend or
distribution.
(g) Reservation of Shares. The Company covenants that it will at all
times reserve and keep available, out of its authorized and unissued Common
Stock solely for the purpose of issuance upon conversion of Notes as herein
provided, free from preemptive rights or any other actual or contingent
purchase rights of persons other than the holders of Notes, such number of
shares of Common Stock as shall then be issuable upon the conversion of all
outstanding Notes. The Company covenants that all shares of Common Stock
that shall be so issuable shall upon issue be duly and validly issued and
fully paid and nonassessable.
3. Transfer, Etc. of Notes. The Company shall keep at its office or agency
maintained as provided in paragraph (a) of Section 11 a register in which the
Company shall provide for the registration of Notes and for the registration of
transfer and exchange of Notes. Subject to compliance with the transfer
restrictions appearing on the legend on the face of this Note, the holder of
this Note may, at its option, and either in person or by its duly authorized
attorney, surrender the same for registration of transfer or exchange at the
office or agency of the Company maintained as provided in paragraph (a) of
Section 11, and, without expense to such holder (except for taxes or
governmental charges imposed in connection therewith), receive in exchange
therefor a Note or Notes each in such denomination or denominations as such
holder may request, dated as of the date to which interest has been paid on the
Note or Notes so surrendered for transfer or exchange (or, if no interest has
been paid, dated the date hereof), for the same aggregate principal amount as
the then unpaid principal amount of the Note or Notes so surrendered for
transfer or exchange, and registered in the name of such person or persons as
may be designated by such holder. Every Note presented or surrendered for
registration of transfer or exchange shall be duly endorsed, or shall be
accompanied by a written instrument of transfer, satisfactory in form to the
Company, duly executed by the holder of such Note or its attorney duly
authorized in writing, together with any opinion of counsel necessary in order
to comply with the transfer restrictions appearing on the legend on the face of
this Note. Every
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Note so made and delivered in exchange for this Note shall in all other respects
be in the same form and have the same terms as this Note. No transfer or
exchange of any Note shall be valid unless made in the foregoing manner at such
office or agency.
4. Loss, Theft, Destruction or Mutilation of Note. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Note, and, in the case of any such loss, theft or destruction, upon receipt
of an affidavit of loss and indemnity from the holder hereof reasonably
satisfactory to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Note, the Company will make and deliver, in
lieu of this Note, a new Note of like tenor and unpaid principal amount and
dated as of the date to which interest has been paid on this Note.
5. Persons Deemed Owners; Holders. The Company may deem and treat the
person in whose name any Note is registered as the owner and holder of such Note
for the purpose of receiving payment of principal of and interest on such Note
and for all other purposes whatsoever, whether or not such Note shall be
overdue. With respect to any Note at any time outstanding, the term "holder", as
used herein, shall be deemed to mean the person in whose name such Note is
registered as aforesaid at such time.
6. Prepayments. Upon notice given as provided in Section 7 the Company may,
at its option, prepay the Notes, in whole or in part at any time or from time to
time on or after January 15, 2005, without premium or penalty, at the principal
amount thereof so to be prepaid, together with interest accrued thereon to the
date fixed for such prepayment.
7. Notice of Prepayment and Other Notices. The Company shall give written
notice of any prepayment of this Note or any portion hereof pursuant to Section
6 not less than 5 nor more than 60 days prior to the date fixed for such
prepayment. Such notice of prepayment and all other notices to be given to any
holder of this Note shall be given by registered or certified mail to the person
in whose name this Note is registered at its address designated on the register
maintained by the Company on the date of mailing such notice of prepayment or
other notice. Upon notice of prepayment being given as aforesaid, the Company
covenants and agrees that it will prepay, on the date therein fixed for
prepayment, this Note or the portion hereof, as the case may be, so called for
prepayment, at the principal amount thereof so called for prepayment, together
with interest accrued thereon to the date fixed for such prepayment.
8. Allocation of Prepayment. In the event of any prepayment, purchase,
redemption or retirement of less than all of the outstanding Notes, the Company
will allocate the principal amount so to be prepaid, purchased, redeemed or
retired to each Note pro rata, as nearly as may be, in accordance with the
aggregate principal amount of all Notes then outstanding.
9. Interest After Date Fixed for Prepayment. If this Note or a portion
hereof is called for prepayment as herein provided, this Note or such portion
shall (unless the provisions of the last sentence of Section 7 become
applicable) cease to bear interest on and after the date fixed for such
prepayment unless, upon presentation for such purpose, the Company shall fail to
pay this Note or such portion, as the case may be, in which event this Note or
such portion, as the case may be, and,
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so far as may be lawful, any overdue installment of interest, shall bear
interest on and after the date fixed for such prepayment and until paid at the
rate per annum provided herein for overdue principal.
10. Surrender of Notes; Notation Thereon. As a condition to obtaining any
payment of all or any portion of the principal amount of this Note, the Company
may require the holder hereof to surrender this Note, and in such event the
Company will execute and deliver at the expense of the Company, upon such
surrender, a new Note registered in the name of such person or persons as may be
designated by such holder for the principal amount of this Note then remaining
unpaid, dated as of the date to which interest has been paid on the principal
amount of this Note then remaining unpaid, or may require the holder to present
this Note to the Company for notation hereon of the payment of the portion of
the principal amount of this Note so repaid.
11. Covenants. The Company covenants and agrees that, so long as any Note
shall be outstanding:
(a) Maintenance of Office. The Company will maintain an office or
agency in such place in the United States of America as the Company may
designate in writing to the registered holder hereof, where the Notes may
be presented for registration of transfer and exchange as herein provided,
where notices and demands to or upon the Company in respect of the Notes
may be served and where the Notes shall be presented for payment. Until the
Company otherwise notifies the holders of Notes, said office shall be the
office of the Company at 201 St. Charles Avenue, Suite 3400, New Orleans,
Louisiana 70170.
(b) Notice of Default. If any one or more events which constitute, or
which with notice or lapse of time or both would constitute, an Event of
Default under Section 13 of this Note shall occur, or if the holder of any
Note shall demand payment or take any other action permitted upon the
occurrence of any such Event of Default, the Company shall, immediately
after it becomes aware that any such event has occurred or that such demand
has been made or that any such action has been taken, give notice to all
holders of the Notes, specifying the nature of such event or of such demand
or action, as the case may be; provided, however, that if such event, in
the good faith judgment of the Company, will be cured within ten days after
the Company has knowledge that such event would, with or without notice or
lapse of time or both, constitute such an Event of Default, no such notice
need be given if such Event of Default shall be cured within such ten-day
period.
(c) Merger or Consolidation. If the Company shall effect a merger or
consolidation in which it is not the surviving entity, then the Company
shall take such action as may be necessary, as a condition to consummating
such transaction, to cause the surviving entity to assume all of the
Company's obligations under the Notes, as if such entity had been the
original issuer thereof, and such entity shall acknowledge in writing its
obligation to fully and timely honor the Company's obligations under the
Notes.
12. Modification by Holders; Waiver. The Company may, with the written
consent of the holders of not less than a majority in principal amount of the
Notes then outstanding, modify the terms and provisions of the Notes or the
rights of the holders of the Notes or the obliga-
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tions of the Company thereunder, and the observance by the Company of any term
or provision of the Notes may be waived with the written consent of the holders
of not less than a majority in principal amount of the Notes then outstanding;
provided, however, that no such modification or waiver shall:
(a) change the stated maturity of any Note from the Maturity Date or
reduce the principal amount thereof or reduce the rate or extend the time
of payment of interest thereon at stated maturity or modify any prepayment
provision without the consent of the holder of each Note so affected; or
(b) give any Note any preference over any other Note; or
(c) reduce the percentage of Notes the consent of the holders of which
is required for any such modification; or
(d) amend or waive the provisions hereof without the consent of the
Required Banks (as such term is defined in the Credit Agreement referred to
in Section 17).
Any such modification or waiver shall apply equally to all the holders of
the Notes and shall be binding upon them, upon each future holder of any Note
and upon the Company, whether or not such Note shall have been marked to
indicate such modification or waiver, but any Note issued thereafter shall bear
a notation referring to any such modification or waiver. Promptly after
obtaining the written consent of the holders as herein provided, the Company
shall transmit a copy of such modification or waiver to all the holders of the
Notes at the time outstanding.
13. Events of Default. If any one or more of the following events, herein
called "Events of Default", shall occur (for any reason whatsoever, and whether
such occurrence shall be voluntary or involuntary or come about or be effected
by operation of law or pursuant to or in compliance with any judgment, decree or
order of a court of competent jurisdiction or any order, rule or regulation of
any administrative or other governmental authority) and be continuing:
(a) default shall be made in the payment of the principal of any Note
when and as the same shall become due and payable, whether at maturity or
on a date fixed for prepayment or by acceleration or otherwise, and the
continuance of such default for a period of five consecutive days; or
(b) default shall be made in the payment of interest on any Note when
and as the same shall become due and payable and the continuance of such
default for a period of 15 consecutive days; or
(c) default shall be made in the due observance or performance of any
other covenant, condition or agreement on the part of the Company to be
observed or performed pursuant to the terms hereof, and any such default
shall continue for 30 days after written notice thereof, specifying such
default and requesting that the same be remedied, shall have been given to
the Company by the holder or holders of at least 25% of the principal
amount of the Notes then outstanding (the Company to give forthwith to all
other holders of Notes at the
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time outstanding written notice of the receipt of such notice specifying
the default referred to therein); or
(d) the entry of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Company in an involuntary
case under the federal bankruptcy laws, as now constituted or hereafter
amended, or any other applicable federal or state bankruptcy, insolvency or
other similar laws, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Company or
for any substantial part of any of its property, or ordering the winding-up
or liquidation of any of its affairs and the continuance of any such decree
or order unstayed and in effect for a period of 60 consecutive days; or
(e) the commencement by the Company of a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or any
other applicable federal or state bankruptcy, insolvency or other similar
laws, or the consent by it to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Company or for any substantial part of its
property, or the making by it of any assignment for the benefit of its
creditors;
then, the holder or holders of a least 25% in aggregate principal amount of the
Notes at the time outstanding may, at its or their option but subject to any
applicable provisions of Section 17, by notice to the Company, declare all the
Notes to be, and all the Notes shall thereupon be and become, forthwith due and
payable together with interest accrued thereon without presentment, demand,
protest or further notice of any kind, all of which are expressly waived to the
extent permitted by law.
At any time after any declaration of acceleration has been made as provided
in this Section 13, the holders of at least a majority in principal amount of
the Notes then outstanding may, by notice to the Company, rescind such
declaration and its consequences, if (i) the Company has paid all interest on
and principal of the Notes that have become due otherwise than by such
declaration of acceleration and (ii) all other defaults and Events of Default
(other than nonpayments of principal and interest that have become due solely by
reason of acceleration) shall have been remedied or cured or shall have been
waived pursuant to this paragraph; provided, however, that no such rescission
shall extend to or affect any subsequent default or Event of Default or impair
any right consequent thereon.
14. Suits for Enforcement. In case any Event of Default shall occur and be
continuing and a declaration of acceleration shall not have been made in
accordance with Section 13, the holder of this Note may proceed to protect and
enforce its rights by suit in equity, action at law and/or by other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Note or in aid of the exercise of any power granted in this
Note, or may, subject to the provisions of Section 13 and Section 17 hereof,
proceed to enforce the payment of this Note to the extent of amounts then due
and payable hereon or to enforce any other legal or equitable right of the
holder of this Note.
15. Remedies Cumulative. No remedy herein conferred upon the holder of this
Note is intended to be exclusive of any other remedy and each and every such
remedy shall be cumu-
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lative and shall be in addition to every other remedy given hereunder or now or
hereafter existing at law or in equity or by statute or otherwise.
16. Remedies Not Waived. No course of dealing between the Company and the
holder of this Note or any delay on the part of the holder hereof in exercising
any rights hereunder shall operate as a waiver of any right of any holder of
this Note.
17. Subordination. (a) Anything contained in this Note to the contrary
notwithstanding, the indebtedness evidenced by the Notes shall be subordinate
and junior, to the extent set forth in this Section 17, to all Senior
Indebtedness of the Company. "Senior Indebtedness" shall mean the principal of,
premium, if any, and interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the documentation
with respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all fees, reimbursement and indemnity obligations, and
all other obligations, contingent or otherwise, arising under any indebtedness
of the Company for borrowed money, including without limitation [define Credit
Agreement].
(i) In the event of any insolvency, bankruptcy, liquidation,
reorganization or other similar proceedings, or any receivership
proceedings in connection therewith, relative to the Company or its
creditors or their property, and in the event of any proceedings, whether
voluntary or involuntary, for liquidation, dissolution, or other winding up
of the Company, whether or not involving insolvency or bankruptcy
proceedings, then all Senior Indebtedness shall first be paid in full in
cash before any payment is made upon this Note.
(ii) In any of the proceedings referred to in subparagraph (i) above,
any payment or distribution of any kind or character, whether in cash,
property, stock or obligations which may be payable or deliverable in
respect of this Note shall be paid or delivered directly to the holders of
Senior Indebtedness for application in payment thereof, unless and until
all Senior Indebtedness shall have been paid in full in cash.
(iii) In the event the Company shall default in the payment when due,
whether at maturity, at a date fixed for mandatory prepayment, by
acceleration or otherwise, of any Senior Indebtedness, and for so long as
such default shall continue, the Company will not make, directly or
indirectly, to the holder of this Note (and no holder shall accept, receive
or retain) any payment or distribution of any kind or character of or on
account of all or any part of the indebtedness evidenced by this Note.
(iv) Upon receipt by the Company of notice from the holder or holders
of any Senior Indebtedness of an event of default (including with respect
to any Obligation as defined in the Credit Agreement), no holder of a Note
may take action (A) to accelerate or collect payment of this Note, (B) in
its capacity as a holder of a Note, commence or join with any other
creditor in commencing in any bankruptcy or similar proceeding or (C) to
pursue any other remedy with respect to a Note prior to the earlier of (I)
the Maturity Date, (II) the payment in full in cash of all Senior
Indebtedness or (III) the occurrence of an event specified in paragraph (d)
or paragraph (e) of Section 13; provided, however, the holder of a Note
will not be prohibited from attending meetings of creditors or filing
proofs of claim.
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Upon request of any holder of Senior Indebtedness, the holder of this Note will
reaffirm its obligations under this Section 17.
(b) Subject to the payment in full in cash of all Senior Indebtedness and
the termination or expiration of any and all commitments of the holders of the
Senior Indebtedness to extend credit to or for the account of the Company as
aforesaid, the holder of this Note shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions of any kind
or character, whether in cash, property, stock or obligations, which may be
payable or deliverable to the holders of Senior Indebtedness, until the
principal of, and interest on, this Note shall be paid in full in cash, and, as
between the Company, their creditors other than the holders of Senior
Indebtedness, and the holder of this Note, no such payment or distribution made
to the holders of Senior Indebtedness by virtue of this Section 17 which
otherwise would have been made to the holder of this Note shall be deemed a
payment by the Company on account of the Senior Indebtedness, it being
understood that the provisions of this Section 17 are and are intended solely
for the purposes of defining the relative rights of the holder of this Note, on
the one hand, and the holder of the Senior Indebtedness, on the other hand.
Subject to the rights, if any, under this Section 17 of holders of Senior
Indebtedness to receive cash, property, stock or obligations otherwise payable
or deliverable to the holder of this Note, nothing herein shall, as between the
holder of this Note and the Company, either impair the obligation of the
Company, which is unconditional and absolute, to pay the holder hereof the
principal hereof and interest hereon in accordance with the terms and provisions
of this Note or prevent the holder of this Note from exercising all remedies
otherwise permitted by applicable law or upon default hereunder.
(c) No holder of any Senior Indebtedness need at any time give the holder
of this Note notice of any kind of the creation or existence of any Senior
Indebtedness, nor of the amount or terms thereof, all such notice being
expressly waived. Also, each holder of Senior Indebtedness may at any time from
time to time, without the consent of or notice to any holder of this Note,
without incurring responsibility to the holder of this Note, and without
impairing or releasing the subordination provisions of this Note (i) renew,
refund, refinance, increase or extend the maturity of any Senior Indebtedness,
or any part thereof, or otherwise revise, amend or alter the terms and
conditions thereof, including without limitation, increasing the amount thereof,
(ii) sell, exchange, release or otherwise deal with any property by whomsoever
at any time pledged, mortgaged, or otherwise hypothecated or subjected to a lien
to secure any Senior Indebtedness, and (iii) exercise or refrain from exercising
any rights against the Company and others, including the holder of this Note.
(d) In case that, despite the subordination provisions of this Note, any
payment or distribution shall be paid or delivered to the holder of this Note in
violation or contravention of the terms of this Note before all Senior
Indebtedness shall have been paid in full in cash and any and all commitments of
the holders of Senior Indebtedness to extend credit to or for the account of the
Company shall have terminated or expired, such payment or distribution shall be
held in trust for and immediately paid and delivered ratably to the holders of
Senior Indebtedness (or their duly authorized representatives), until all Senior
Indebtedness shall have been paid in full in cash and the commitments, if any,
of all holders of Senior Indebtedness to extend credit to or for the account of
the Company shall have terminated or expired.
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(e) The holders of the Notes hereby undertake and agree for the benefit of
the holders of Senior Indebtedness that, upon the occurrence of any of the
events set forth in subparagraphs (iii) and (iv) of paragraph (a) of this
Section 17, the holders shall take any actions reasonably requested by any
holder of Senior Indebtedness to effectuate the full benefit of the provisions
contained herein.
(f) The holders of the Notes hereby undertake and agree for the benefit of
the holders of Senior Indebtedness that they will not vote their claim or claims
with respect to this Note in a manner inconsistent with the terms of this
Section 17.
(g) The holders from time to time of the Senior Indebtedness and third
party beneficiaries and shall be entitled to the benefits of this Section 17
and, so long as any Senior Indebtedness remains outstanding, this Section 17 may
not be modified, rescinded or canceled in whole or in part without the prior
written consent thereto of the holders of Senior Indebtedness in accordance with
Section 12 hereof.
18. Covenants Bind Successors and Assigns. All the covenants, stipulations,
promises and agreements in this Note contained by or on behalf of the Company
shall bind its successors and assigns, whether so expressed or not.
19. Governing Law. This Note shall be governed and construed in accordance
with the internal substantive laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
20. Headings. The headings of the Sections and paragraphs of this Note are
inserted for convenience only and do not constitute a part of this Note.
S-1
IN WITNESS WHEREOF, ENERGY PARTNERS, LTD. HAS CAUSED THIS NOTE TO BE SIGNED
IN ITS CORPORATE NAME BY ONE OF ITS OFFICERS THEREUNTO DULY AUTHORIZED AND TO BE
DATED AS OF THE DAY AND YEAR FIRST ABOVE WRITTEN.
ENERGY PARTNERS, LTD.
By:
--------------------------------------------------
Name:
Title:
Exhibit F
to Merger Agreement
[FORM OF BUYER SENIOR SUBORDINATED NOTE]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY
NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR
QUALIFIED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE
ISSUER RECEIVES AN OPINION OF COUNSEL (WHO MAY BE AN EMPLOYEE OF THE HOLDER)
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION, QUALIFICATION OR OTHER
SUCH ACTIONS ARE NOT REQUIRED UNDER SAID ACT. THE OFFERING OF THIS SECURITY HAS
NOT BEEN REVIEWED OR APPROVED BY ANY STATE SECURITIES ADMINISTRATOR.
ENERGY PARTNERS, LTD.
11% Senior Subordinated Note
$ New Orleans, Louisiana
January , 2002
The undersigned, Energy Partners, Ltd., a Delaware corporation (the
"Company"), for value received hereby promises to pay to , the principal sum of
DOLLARS ($ ) on January , 2009 (the "Maturity Date"). Interest (computed on the
basis of a 360-day year consisting of twelve 30-day months) shall accrue and be
payable semi-annually on each January 15 and July 15, commencing July 15, 2002,
to the person in whose name this Note was registered at the close of business on
the preceding January 1 and July 1, respectively, from the most recent date to
which interest has been paid (or, if no interest has been paid, from the date
hereof) to the Maturity Date on the unpaid principal amount hereof at the rate
of 11% per annum.
All payments of principal and interest on this Note shall be in such coin
or currency of the United States of America as at the time of payment shall be
legal tender for payment of public and private debts, and shall be made by check
mailed to the person deemed the holder hereof in accordance with Section 4 at
the address for such person appearing in the register maintained pursuant to
Section 2. Payments of principal at maturity or upon earlier payment will be
made against surrender of this Note to the office or agency of the Company
maintained pursuant to Section 10(a).
1. Notes. This Note is one of a duly authorized issue of Notes (herein
called the "Notes") designated "11% Senior Subordinated Notes" made or to be
made by the Company pursuant to the Debt Exchange Agreement dated as of December
16, 2001 (the "Debt Exchange Agreement") by and between the Company and the
Holders party thereto, in the aggregate principal amount of up
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to $40,000,000 and bearing interest payable at the same rate and on the same
dates as the interest on the principal amount of this Note.
2. Transfer, Etc. of Notes. The Company shall keep at its office or agency
maintained as provided in paragraph (a) of Section 10 a register in which the
Company shall provide for the registration of Notes and for the registration of
transfer and exchange of Notes. Subject to compliance with the transfer
restrictions appearing on the legend on the face of this Note, the holder of
this Note may, at its option, and either in person or by its duly authorized
attorney, surrender the same for registration of transfer or exchange at the
office or agency of the Company maintained as provided in paragraph (a) of
Section 10, and, without expense to such holder (except for taxes or
governmental charges imposed in connection therewith), receive in exchange
therefor a Note or Notes each in such denomination or denominations as such
holder may request, dated as of the date to which interest has been paid on the
Note or Notes so surrendered for transfer or exchange (or, if no interest has
been paid, dated the date hereof), for the same aggregate principal amount as
the then unpaid principal amount of the Note or Notes so surrendered for
transfer or exchange, and registered in the name of such person or persons as
may be designated by such holder. Every Note presented or surrendered for
registration of transfer or exchange shall be duly endorsed, or shall be
accompanied by a written instrument of transfer, satisfactory in form to the
Company, duly executed by the holder of such Note or its attorney duly
authorized in writing, together with any opinion of counsel necessary in order
to comply with the transfer restrictions appearing on the legend on the face of
this Note. Every Note so made and delivered in exchange for this Note shall in
all other respects be in the same form and have the same terms as this Note. No
transfer or exchange of any Note shall be valid unless made in the foregoing
manner at such office or agency.
3. Loss, Theft, Destruction or Mutilation of Note. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Note, and, in the case of any such loss, theft or destruction, upon receipt
of an affidavit of loss and indemnity from the holder hereof reasonably
satisfactory to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Note, the Company will make and deliver, in
lieu of this Note, a new Note of like tenor and unpaid principal amount and
dated as of the date to which interest has been paid on this Note.
4. Persons Deemed Owners; Holders. The Company may deem and treat the
person in whose name any Note is registered as the owner and holder of such Note
for the purpose of receiving payment of principal of and interest on such Note
and for all other purposes whatsoever, whether or not such Note shall be
overdue. With respect to any Note at any time outstanding, the term "holder", as
used herein, shall be deemed to mean the person in whose name such Note is
registered as aforesaid at such time.
5. Prepayments. Notwithstanding anything in this Section 5, the holders of
the Notes acknowledge that prior to maturity of the Notes, they are not entitled
to any payment hereunder until the payment in full in cash of all Senior
Indebtedness (unless the holders of Senior Indebtedness shall have consented
thereto), and that following the maturity of the Notes, they are entitled to
payment hereunder subject at all times to Section 16 hereof.
-3-
(a) Optional Prepayment. Upon notice given as provided in Section 6
the Company may, at its option, prepay the Notes, in whole or in part at
any time or from time to time, without premium or penalty, at the principal
amount thereof so to be prepaid, together with interest accrued thereon to
the date fixed for such prepayment.
(b) Mandatory Prepayment. If at any time while any of the Notes shall
be outstanding, the Company shall consummate a public offering of its debt
securities pursuant to an effective registration statement filed under the
Securities Act of 1933, as amended, or shall consummate an offering of its
debt securities pursuant to Rule 144A under the Securities Act of 1933, as
amended, then the Company shall apply the net proceeds of such offering to
prepay the principal amount of the Notes (to the extent thereof), plus
interest accrued thereon through the date of prepayment, after application
of such net proceeds in accordance with the terms of any Senior
Indebtedness then outstanding.
6. Notice of Prepayment and Other Notices. The Company shall give written
notice of any prepayment of this Note or any portion hereof pursuant to Section
5 not less than 5 nor more than 60 days prior to the date fixed for such
prepayment. Such notice of prepayment and all other notices to be given to any
holder of this Note shall be given by registered or certified mail to the person
in whose name this Note is registered at its address designated on the register
maintained by the Company on the date of mailing such notice of prepayment or
other notice. Upon notice of prepayment being given as aforesaid, the Company
covenants and agrees that it will prepay, on the date therein fixed for
prepayment, this Note or the portion hereof, as the case may be, so called for
prepayment, at the principal amount thereof so called for prepayment, together
with interest accrued thereon to the date fixed for such prepayment.
Notwithstanding the foregoing, any notice of a prepayment pursuant to Section
5(b) may specify that the obligation to make such prepayment is conditional upon
the closing of the transaction requiring such prepayment, in which event no
prepayment shall be required unless and until such transaction is consummated.
7. Allocation of Prepayment. In the event of any prepayment, purchase,
redemption or retirement of less than all of the outstanding Notes, the Company
will allocate the principal amount so to be prepaid, purchased, redeemed or
retired to each Note pro rata, as nearly as may be, in accordance with the
aggregate principal amount of all Notes then outstanding.
8. Interest After Date Fixed for Prepayment. If this Note or a portion
hereof is called for prepayment as herein provided, this Note or such portion
shall (unless the provisions of the last sentence of Section 6 become
applicable) cease to bear interest on and after the date fixed for such
prepayment unless, upon presentation for such purpose, the Company shall fail to
pay this Note or such portion, as the case may be, in which event this Note or
such portion, as the case may be, and, so far as may be lawful, any overdue
installment of interest, shall bear interest on and after the date fixed for
such prepayment and until paid at the rate per annum provided herein for overdue
principal.
9. Surrender of Notes; Notation Thereon. As a condition to obtaining any
payment of all or any portion of the principal amount of this Note, the Company
may require the holder hereof to surrender this Note, and in such event the
Company will execute and deliver at the expense of the Company, upon such
surrender, a new Note registered in the name of such person or persons as may be
designated by such holder for the principal amount of this Note then remaining
unpaid, dated
-4-
as of the date to which interest has been paid on the principal amount of this
Note then remaining unpaid, or may require the holder to present this Note to
the Company for notation hereon of the payment of the portion of the principal
amount of this Note so repaid.
10. Covenants. The Company covenants and agrees that, so long as any Note
shall be outstanding:
(a) Maintenance of Office. The Company will maintain an office or
agency in such place in the United States of America as the Company may
designate in writing to the registered holder hereof, where the Notes may
be presented for registration of transfer and exchange as herein provided,
where notices and demands to or upon the Company in respect of the Notes
may be served and where the Notes shall be presented for payment. Until the
Company otherwise notifies the holders of Notes, said office shall be the
office of the Company at 201 St. Charles Avenue, Suite 3400, New Orleans,
Louisiana 70170.
(b) Notice of Default. If any one or more events which constitute, or
which with notice or lapse of time or both would constitute, an Event of
Default under Section 12 of this Note shall occur, or if the holder of any
Note shall demand payment or take any other action permitted upon the
occurrence of any such Event of Default, the Company shall, immediately
after it becomes aware that any such event has occurred or that such demand
has been made or that any such action has been taken, give notice to all
holders of the Notes, specifying the nature of such event or of such demand
or action, as the case may be; provided, however, that if such event, in
the good faith judgment of the Company, will be cured within ------- ten
days after the Company has knowledge that such event would, with or without
notice or lapse of time or both, constitute such an Event of Default, no
such notice need be given if such Event of Default shall be cured within
such ten-day period.
(c) Merger or Consolidation. If the Company shall effect a merger or
consolidation in which it is not the surviving entity, then the Company
shall take such action as may be necessary, as a condition to consummating
such transaction, to cause the surviving entity to assume all of the
Company's obligations under the Notes, as if such entity had been the
original issuer thereof, and such entity shall acknowledge in writing its
obligation to fully and timely honor the Company's obligations under the
Notes.
(d) Limitation on Incurrence of Certain Indebtedness. The Company
shall not, directly or indirectly, incur any indebtedness that by its terms
would expressly rank senior in right of payment to the Notes and expressly
rank subordinate in right of payment to any Senior Indebtedness.
11. Modification by Holders; Waiver. The Company may, with the written
consent of the holders of not less than a majority in principal amount of the
Notes then outstanding, modify the terms and provisions of the Notes or the
rights of the holders of the Notes or the obligations of the Company thereunder,
and the observance by the Company of any term or provision of the Notes may be
waived with the written consent of the holders of not less than a majority in
principal amount of the Notes then outstanding; provided, however, that no such
modification or waiver shall:
-5-
(a) change the stated maturity of any Note from the Maturity Date or
reduce the principal amount thereof or reduce the rate or extend the time
of payment of interest thereon at stated maturity or modify any prepayment
provision without the consent of the holder of each Note so affected; or
(b) give any Note any preference over any other Note; or
(c) reduce the percentage of Notes the consent of the holders of which
is required for any such modification; or
(d) amend or waive the provisions hereof without the consent of the
Required Banks (as such term is defined in the Credit Agreement referred to
in Section 16).
Any such modification or waiver shall apply equally to all the holders of
the Notes and shall be binding upon them, upon each future holder of any Note
and upon the Company, whether or not such Note shall have been marked to
indicate such modification or waiver, but any Note issued thereafter shall bear
a notation referring to any such modification or waiver. Promptly after
obtaining the written consent of the holders as herein provided, the Company
shall transmit a copy of such modification or waiver to all the holders of the
Notes at the time outstanding.
12. Events of Default. If any one or more of the following events, herein
called "Events of Default", shall occur (for any reason whatsoever, and whether
such occurrence shall be voluntary or involuntary or come about or be effected
by operation of law or pursuant to or in compliance with any judgment, decree or
order of a court of competent jurisdiction or any order, rule or regulation of
any administrative or other governmental authority) and be continuing:
(a) default shall be made in the payment of the principal of any Note
when and as the same shall become due and payable, whether at maturity or
on a date fixed for prepayment or by acceleration or otherwise, and the
continuance of such default for a period of five consecutive days; or
(b) default shall be made in the payment of interest on any Note when
and as the same shall become due and payable and the continuance of such
default for a period of 15 consecutive days; or
(c) default shall be made in the due observance or performance of any
other covenant, condition or agreement on the part of the Company to be
observed or performed pursuant to the terms hereof, and any such default
shall continue for 30 days after written notice thereof, specifying such
default and requesting that the same be remedied, shall have been given to
the Company by the holder or holders of at least 25% of the principal
amount of the Notes then outstanding (the Company to give forthwith to all
other holders of Notes at the time outstanding written notice of the
receipt of such notice specifying the default referred to therein); or
(d) the entry of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Company in an involuntary
case under the federal bankruptcy laws,
-6-
as now constituted or hereafter amended, or any other applicable federal or
state bankruptcy, insolvency or other similar laws, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or
similar official) of the Company or for any substantial part of any of its
property, or ordering the winding-up or liquidation of any of its affairs
and the continuance of any such decree or order unstayed and in effect for
a period of 60 consecutive days; or
(e) the commencement by the Company of a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or any
other applicable federal or state bankruptcy, insolvency or other similar
laws, or the consent by it to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Company or for any substantial part of its
property, or the making by it of any assignment for the benefit of its
creditors;
then, the holder or holders of a least 25% in aggregate principal amount of the
Notes at the time outstanding may, at its or their option but subject to any
applicable provisions of Section 16, by notice to the Company, declare all the
Notes to be, and all the Notes shall thereupon be and become, forthwith due and
payable together with interest accrued thereon without presentment, demand,
protest or further notice of any kind, all of which are expressly waived to the
extent permitted by law.
At any time after any declaration of acceleration has been made as provided
in this Section 12, the holders of at least a majority in principal amount of
the Notes then outstanding may, by notice to the Company, rescind such
declaration and its consequences, if (i) the Company has paid all interest on
and principal of the Notes that have become due otherwise than by such
declaration of acceleration and (ii) all other defaults and Events of Default
(other than nonpayments of principal and interest that have become due solely by
reason of acceleration) shall have been remedied or cured or shall have been
waived pursuant to this paragraph; provided, however, that no such rescission
shall extend to or affect any subsequent default or Event of Default or impair
any right consequent thereon.
13. Suits for Enforcement. In case any Event of Default shall occur and be
continuing and a declaration of acceleration shall not have been made in
accordance with Section 12, the holder of this Note may proceed to protect and
enforce its rights by suit in equity, action at law and/or by other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Note or in aid of the exercise of any power granted in this
Note, or may, subject to the provisions of Section 12 and Section 16 hereof,
proceed to enforce the payment of this Note to the extent of amounts then due
and payable hereon or to enforce any other legal or equitable right of the
holder of this Note.
14. Remedies Cumulative. No remedy herein conferred upon the holder of this
Note is intended to be exclusive of any other remedy and each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
15. Remedies Not Waived. No course of dealing between the Company and the
holder of this Note or any delay on the part of the holder hereof in exercising
any rights hereunder shall operate as a waiver of any right of any holder of
this Note.
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16. Subordination. (a) Anything contained in this Note to the contrary
notwithstanding, the indebtedness evidenced by the Notes shall be subordinate
and junior, to the extent set forth in this Section 16, to all Senior
Indebtedness of the Company. "Senior Indebtedness" shall mean the principal of,
premium, if any, and interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the documentation
with respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all fees, reimbursement and indemnity obligations, and
all other obligations, contingent or otherwise, arising under [define Credit
Agreement].
(i) In the event of any insolvency, bankruptcy, liquidation,
reorganization or other similar proceedings, or any receivership
proceedings in connection therewith, relative to the Company or its
creditors or their property, and in the event of any proceedings, whether
voluntary or involuntary, for liquidation, dissolution, or other winding up
of the Company, whether or not involving insolvency or bankruptcy
proceedings, then all Senior Indebtedness shall first be paid in full in
cash before any payment is made upon this Note.
(ii) In any of the proceedings referred to in paragraph (i) above, any
payment or distribution of any kind or character, whether in cash,
property, stock or obligations which may be payable or deliverable in
respect of this Note shall be paid or delivered directly to the holders of
Senior Indebtedness for application in payment thereof, unless and until
all Senior Indebtedness shall have been paid in full in cash.
(iii) In the event the Company shall default in the payment when due,
whether at maturity, at a date fixed for mandatory prepayment, by
acceleration or otherwise, of any Senior Indebtedness, and for so long as
such default shall continue, the Company will not make, directly or
indirectly, to the holder of this Note (and no holder shall accept, receive
or retain) any payment or distribution of any kind or character of or on
account of all or any part of the indebtedness evidenced by this Note.
(iv) Upon receipt by the Company of notice from the holder or holders
of any Senior Indebtedness of an event of default (other than a payment
default described in paragraph (iii) above) under any Senior Indebtedness
or any event which, with the giving of notice or passage of time, or both,
if required, would become such an event of default (and which notice shall
specify that it is a Payment Blockage Notice delivered pursuant to this
Section 16(a)(iv)), as such event of default is defined therein or in any
instrument under which it is outstanding, and such event of default or
other such event shall not have been cured or waived in writing or shall
not have ceased to exist, no direct or indirect payment or distribution
shall be made by the Company with respect to this Note (or accepted,
received or retained by any holder hereof) during the period (the "Payment
Blockage Period") lasting 180 days from the receipt of such notice by the
Company (except as hereinafter provided in this Section 16(a)(iv)). During
the Payment Blockage Period, the Company may make payments with respect to
this Note if each event of default or other such event upon which any
notice is based shall have been cured (to the reasonable satisfaction of
the holders of Senior Indebtedness giving such notice) or waived in writing
or shall have ceased to exist.
-8-
Notwithstanding the foregoing, Payment Blockage Notices may not be in
effect for more than 179 days in any 360-day period.
(v) Upon the occurrence of any Event of Default (other than an Event
of Default of the type specified in Sections 12(d) or (e)) under this Note,
the holder of this Note shall provide 180 days prior written notice of such
Event of Default to the holders of Senior Indebtedness prior to
accelerating this Note or instituting legal proceedings to enforce and
collect upon the indebtedness evidenced hereby.
Upon request of any holder of Senior Indebtedness, the holder of this Note will
reaffirm its obligations under this Section 16.
(b) Subject to the payment in full in cash of all Senior Indebtedness and
the termination or expiration of any and all commitments of the holders of the
Senior Indebtedness to extend credit to or for the account of the Company as
aforesaid, the holder of this Note shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions of any kind
or character, whether in cash, property, stock or obligations, which may be
payable or deliverable to the holders of Senior Indebtedness, until the
principal of, and interest on, this Note shall be paid in full in cash, and, as
between the Company, their creditors other than the holders of Senior
Indebtedness, and the holder of this Note, no such payment or distribution made
to the holders of Senior Indebtedness by virtue of this Section 16 which
otherwise would have been made to the holder of this Note shall be deemed a
payment by the Company on account of the Senior Indebtedness, it being
understood that the provisions of this Section 16 are and are intended solely
for the purposes of defining the relative rights of the holder of this Note, on
the one hand, and the holder of the Senior Indebtedness, on the other hand.
Subject to the rights, if any, under this Section 16 of holders of Senior
Indebtedness to receive cash, property, stock or obligations otherwise payable
or deliverable to the holder of this Note, nothing herein shall, as between the
holder of this Note and the Company, either impair the obligation of the
Company, which is unconditional and absolute, to pay the holder hereof the
principal hereof and interest hereon in accordance with the terms and provisions
of this Note or prevent the holder of this Note from exercising all remedies
otherwise permitted by applicable law or upon default hereunder.
(c) No holder of any Senior Indebtedness need at any time give the holder
of this Note notice of any kind of the creation or existence of any Senior
Indebtedness, nor of the amount or terms thereof, all such notice being
expressly waived. Also, each holder of Senior Indebtedness may at any time from
time to time, without the consent of or notice to any holder of this Note,
without incurring responsibility to the holder of this Note, and without
impairing or releasing the subordination provisions of this Note (i) renew,
refund, refinance, increase or extend the maturity of any Senior Indebtedness,
or any part thereof, or otherwise revise, amend or alter the terms and
conditions thereof, including without limitation, increasing the amount thereof,
(ii) sell, exchange, release or otherwise deal with any property by whomsoever
at any time pledged, mortgaged, or otherwise hypothecated or subjected to a lien
to secure any Senior Indebtedness, and (iii) exercise or refrain from exercising
any rights against the Company and others, including the holder of this Note.
(d) In case that, despite the subordination provisions of this Note, any
payment or distribution shall be paid or delivered to the holder of this Note in
violation or contravention of the
-9-
terms of this Note before all Senior Indebtedness shall have been paid in full
in cash and any and all commitments of the holders of Senior Indebtedness to
extend credit to or for the account of the Company shall have terminated or
expired, such payment or distribution shall be held in trust for and immediately
paid and delivered ratably to the holders of Senior Indebtedness (or their duly
authorized representatives), until all Senior Indebtedness shall have been paid
in full in cash and the commitments, if any, of all holders of Senior
Indebtedness to extend credit to or for the account of the Company shall have
terminated or expired.
(e) The holders of the Notes hereby undertake and agree for the benefit of
the holders of Senior Indebtedness that, upon the occurrence of any of the
events set forth in clauses (iii) and (iv) of Section 16(a), the holders shall
take any actions reasonably requested by any holder of Senior Indebtedness to
effectuate the full benefit of the provisions contained herein.
(f) The holders of the Notes hereby undertake and agree for the benefit of
the holders of Senior Indebtedness that they will not vote their claim or claims
with respect to this Note in a manner inconsistent with the terms of this
Section 16.
(g) The holders from time to time of the Senior Indebtedness and third
party beneficiaries and shall be entitled to the benefits of this Section 16
and, so long as any Senior Indebtedness remains outstanding, this Section 16 may
not be modified, rescinded or canceled in whole or in part without the prior
written consent thereto of the holders of Senior Indebtedness in accordance with
Section 11 hereof.
17. Covenants Bind Successors and Assigns. All the covenants, stipulations,
promises and agreements in this Note contained by or on behalf of the Company
shall bind its successors and assigns, whether so expressed or not.
18. Governing Law. This Note shall be governed and construed in accordance
with the internal substantive laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
19. Headings. The headings of the Sections and paragraphs of this Note are
inserted for convenience only and do not constitute a part of this Note.
S-1
IN WITNESS WHEREOF, Energy Partners, Ltd. has caused this Note to be signed
in its corporate name by one of its officers thereunto duly authorized and to be
dated as of the day and year first above written.
ENERGY PARTNERS, LTD
By:
------------------------------------
Name:
Title:
Exhibit G-1
to Merger Agreement
This Agreement requires that EACH Seller indemnify Purchaser
and certain other parties and that Purchaser indemnify each
Seller and certain other parties. Such requirements
are found in Section 5.2, Section 5.4, Section 9.6 and
Section 9.7, respectively, of this Agreement
- --------------------------------------------------------------------------------
PURCHASE AND SALE AGREEMENT
between
HALL PARTNERS, L.P.
LPCR INVESTMENT GROUP, L.P.
HALL CONSULTING COMPANY, INC.
HALL EQUITIES, INC.
HALL FAMILY TRUST
BRUCE R. SIDNER
WAYNE P. HALL
And
JOHN H. PEPER
("Sellers")
and
ENERGY PARTNERS, LTD.
("Purchaser")
December 16, 2001
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
ARTICLE I PURCHASE AND SALE.......................................1
1.1 Purchase and Sale...................................... 1
1.2 Interests.............................................. 1
1.3 Effective Time......................................... 2
ARTICLE II PURCHASE PRICE......................................... 2
2.1 Purchase Price......................................... 2
2.2 Adjustment to Purchase Price........................... 2
2.3 Payment of Purchase Price..............................
2.4 Allocation of Purchase Price...........................
ARTICLE III REPRESENTATIONS AND WARRANTIES..........................
3.1 Representations and Warranties by Sellers...............
3.2 Representations and Warranties by Purchaser.............
ARTICLE IV COVENANTS...............................................
4.1 Covenants of Seller.....................................
4.2 Covenants of Purchaser..................................
ARTICLE V REVIEW BY PURCHASER.....................................
5.1 Due Diligence...........................................
5.2 Access to Interests.....................................
5.3 Environmental Assessment................................
5.4 Imbalances..............................................
5.5 Defensible Title........................................
5.6 Casualty Loss...........................................
5.7 No Warranty of Merchantability or Fitness...............
ARTICLE VI CONDITIONS TO CLOSING...................................
6.1 Conditions to Obligations of Sellers....................
6.2 Conditions to Obligations of Purchaser..................
ARTICLE VII CLOSING.................................................
7.1 Closing Date............................................
7.2 Closing Obligations.....................................
7.3 Transfer of Risk of Loss................................
ARTICLE VIII TERMINATION.............................................
8.1 Termination.............................................
1
8.2 Liabilities Upon Termination............................
ARTICLE IX OBLIGATIONS AFTER CLOSING...............................
9.1 Post-Closing Adjustments................................
9.2 Subsequent Adjustments..................................
9.3 Reservation of Claims...................................
9.4 Files and Records.......................................
9.5 Further Assurances......................................
9.6 Assumption and Indemnity................................
9.7 Express Negligence......................................
9.8 Indemnification Procedure...............................
9.9 Allocation of Proceeds..................................
9.10 Termination of Confidentiality Agreement................
ARTICLE X MISCELLANEOUS...........................................
10.1 Notices.................................................
10.2 Expenses................................................
10.3 Amendment...............................................
10.4 Assignment..............................................
10.5 Conditions..............................................
10.6 References..............................................
10.7 Articles and Sections...................................
10.8 Number and Gender.......................................
10.9 Incorporation of Schedules and Exhibits.................
10.10 Counterparts............................................
10.11 Governing Law...........................................
10.12 Integration.............................................
10.13 Parties in Interest.....................................
10.14 Severability............................................
10.15 Survival................................................
10.16 Arbitration.............................................
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LISTING OF SCHEDULES AND EXHIBITS
Schedule 1-A - Listing of Leases and Wells, including Working
Interests and Net Revenues Interests of
Each Seller and status of Wells
Schedule 1-B - Listing of Platforms and Pipelines
Schedule 1-C - Listing of Contracts
Schedule 2.1 - Allocation of Purchase Price among Sellers
Schedule 3.1(a) - Assignments Not Approved by MMS
Schedule 3.1(m) - Outstanding Authorities for Expenditures
Schedule 3.1(n) - Imbalances
Schedule 3.1(o) - Required Consents
Exhibit A - Form of Final Settlement Statement
Exhibit B-1 - Form of Assignment of Record Title
Exhibit B-2 - Form of Assignment of Operating Rights
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PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT (as amended, supplemented, restated or
otherwise modified from time to time in accordance with applicable provisions
hereof, this "Agreement") dated December 16, 2001, is between Hall Partners,
L.P., a Texas limited partnership, LPCR Investment Group, L.P., a Texas limited
partnership, Hall Consulting Company, Inc., a Texas corporation, Hall Equities,
Inc., a Texas corporation, Hall Family Trust, a trust established under the laws
of the State of Texas, Bruce R. Sidner, Wayne P. Hall, and John H. Peper
(collectively, "Sellers" and individually a "Seller"), and Energy Partners,
Ltd., a Delaware corporation ("Purchaser").
In consideration of the mutual agreements set forth herein, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Sellers and Purchaser hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1. Purchase and Sale. In accordance with the terms of this Agreement,
each Seller agrees to sell the interests, rights, and property of such Seller
described in Section 1.2 (collectively as to all Sellers, the "Interests") to
Purchaser and Purchaser agrees to purchase the Interests from Sellers. As used
herein, the term "Working Interest" means, as to each Seller and as to a Lease
(as defined in Section 1.2), the right of such Seller to exploit, produce and
operate the mineral rights covered by such Lease and the obligation of such
Seller to bear the expense and cost associated with such exploitation,
production and operation, whether or not such rights or obligations are derived
from Record Title (as defined below in this Section 1.1) or Operating Rights (as
defined below in this Section 1.1). As used herein, the term "Net Revenue
Interest" means as to each Seller and:
(a) as to a Lease, the ownership percentage of all Substances (as defined
in Section 1.2) produced from the Lease to which it applies; and
(b) as to a Well (as defined in Section 1.2), the ownership percentage
of all Substances produced from the Well to which it applies.
The Net Revenue Interest of a Seller attributable to a Lease or Well that
is pooled or unitized shall be the percentage of Substances produced from the
pool or unit and allocated to the interest of such Seller in the Lease or Well
in question. Each such Net Revenue Interest shall be the relevant ownership
percentage net of all royalties, overriding royalties, production payments and
other burdens measured by or payable out of Substances produced from or
attributable to the relevant Lease, Well, pool or unit. The Net Revenue Interest
of a Seller shall include overriding royalty interests owned by such Seller
measured by or payable out of Substances produced from
or attributable to the relevant Lease, Well, pool or unit. As used herein, the
term "Record Title" means, consistent with the definition of such term found in
30 CFR Section 256.62, the record title ownership of a Lease. As used herein,
the term "Operating Rights" means, consistent with the definition of such term
found in 30 CFR Section 250.105, the interest created out of the record title
ownership of a Lease authorizing the holder of that right to enter upon the
lands covered by the Lease to conduct drilling and related operations, including
production of oil or gas from such lands, in accordance with the terms of the
Lease, and the obligation to bear the expense and cost associated with such
operations.
1.2. Interests. The following interests, rights, and property, collectively
as to all Sellers, comprise the Interests:
(a) all right, title and interest of each Seller (including the interests
of each Seller set forth in Schedule 1-A) in the oil and gas leases and lands
described in such Schedule 1-A (collectively, the "Leases"), including Operating
Rights and Record Title, working, leasehold, mineral, royalty, overriding
royalty, net revenue, net profits or reversionary interests, other mineral
rights, and any other interests of a similar nature expressed, as a percentage
of the leasehold estate under such Leases, in such Schedule 1-A;
(b) all right, title, and interest of each Seller (including the
interests of each Seller set forth in Schedule 1-A) in all oil, gas, injection
or disposal wells (each a "Well"), equipment, fixtures, platforms (including
those listed in Schedule 1-B), pipelines (including those listed in Schedule
1-B) and other personal property and improvements (including materials, plants,
gathering and processing systems and salt water disposal systems) which are, as
of the date of this Agreement, as of the Effective Time (as defined in Section
1.3) or as of the Closing Date (as defined in Section 7.1), as the case may be,
located on, appurtenant to or used in connection with the Leases or the
Contracts (as defined in clause (c) below) (all of the foregoing in this clause
(b), collectively, the "Equipment");
(c) all right, title, and interest of each Seller in all contracts,
escrowed funds for the abandonment of the Interests, agreements, instruments,
payout balances, commitments, licenses, permits, easements, rights-of-way
(including those listed in Schedule 1-C), and other rights of Seller relating to
the items described above in this Section 1.2, together with all rights, claims,
and causes of action of each Seller under such items existing or arising at or
after the Effective Time, and the contracts specifically described in Schedule
1-C (all of the foregoing in this clause (c), collectively, the "Contracts");
(d) all right, title, and interest of each Seller in oil, gas, condensate,
natural gas liquids, related hydrocarbons, and other minerals produced, on or
after the Effective Time, from or attributable to the Leases, including all oil
in storage as described in clause (i) of Section 2.2(a) (all of the foregoing in
this clause (d), collectively, "Substances");
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(e) all accounts of each Seller, including the share of each Seller in any
gas imbalance, makeup obligation, abandonment escrow account, instrument,
general intangible, lien or security interest, arising from the sale or other
disposition, on or after the Effective Time, of any of the items described in
this Section 1.2 (the "Accounts"); provided, however, this clause shall not
entitle any Seller to make any disposition of any portion of the Interests of
such Seller not otherwise permitted under other provisions of this Agreement;
and
(f) to the extent available and assignable pursuant to the terms of
applicable law and third party agreements (without the payment of any funds or
other consideration), all information, books, records, files, muniments of
title, reports, documents and materials of each Seller that are related to the
portion of the Interests of such Seller described in clauses (a)-(e) of this
Section 1.2, including (i) all reservoir, land, lease, prospect, well,
operation, and production files, drilling reports and other data including
geological, engineering, and geophysical data, (ii) maps, logs, core analyses,
and formation tests; (iii) production records; and (iv) title and contract files
(all of the foregoing in this clause (f), collectively, the "Records").
1.3. Effective Time. The purchase and sale of the Interests shall be
effective for all purposes on November 1, 2001, at 7:00 a.m., Central Standard
time (the "Effective Time").
ARTICLE II
PURCHASE PRICE
2.1. Purchase Price. The purchase price for the Interests (the "Purchase
Price") is 125,000 $9 Buyer Warrants and 375,000 $11 Buyer Warrants (as such
terms are defined in the Agreement and Plan of Merger referred to in clause (e)
of Section 6.1) (the "Securities Consideration") and 25% of the Earnout (as such
term is defined in the Agreement and Plan of Merger referred to in clause (e) of
Section 6.1) (the "Earnout Consideration"). The Securities Consideration and the
Earnout Consideration are allocable among the Sellers as set forth in Schedule
2.1.
2.2. Adjustment to Purchase Price. The Purchase Price allocated to each
Seller shall be adjusted, pursuant to the procedure set forth in Section 9.1, in
cash as provided in this Section 2.2 and the resulting net adjustment amount as
to each Seller shall be referred to as the "Adjustment Amount."
(a) The Purchase Price for each Seller, shall be increased in cash by the
following:
(i) an amount equal to the product of (A) the relevant Seller's
relevant Net Revenue Interest share of the quantity of merchantable oil
produced from or allocable to the Leases and in storage at the Effective
Time and not sold or disposed of prior to the Closing (as defined in
Section 7.1) multiplied by (B) the market price for such oil at the
Effective Time, with such product being reduced by an amount equal to the
sum of all taxes and gravity adjustments and all transportation expenses,
in each case necessary to market the relevant production;
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(ii) an amount equal to the relevant Seller's relevant Working
Interest share of the sum of direct capital expenses after the Effective
Time with respect to the operations which are the subject of the
authorities for expenditures listed in Schedule 3.1(m) or which are
approved in accordance with Section 4.1 or otherwise made in accordance
with applicable provisions of this Agreement, direct lease operating
expenses charged under applicable operating or other agreements, and
general and administrative charges, if any, payable to any operator under
applicable operating or other agreements in each instance that are: (1)
attributable to the Interests during the period between the Effective Time
and the Closing Date, and (2) incurred and paid by the relevant Seller,
whether before or after the Closing;
(iii) an amount equal to the sum of the relevant Seller's relevant
Working Interest share of premiums under insurance policies and bonds
(including, as applicable, business interruption insurance) attributable to
the Interests and the production therefrom for the period extending from
the Effective Time to the Closing Date; and
(iv) an amount of $971, representing the agreed value of the net
undertaken Imbalances (as defined in Section 3.1(n)) as of the Effective
Time (such Imbalances being on a net basis as to Imbalances at a wellhead).
(b) The Purchase Price for each Seller, shall be decreased by the
following:
(i) an amount equal to the sum of net proceeds (being gross
proceeds less applicable taxes, other than income taxes, and royalties,
overriding royalties, production payments and other burdens measured by or
payable out of such Substances, so long as constituting Permitted
Encumbrances (as defined in Section 5 and actually paid by the relevant
Seller or deducted in any remittance of proceeds to the relevant Seller) or
other value received by the relevant Seller for the sale or disposition of
Substances, including net proceeds from the sale of liquids and other
constituents removed in gas plants or other processing facilities, produced
after the Effective Time and allocable to any of the Interests of the
relevant Seller; and
(ii) an amount equal to the sum of proceeds or other value (in
excess of reasonable and necessary transaction costs, including fees and
expenses of attorneys, accountants, engineers and other professionals)
received by the relevant Seller for the sale or disposition, after the
Effective Time, of any portion of the Interests of the relevant Seller;
provided, however, provision for such adjustment shall not entitle any
Seller to make any disposition of any of the Interests not otherwise
permitted under other provisions of this Agreement.
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2.3. Payment of Purchase Price. At the Closing (as defined in Section 7.1),
Purchaser shall deliver to each Seller the Buyer Warrants (as such term is
defined in the Agreement and Plan of Merger referred to in clause (e) of Section
6.1) referred to in Section 2.1 due to such Seller evidencing such Buyer
Warrants as registered in the name of such Seller on the books of Purchaser and
a copy of the Earnout Agreement (as such term is defined in the Agreement and
Plan of Merger referred to in clause (e) of Section 6.1) executed by Purchaser
and HHOC in connection with the closing of the merger which is the subject of
the Merger Agreement (as defined in clause (e) of Section 6.1), under which
Sellers will be acknowledged to be third party beneficiaries.
2.4. Allocation of Purchase Price. The Purchase Price shall be allocated
among tangibles and intangibles comprising the Interests of each Seller as
mutually agreed by Purchaser and Sellers. Purchaser and each Seller agree: (i)
to be bound by the agreed allocation of the Purchase Price among tangibles and
intangibles for all purposes; (ii) to consistently report such allocations for
all federal, state and local income tax purposes; and (iii) to file timely all
reports required by the Internal Revenue Code of 1986, as amended (the "Code"),
including Form 8594 (Asset Acquisition Statement Under Section 1060), pursuant
to the requirements of Section 1060 of the Code, concerning the Purchase Price
allocation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties by Sellers. Each Seller, severally and
not jointly, represents and warrants to Purchaser (which representations and
warranties shall survive the Closing and the execution and delivery of the
documentation to be executed and delivered at the Closing, to the extent
provided below in this Section 3.1 and in Section 10.15) that:
(a) Such Seller is a natural person, corporation, limited partnership or
trust, as the case may be, and, if other than a natural person, is duly
organized and, if required, in good standing in its jurisdiction of organization
and is qualified and, if required, in good standing under the laws of each
additional jurisdiction wherein such qualification is necessary for the
ownership of its assets or the conduct of its business. Such Seller is qualified
under applicable laws and regulations, including those of the United States of
America, Department of Interior, Minerals Management Service (the "MMS") to own
the Interests of such Seller. Such Seller has and will have at the time of
Closing Defensible Title (as defined in Section 5.5) to the Interests of such
Seller; provided, however, such representation and warranty, insofar as relating
to rights-of-way, consists solely of beneficial ownership, with record title to
such rights-of-way being vested in Hall-Houston Oil Company ("HHOC").
Notwithstanding the preceding sentence or any other provision of this Agreement
to the contrary, for purposes of Section 9.6 and otherwise subsequent to the
Closing, such Seller warrants and agrees to defend title to the Interests of
such Seller unto Purchaser, its successors, and permitted assigns against the
lawful claims of all persons or entities claiming or to claim the same or any
part thereof by, through or under such
9
Seller, but not otherwise. Except as set forth in Schedule 3.1(a), all prior
assignments of interests in any of the Leases or other Interests in the chain of
title to the Interests of such Seller have been approved by the MMS.
(b) Such Seller has the full legal power, right and authority to carry
on its business as presently conducted, to enter into this Agreement and to
perform its obligations under this Agreement.
(c) If such Seller is other than a natural person, the execution,
delivery and performance by such Seller of this Agreement and the documentation
to be executed and delivered by such Seller at the Closing have been authorized
by all necessary action on the part of such Seller. Execution, delivery and
performance by such Seller of this Agreement do not, and execution, delivery and
performance by such Seller of the documentation to be executed and delivered by
such Seller at the Closing will not, and the consummation of the transactions
contemplated by this Agreement will not, (i) violate or be in conflict with any
(A) agreement, instrument, judgment, order, decree, law or regulation applicable
to such Seller or the Interests of such Seller or (B) any provision of the
governing documents of any Seller that is other than a natural person, or (ii)
result in the creation of any lien or other encumbrance on the Interests of such
Seller.
(d) Subject to laws and equitable principles affecting the rights of
creditors, this Agreement is and the documentation to be executed and delivered
by such Seller at the Closing will be, upon execution and delivery thereof by
all parties thereto, legal, valid and binding obligations of such Seller
enforceable according to their respective terms.
(e) No suit, arbitration, inquiry, proceeding, audit, claim, demand or
investigation is pending or, to the knowledge of such Seller, threatened that
might result in impairment or loss or diminution of the title of such Seller to
the Interests of such Seller or otherwise adversely affect, in any material
respect, any of the Interests of such Seller. There are no bankruptcy or
reorganization proceedings pending or threatened against such Seller.
(f) All Contracts which burden or will burden or encumber or are
otherwise material to the ownership, use, maintenance or operation of the
Interests of such Seller (i) are described on Schedule 1-C, (ii) were entered
into in the ordinary course of business, and (iii) are in force according to
their terms. Neither such Seller nor, to the knowledge of such Seller, any other
person or entity is in breach of any obligation under any Contract which might
adversely affect any of the Interests of such Seller in any material respect.
(g) All rentals, royalties, shut-in royalties, overriding royalties,
taxes and other payments due pursuant to or with respect to the Leases or the
production of Substances therefrom or attributable thereto or revenue
attributable to such production have been properly paid or placed in suspense.
(h) During the period of ownership by such Seller, (i) the Leases have
been drilled, completed, operated, developed and produced in compliance with all
applicable judgments,
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orders, laws, rules and regulations and in accordance with good oilfield
practice, (ii) all bonds in favor of the MMS or any other person or entity,
including plugging and abandonment bonds and supplemental bonds, required for
operation of the Leases have been and are in force, (iii) the Leases and the
other Interests of such Seller have been and are insured against such losses and
in such amounts as is customary in the industry and (iv) all necessary
certificates, consents, permits, licenses and other governmental authorizations
affecting the Interests of such Seller have been obtained and have been and are
in force. There are no outstanding violations of any applicable regulations,
rules or orders of the Federal Energy Regulatory Commission, the MMS, or any
other regulatory agency with respect to the Interests of such Seller. Each Well
included in the Interests is identified in Schedule 1 A and as of the date of
execution of this Agreement, the production status of each such Well is
correctly reflected on such Schedule 1-A. There are no Wells included in the
Interests of such Seller or located on the Leases that (A) such Seller is
obligated, by applicable judgments, orders, laws, rules, regulations or contract
and as of the date of this Agreement, to plug and abandon or cause to be plugged
and abandoned currently or (B) are subject to exceptions to a requirement to
plug and abandon issued by a governmental authority.
(i) Such Seller is not obligated, under a take-or-pay or similar
arrangement, or by virtue of an election to non-consent or not participate in a
past or current operation on the Leases pursuant to applicable operating
agreements, to produce Substances, or allow Substances to be produced, without
receiving full payment at the time of delivery in an amount that corresponds to
the relevant Net Revenue Interest of such Seller listed in Schedule 1-A. Except
pursuant to the provisions of any of the Contracts listed in Schedule 1-C, none
of the Leases is subject to any contract or agreement for the sale of Substances
produced from or allocable thereto which is not subject to termination by such
Seller (or the representative of such Seller which is a party thereto) on no
more than thirty (30) days' advance notice.
(j) Such Seller is timely receiving its share of proceeds from the sale
of Substances produced from or allocable to the Leases without suspense,
counterclaim or set-off and there has been no production of Substances from or
allocable to the Leases in excess of the allowable production established
pursuant to applicable state or federal law or regulation that would result in a
restriction on production of Substances from or allocable to the Leases
subsequent to the Effective Time.
(k) There has been no material adverse change in the condition of any
of the Leases or any Equipment after the Effective Time, except for Casualty
Losses to the extent coverage is provided under one or more policies of
insurance, depletion through normal production, changes in rates of production
that occur in the ordinary course of operation, depreciation of the Equipment
through ordinary wear and tear, and changes in general economic conditions and
pricing of Substances generally affecting the offshore Gulf of Mexico oil and
gas industry.
(l) Such Seller has incurred no liability for brokers' or finders' fees
related to the transactions contemplated by this Agreement for which Purchaser
shall be liable.
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(m) Except as set forth in Schedule 3.1(m), as of the date hereof,
there are no outstanding authorities for expenditures or any oral or written
commitments or proposals to conduct operations on the Leases which are required
to be approved by non-operators under the terms of the applicable joint
operating agreement.
(n) Except as set forth in Schedule 3.1(n), as of the Effective Time,
no portion of the Interests was over produced, under produced, or otherwise
subject to an imbalance or make-up obligation (collectively, "Imbalances") with
respect to Substances produced from or allocated to the Interests of such
Seller, regardless of whether such Imbalances arise at the platform, wellhead,
pipeline, gathering system or other level and regardless of whether such
Imbalances arise under a Contract or otherwise.
(o) No consents or approvals of any third persons are required in
connection with the transfer of the Interests of such Seller from such Seller to
Purchaser other than the approval of the MMS and the consents listed in Schedule
3.1(o) and there are no preferential purchase rights applicable to the sale of
the Interests of such Seller by such Seller to Purchaser pursuant to this
Agreement.
(p) All permits, licenses and other authorizations (collectively,
"Environmental Permits") which are required under any law, ordinance, statute,
code, rule, regulation, agreement, judgment, order, or decree of any federal,
state or local governmental authority applicable to ownership or operation of
the Interests of such Seller, relating to pollution, the protection or
regulation of human health, natural resources, or the environment, or the
emission, discharge, release or threatened release of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or waste into the
environment, including ambient air, surface water, ground water or land or soil
(collectively, "Environmental Laws") have been obtained, and all of such
Environmental Permits are in full force and effect and all fees and charges
relating thereto have been paid. The Interests of such Seller are in material
compliance with all Environmental Laws and Environmental Permits applicable to
the Interests of such Seller, and the Interests of such Seller are not subject
to any material unfulfilled remedial obligations pursuant to Environmental Laws.
Such Seller has not received notice of any violation or alleged violation that
is continuing (or of any fact or circumstance which with notice or the passage
of time or both would constitute a violation) of any Environmental Laws or
Environmental Permits relating to the Interests of such Seller or any
investigation relating thereto.
(q) During the period from the Effective Time to the date of execution
of this Agreement, Such Seller has not waived, compromised or settled any claim
that diminishes or adversely burdens any Interest of such Seller.
(r) Such Seller is not a nonresident alien of the United States.
(s) The Buyer Warrants to be acquired by such Seller pursuant to this
Agreement are being acquired for the account of such Seller and without a view
to distribution. Such Seller
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understands that neither the transfer of any of such Buyer Warrants nor the
transfer of the shares of common stock of Purchaser, par value $0.01 per share
(the "Purchaser Common Stock") issuable upon exercise of any of such Buyer
Warrants has been registered under the Securities Act of 1933 (the "Securities
Act") or the securities laws of any state and that such Seller cannot offer,
sell, transfer, pledge, hypothecate or otherwise dispose of any or all of such
Buyer Warrants or shares of the Purchaser Common Stock unless the transaction is
subsequently registered under the Securities Act and the securities laws of
relevant states or exemptions from such registrations are available. Seller
further understands that the certificate or certificates representing such
shares of the Purchaser Common Stock will bear a legend substantially as
follows, and agrees to comply with such legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE
TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR UNLESS THE ISSUER RECEIVES AN
OPINION OF COUNSEL (WHO MAY BE AN EMPLOYEE OF THE HOLDER) REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION, QUALIFICATION OR OTHER
SUCH ACTIONS ARE NO REQUIRED UNDER SAID ACT. THE OFFERING OF THIS
SECURITY HAS NOT BEEN REVIEWED OR APPROVED BY ANY STATE SECURITIES
ADMINISTRATOR."
and that, if such Seller is an executive officer of HHOC or one of its
Subsidiaries on the Closing Date, the certificate or certificates representing
such shares will also bear a legend substantially as follows, and agrees to
comply with such legend:
"THIS SECURITY IS ALSO SUBJECT TO RESTRICTIONS ON TRANSFER CONTAINED IN
AN AGREEMENT BETWEEN THE ISSUER AND SUCH HOLDER."
(t) Such Seller has such knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of its
investment in the Buyer Warrants, and such Seller is capable of bearing the
economic risks of such investment. Such Seller is an "Accredited Investor"
within the meaning of Rule 501(a) of the Securities Act. Such Seller:
(i) understands that (A) the issuance of the Buyer Warrants
hereunder is intended to be exempt from registration under the Securities
Act and (B) there is only a limited market for such Buyer Warrants, and
there can be no assurance that such Seller will be able to sell or dispose
of the Buyer Warrants to be acquired by such Seller hereunder;
13
(ii) can afford to bear the economic risk of holding the Buyer
Warrants acquired by such Seller hereunder for an indefinite period of time
and can afford to suffer the complete loss of the investment by such Seller
in the Buyer Warrants;
(iii) understands that the Buyer Warrants acquired by such Seller
hereunder are a speculative investment which involves a high degree of risk
of loss of the entire investment therein and that for an indefinite period
following the date hereof there will be no public market for the Buyer
Warrants acquired by such Seller hereunder and that, accordingly, it may
not be possible for such Seller to sell the Buyer Warrants acquired by such
Seller hereunder in case of emergency or otherwise;
(iv) and its representatives, including to the extent it deems
appropriate its professional, financial, tax and other advisors, have
reviewed all documents provided to them in connection with the investment
by such Seller hereunder in the Buyer Warrants by such Seller; and
(v) and its representatives have been given the opportunity to
examine all documents and to ask questions of, and to receive answers from,
Purchaser and its representatives concerning the terms and conditions of
the acquisition hereunder of the Buyer Warrants by such Seller and related
matters and to obtain all additional information which such Seller or its
representatives deem necessary.
(u) No representation or warranty of such Seller contained in this
Agreement and no statement contained in any certificate or schedule furnished or
to be furnished by or on behalf of such Seller or any of its representatives
pursuant thereto contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact necessary, in light of
the circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading or necessary in order to fully and
fairly provide the information required to be provided in any such document,
certificate or schedule.
3.2 Representations and Warranties by Purchaser. Purchaser represents and
warrants to Seller (which representations and warranties shall survive the
Closing and the execution and delivery of the documentation to be executed and
delivered at the Closing) that:
(a) Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and is qualified to do
business in, and is in good standing under, the laws of the State of Louisiana.
(b) Purchaser has the full legal power, right and authority to carry on
its business as presently conducted, to enter into this Agreement and to perform
its obligations under this Agreement.
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(c) The execution, delivery and performance by Purchaser of this
Agreement and the documentation to be executed and delivered by Purchaser at the
Closing have been authorized by all necessary action, corporate and otherwise,
on the part of Purchaser and execution, delivery and performance by Purchaser of
this Agreement do not, and execution, delivery and performance by Purchaser of
the documentation to be executed and delivered by Purchaser at the Closing will
not, and the consummation of the transactions contemplated by this Agreement
will not, violate or be in conflict with any (i) agreement, instrument,
judgment, order, decree, law or regulation applicable to Purchaser or (ii) any
provision of the certificate of incorporation or bylaws of Purchaser.
(d) Subject to laws and equitable principles affecting the rights of
creditors, this Agreement is and the documentation to be executed and delivered
by Purchaser at the Closing will be, upon execution and delivery thereof by all
parties thereto, legal, valid and binding obligations of Purchaser enforceable
according to their terms. There are no bankruptcy or reorganization proceedings
pending or, to the knowledge of Purchaser, threatened against Purchaser.
(e) Purchaser has incurred no liability for brokers' or finders' fees
related to the transactions contemplated by this Agreement for which any Seller
shall be liable.
(f) There are no pending suits, actions or other proceedings to which
Purchaser is a party (or, to the knowledge of Purchaser, which have been
threatened to be instituted against Purchaser) which affect the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
(g) Purchaser is qualified under applicable law and regulations,
including the rules and regulations of the MMS, to own and operate federal oil
and gas leases in the Outer Continental Shelf, Gulf of Mexico and is in good
standing with all governmental agencies with jurisdiction or cognizance over
operations on the Outer Continental Shelf, Gulf of Mexico.
(h) Purchaser is a knowledgeable purchaser, owner and operator of oil
and gas properties, has the ability to evaluate the Interests for purchase, and
is acquiring the Interests for its own account and not with the intent to make a
distribution thereof in violation of the Securities Act or any applicable state
securities law.
(i) The authorized and outstanding capital stock of Purchaser is as set
forth in the SEC Documents (as defined in subsection (k) below) as of September
30, 2001. All of such issued and outstanding shares are validly issued, fully
paid and nonassessable and free of preemptive rights. Except as reflected in the
SEC Documents, Purchaser has no other equity securities of any class issued,
reserved for issuance or outstanding, and there are no outstanding options,
warrants, agreements or rights to subscribe for or to purchase, or commitments
to issue, or other securities of Purchaser which, pursuant to their terms, are
convertible into or exchangeable for, equity securities of Purchaser.
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(j) The shares of Purchaser Common Stock to be issued as the Stock
Purchase Price have been duly authorized, and when issued at the Closing under
the terms of this Agreement, will be validly issued, fully paid and
non-assessable and not issued in violation of any preemptive rights.
(k) Since December 31, 2000, Purchaser has filed all documents (the
"SEC Documents") required to be filed by it with the Securities and Exchange
Commission (the "Commission"), pursuant to the Securities Exchange Act of 1934
(the "Exchange Act"). As of their respective filing dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act, and
none of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading except to the extent corrected by a subsequently filed
SEC Document. The financial statements of Purchaser included in the SEC
Documents complied as to form in all material respects with then applicable
accounting requirements and with the published rules and regulations of the
Commission with respect thereto, were prepared in accordance with generally
accepted accounting principles during the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q and Regulation S-X of the Commission) and fairly present
the consolidated financial position of Purchaser and its consolidated
subsidiaries as at the dates thereof and the consolidated results of their
operations and changes in financial position for the periods then ended
(subject, in the case of unaudited statements, to normal, recurring audit
adjustments). Since December 31, 2000, there has not been any change which,
individually or in the aggregate, could reasonably be expected to have a
material adverse effect on Purchaser that has not been reflected in the SEC
Documents, publicly announced or otherwise disclosed.
(l) No representation or warranty of Purchaser contained in this
Agreement and no statement contained in any certificate or schedule furnished or
to be furnished by or on behalf of Purchaser or any of its representatives
pursuant thereto contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact necessary, in light of
the circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading or necessary in order to fully and
fairly provide the information required to be provided in any such document,
certificate or schedule.
ARTICLE IV
COVENANTS
4.1. Covenants of Seller. Each Seller, severally and not jointly, covenants
and agrees with Purchaser as follows:
(a) Following execution of this Agreement and until the Closing, such
Seller shall (i) cause the Interests of such Seller to be operated in a good and
workmanlike manner; (ii) cause to be maintained the insurance now in force with
respect to the Interests of such Seller; (iii) notify
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Purchaser of any suit, arbitration, inquiry, proceeding, audit, claim, demand or
investigation becoming known to such Seller which might adversely affect any of
the Interests of such Seller; (iv) cause to be paid, in the ordinary course of
business and consistent with past practices, all costs, taxes and expenses which
are obligated to be paid in connection with the Interests of such Seller as they
become due; (v) cause to be paid all rentals and other payments necessary to
maintain the Leases and the Contracts in force according to their terms and
cause all express and implied covenants contained in the Leases or the Contracts
to be complied with; (vi) cause the Interests of such Seller to be safeguarded
and the confidentiality of all data and other confidential or proprietary
materials relating to the Interests of such Seller to be maintained; (vii)
promptly notify Purchaser of any Casualty Loss and of any operation which is
proposed with respect to the Interests of such Seller and which involves an
expenditure greater than $75,000 to the six-sixths working interest in the
relevant Lease, other than those which are the subject of an authority for
expenditure listed in Schedule 3.1(m); and (viii) obtain any consents, waivers,
and approvals required of third persons, governmental authorities (excluding MMS
approvals which can only be obtained subsequent to the Closing) or other
entities in connection with consummation of the transactions contemplated by
this Agreement.
(b) Following execution of this Agreement, Seller shall not, without the
consent of Purchaser (i) consent to the abandonment of any Well capable of
commercial production or any related platform, pipeline or other facility; (ii)
release all or a portion of a Lease; (iii) consent to an operation, other than
those which are the subject of an authority for expenditure listed in Schedule
3.1(m), estimated to cost an amount in excess of the amount an operator is
entitled to expend without non-operator approval under the applicable operating
agreement (excluding emergency operations and operations undertaken to avoid a
penalty or forfeiture provision of any applicable agreement or order); (iv)
create a lien, security interest or other encumbrance on any of the Interests of
such Seller; (v) sell or dispose of any of the Interests of such Seller, other
than Substances sold, consumed or produced or Equipment replaced, in either case
in the ordinary course of business; (vi) amend a Lease or a Contract or
compromise an Account or enter into new contracts affecting the Interests of
such Seller, other than those necessary to conduct the operations which are the
subject of an authority for expenditure listed in Schedule 3.1(m) or those
entered into in the ordinary course of business with a term of not more than
ninety (90) days; or (vii) waive, compromise or settle any claim that diminishes
or adversely burdens any Interest of such Seller.
(c) Following the execution of this Agreement and until the Closing,
such Seller shall provide Purchaser and its attorneys, employees, accountants,
engineers, consultants and agents (collectively "representatives") access,
during normal business hours and at the offices of Hall-Houston Oil Company
("HHOC"), to (and the right to copy, at the expense of Purchaser) the Contracts
and other records pertaining to the ownership and/or operation of the Interests
of such Seller (including title files, lease files, prospect files, division
order files, production, severance and ad valorem tax records, and financial,
accounting, engineering, geological and geophysical records), insofar as any of
such are in the possession or control of such Seller or HHOC or insofar as such
Seller or HHOC has access thereto, and to the extent, in each case, that such
17
Seller or HHOC may do so without violating legal constraints or any legal
obligation, for the purpose of the conducting, by or at the direction of
Purchaser, of due diligence reviews of the Interests of such Seller. Subsequent
to the Closing, such Seller shall cooperate with Purchaser in any efforts by
Purchaser to obtain (at the expense of Purchaser) such additional title
information as Purchaser may reasonably require.
(d) At or prior to the Closing, with respect to matters that are not
Permitted Encumbrances (as defined in Section 5.5), such Seller shall cause the
owners and holders of any liens, security interests and other encumbrances filed
of record against any of the Interests of such Seller to execute and deliver
such releases and other instruments, in form and substance reasonably
satisfactory to Purchaser, as shall be necessary or appropriate to release of
record, or to the extent not of record, known to such Seller, all liens,
security interests, and other encumbrances filed against any of the Interests of
such Seller.
(e) Such Seller shall use its reasonable efforts to obtain, before the
Closing, all of the consents listed in Schedule 3.1(o) on terms reasonably
satisfactory to Purchaser and, with respect to the transfer to Purchaser of
engineering, geological and geophysical data included in the Records for which
any third-party consents are conditioned upon payment of transfer fees, to
obtain all such consents for the lowest applicable transfer fees reasonably
possible, which transfer fees shall be payable by Purchaser.
(f) Such Seller shall take or cause to be taken all reasonable actions
within its control as may be necessary or advisable to consummate and make
effective the purchase of the Interests of such Seller and the transactions
contemplated by this Agreement and to assure that, as of the Closing Date, it
will not be under any material organizational, legal or contractual restriction
that would prohibit or delay the timely consummation of such transactions.
(g) Such Seller shall take or cause to be taken all reasonable actions
to cause all the representations and warranties of such Seller contained in this
Agreement to be true and correct on and as of the Closing Date, other than those
as are made as of a specific date.
(h) Such Seller shall notify Purchaser promptly (i) upon learning of any
change in fact or circumstance that causes any representation or warranty of
such Seller contained in this Agreement to no longer be accurate and complete or
(ii) if such Seller fails to perform or comply with any covenant or agreement
contained in this Agreement or it is reasonably anticipated that such Seller
will be unable to perform or comply with any covenant or agreement contained in
this Agreement.
4.2. Covenants of Purchaser. Purchaser agrees with each Seller as follows:
(a) Until the Closing, Purchaser shall comply with the Confidentiality
Agreements (as such term is defined in the Agreement and Plan of Merger referred
to in clause (e) of Section 6.1, except as otherwise permitted in this Section
4.2(a), which Confidentiality Agreements shall be deemed by Sellers and
Purchaser to cover the transactions contemplated by this Agreement.
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After the Closing nothing contained in this Agreement or the Confidentiality
Agreements shall restrict the right of Purchaser, as between Purchaser and any
Seller, to use or disclose information regarding the Interests. Notwithstanding
anything contained in this Section 4.2(a) to the contrary and insofar as it
relates to the Interests, Purchaser may disclose any of the information subject
to the first sentence of this Section 4.2(a) or covered by the Confidentiality
Agreements to the extent (i) necessary to enforce, or seek redress for breach
of, this Agreement, (ii) required by applicable law or the rules of a national
securities exchange, (iii) necessary for financing, reserve engineering or
accounting purposes, (iv) to comply with any law or legal process, or (v)
otherwise previously made public (without breach of the preceding sentence of
this Section 4.2(a) or of the Confidentiality Agreements). In addition, Seller
acknowledges and agrees that Purchaser may issue one or more press releases and
may make other public statements with respect to this Agreement or the
transactions contemplated by this Agreement. If a proposed press release or
other public statement will contain information not previously disclosed,
Purchaser shall provide HHOC, pursuant to the Agreement and Plan of Merger
referred to in clause (e) of Section 6.1, with any and all proposed forms of
press release or other public statement and consult with HHOC before issuing any
press release or otherwise making any public statement with respect to this
Agreement or the transactions contemplated by this Agreement and shall not issue
any such press release or make any such public statement prior to providing the
proposed form of such press release or public statements and having such
consultation; provided, however, that Purchaser may, without providing the
proposed form of such press release or public statement or consulting with HHOC,
issue such a press release or make such a public statement if required by
applicable law or the rules of a national securities exchange if Purchaser has
used reasonable efforts to provide HHOC with the proposed form of press release
or public statement and consult with HHOC but has been unable to do so in a
timely manner.
(b) Purchaser shall remain qualified under applicable laws and
regulations, including the rules and regulations of the MMS, to own and operate
federal oil and gas leases in the Outer Continental Shelf, Gulf of Mexico and
shall be, as of the Closing, in good standing with, and authorized and qualified
by, all governmental agencies with jurisdiction or cognizance over operations on
the Outer Continental Shelf, Gulf of Mexico.
(c) Purchaser shall take or cause to be taken all reasonable actions
within its control as may be necessary or advisable to consummate and make
effective the purchase of the Interests and the transactions contemplated by
this Agreement and to assure that, as of the Closing Date, it will not be under
any material corporate, legal or contractual restriction that would prohibit or
delay the timely consummation of such transactions.
(d) Purchaser shall take or cause to be taken all reasonable actions to
cause all the representations and warranties of Purchaser contained in this
Agreement to be true and correct on and as of the Closing Date, other than such
as are made as of a specific date.
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(e) Purchaser shall notify each Seller promptly (i) upon learning of any
change in fact or circumstance that causes any representation or warranty of
Purchaser contained in this Agreement to no longer be accurate and complete or
(ii) if Purchaser fails to perform or comply with any covenant or agreement
contained in this Agreement or it is reasonably anticipated that Purchaser will
be unable to perform or comply with any covenant or agreement contained in this
Agreement.
ARTICLE V
REVIEW BY PURCHASER
5.1. Due Diligence. Purchaser may conduct, prior to the Closing and at its
cost, such further review of data and information pertaining to the Interests
and title examination and other examinations and investigations in respect of
the Interests as Purchaser desires.
5.2. Access to Interests. Following the execution of this Agreement and
until the Closing, Seller shall provide Purchaser and its representatives access
to the Interests and the right to observe operations and inspect any and all of
the Interests, the Equipment and improvements and fixtures included in the
Interests, to the extent that such Seller has the legal right to grant such
access and right. All visits by Purchaser or by others on behalf of Purchaser to
any facilities associated with any of the Leases shall be scheduled by mutual
consent of Purchaser and HHOC, subject to Purchaser providing to HHOC reasonable
advance notice of the locations that Purchaser wishes to visit and the proposed
times. Any Seller or HHOC may accompany Purchaser and its representatives during
their site visits. Entry onto any Interest will be (i) subject to valid
third-party restrictions, if any, existing under the terms of the Contracts, and
to industrial safety, hygiene, and drug and alcohol requirements of any Seller
or the relevant operator and (ii) at the sole risk and expense of Purchaser.
Each Seller shall use reasonable efforts to arrange for Purchaser access to, and
the right to observe operations on and inspect, any Interests requested by
Purchaser with respect to which such Seller alone does not have the right to
grant such access and rights. Each Seller shall use reasonable efforts to
identify for Purchaser, upon request, any third-party restrictions to which
Purchaser may be subject in exercising its rights to enter upon any of the
Interests. PURCHASER AGREES TO PROTECT, INDEMNIFY, DEFEND AND HOLD HARMLESS EACH
SELLER AND ITS CO-OWNERS, FARMORS AND CONTRACTORS, ITS AND THEIR RESPECTIVE
SUBCONTRACTORS, AND ITS AND THEIR RESPECTIVE DIRECTORS, MANAGERS, OFFICERS,
EMPLOYEES, AGENTS, REPRESENTATIVES AND INVITEES FROM AND AGAINST ANY AND ALL
LOSSES, CLAIMS AND DEMANDS IN CONNECTION WITH PERSONAL INJURIES, INCLUDING
DEATH, AND PROPERTY DAMAGE ARISING OUT OF OR RELATING TO THE ACCESS OF PURCHASER
AND ITS REPRESENTATIVES TO THE INTERESTS, THE EQUIPMENT AND IMPROVEMENTS AND
FIXTURES INCLUDED IN THE INTERESTS.
5.3. Environmental Assessment.
(a) Purchaser may conduct, prior to the Closing and at its cost, an
environmental assessment of any of the Interests.
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(b) PURCHASER ACKNOWLEDGES THAT PORTIONS OF THE INTERESTS MAY BE
CONTAMINATED WITH NATURALLY OCCURRING RADIOACTIVE MATERIALS ("NORM"), AND, UPON
THE CLOSING, PURCHASER HEREBY ACCEPTS, WITH RESPECT TO THE INTERESTS, FULL
RESPONSIBILITY FOR COMPLYING WITH ALL LEGAL REQUIREMENTS APPLICABLE TO NORM.
5.4. Imbalances. Upon the occurrence of the Closing, but effective as of
the Effective Time, Purchaser shall succeed to and assume the position of each
Seller with respect to all Imbalances related to the Interests and described in
Schedule 3.1(n). As a result of such succession, Purchaser shall be (i) entitled
to receive any and all benefits which any Seller would have been entitled to
receive by virtue of such position (including rights to produce and receive
volumes of production in excess of volumes which it would otherwise be entitled
to produce and receive by virtue of ownership of the Interests and rights to
receive cash balancing payments), (ii) obligated to suffer any detriments which
any Seller would have been obligated to suffer by virtue of such position
(including the obligation to deliver to others production volumes which would
have otherwise been attributable to its ownership of any of the Interests, to
deliver production to purchasers thereof without receiving full payment
therefor, or to make cash balancing payments or to repay take or pay payments)
and (iii) responsible for any and all royalty obligations with respect to such
Imbalances (including any of such arising out of royalties having been paid on
an "entitlements" basis rather than a "receipts" basis). EACH SELLER, SEVERALLY
AND NOT JOINTLY, SHALL PROTECT, DEFEND INDEMNIFY AND HOLD PURCHASER HARMLESS
FROM AND AGAINST ANY OBLIGATIONS, LOSSES OR LIABILITIES ARISING OUT OF ANY
IMBALANCES ALLOCABLE TO SUCH SELLER THAT EXIST ON THE EFFECTIVE TIME, OTHER THAN
THOSE DESCRIBED IN SCHEDULE 3.1(N).
5.5. Defensible Title.
(a) "Defensible Title" means such title and ownership of each Seller
(pursuant to instruments filed with and, to the extent required, approved by the
MMS and filed of record in the appropriate parish records or, in the case of
those instruments not yet approved by the MMS or not in approvable form and
listed in Schedule 3.1(a), pursuant to instruments filed with the MMS and filed
of record in the appropriate parish record or, as to assignments to each Seller
of those of the Interests of such Seller relating to East Cameron Block 196,
pursuant to instruments in the possession of such Seller) that, in each case (i)
will entitle Purchaser, as the successor to each Seller, to receive and retain,
now and, except as the result of any action by Purchaser subsequent to the
Closing, in the future, without suspension, reduction or termination, not less
than the relevant Net Revenue Interest of such Seller listed in Schedule 1-A of
Substances produced under the terms of the Leases (or other property denominated
in Schedule 1-A) and the proceeds from the sale thereof through plugging,
abandonment and salvage of all Wells comprising or included in such Interests of
such Seller and all Wells now or hereafter producing from or attributable to
such Interests of such Seller; (ii) will obligate Purchaser, as the successor to
such Seller to bear, now and, except as the result of any action by Purchaser
subsequent to the Closing, in the future, a percentage of costs and expenses
related to the maintenance, operation and development of the Leases (or other
property denominated in Schedule 1-A) not greater than
21
the relevant Working Interest of such Seller listed in Schedule 1-A, through
plugging, abandonment and salvage of all Wells comprising or included in such
Interests of such Seller and all Wells now or hereafter producing from or
attributable to such Interests of such Seller, unless the circumstances causing
the Working Interest of such Seller to be greater will cause the corresponding
Net Revenue Interest of such Seller to increase in the same proportion; and
(iii) is free of all claims, liens, security interests, encumbrances,
irregularities and defects, except for Permitted Encumbrances (as defined below
in this Section 5.5).
(b) "Permitted Encumbrances" are:
(i) lessor's royalties, overriding royalties, production
payments, net profits interests, reversionary interests and similar burdens
measured by or payable out of production of Substances or proceeds from the
sale thereof and other obligations that, in any case, do not, and will not,
reduce, now or, except as the result of any action by Purchaser subsequent
to the Closing, in the future, the relevant Net Revenue Interest of
Purchaser, as the successor in title to each Seller, below the relevant Net
Revenue Interest of such Seller listed in Schedule 1-A or increase, now or,
except as the result of any action by Purchaser subsequent to the Closing,
in the future, the relevant Working Interest of Purchaser, as the successor
in title to each Seller, above the relevant Working Interest of such Seller
listed in Schedule 1-A (unless the circumstance causing such Working
Interest of such Seller to increase will cause the corresponding Net
Revenue Interest of such Seller to increase at least in the same
proportion);
(ii) third-party consents which are obtained prior to the Closing
from the appropriate persons or entities;
(iii) mechanics', materialmen's, operator's and non-operators', tax
and similar liens or charges arising in the ordinary course of business
related to an Interest, if such liens or charges secure payments not yet
due;
(iv) all consents from, notices to, approvals by or other actions
by any governmental authority in connection with the sale or transfer of
the Interests of any Seller by such Seller to Purchaser pursuant to this
Agreement if such matters are customarily and appropriately obtained after
the sale or transfer;
(v) rights of a governmental entity to control or regulate the
Interests, together with all applicable laws, rules and regulations;
(vi) easements, rights-of-way, surface leases and other surface
use restrictions if such restrictions will not materially adversely affect
the use, value or operation of the Interests; and
22
(vii) to the extent not included in any of the foregoing clauses
(i) - (vii), the Contracts.
5.6. Casualty Loss. If, subsequent to the execution of this Agreement but
prior to the Closing, all or any portion of an Interest is damaged or destroyed
(each such instance a "Casualty Loss"), this Agreement shall remain in full
force and effect notwithstanding any such damage or destruction. Purchaser may,
to the extent insurance proceeds are not committed, used or applied prior to the
Closing Date to repair, restore or replace such damaged Interests, require each
Seller, at the Closing, to (i) assign to Purchaser the right of such Seller to
receive all insurance proceeds owed to such Seller by reason of such Casualty
Loss, less any reasonable costs and expenses incurred by such Seller in
collecting such proceeds and (ii) pay to Purchaser all insurance proceeds
theretofore paid to such Seller by reason of such destruction, less any
reasonable costs and expenses incurred by such Seller in collecting such
proceeds. Notwithstanding the foregoing, any insurance proceeds (or any rights
thereto) by reason of any Casualty Loss which are held by or owed to any Seller
for the account or benefit of any third party joint interest owners shall not be
paid or assigned by such Seller to Purchaser pursuant to this Section 5.6 but
shall instead be transferred to the successor operator or other party
responsible therefor pursuant to the terms of the applicable operating or other
agreement. No Seller shall compromise or settle a Casualty Loss without the
consent of Purchaser.
5.7. No Warranty of Merchantability or Fitness. Except as otherwise
specifically set forth in this Agreement, no Seller makes any warranties,
express or implied, including the warranty of merchantability and the implied
warranty of fitness for a particular purpose, regarding the Equipment and other
like personal property located on or included in the Interests of any Seller and
such are to be sold on an "as is, where is", basis and condition.
ARTICLE VI
CONDITIONS TO CLOSING
6.1. Conditions to Obligations of Sellers. The obligations of Sellers at
the Closing are subject to the satisfaction, at or prior to the Closing, of the
following conditions, which shall be deemed satisfied upon the occurrence of the
Closing:
(a) the representations and warranties of Purchaser set forth in this
Agreement that are qualified as to materiality shall be true and correct and
those that are not so qualified shall be true and correct in all material
respects, in each case, as of the date hereof and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing as
though made at and as of the Closing;
(b) Purchaser shall have performed in all material respects the
covenants and agreements which Purchaser was required to perform or satisfy at
or prior to the Closing or performance of any such covenant or agreement not so
performed shall have been waived in writing by all Sellers;
23
(c) except for approvals not customarily and appropriately obtained from
the MMS prior to a Closing, Sellers shall have received evidence, in form
reasonably satisfactory to each Seller and its counsel, that all permits,
consents, approvals, licenses, qualifications and orders required by
governmental authorities, or the terms of the Interests, for ownership of the
Interests by Purchaser to be obtained prior to the Closing have been obtained or
waived;
(d) no action or proceeding shall be pending or threatened before a
court, arbitrator or governmental authority seeking to restrain or prohibit the
consummation of the transactions contemplated by this Agreement or to obtain
substantial damages from Seller related to this Agreement; and
(e) Purchaser shall be in compliance with all of its obligations under
that certain Agreement and Plan of Merger between Purchaser and HHOC (the
"Merger Agreement"), or such obligations shall have been waived in writing by
HHOC, and the closing under the Merger Agreement (including execution by the
parties thereto of the Registration Rights Agreement contemplated in the Merger
Agreement, under which Sellers are third party beneficiaries) shall have
occurred simultaneously with the Closing.
6.2. Conditions to Obligations of Purchaser. The obligations of Purchaser
at the Closing are subject to the satisfaction, at or prior to the Closing, of
the following conditions, which shall be deemed satisfied upon the occurrence of
the Closing:
(a) the representations and warranties of each Seller set forth in this
Agreement that are qualified as to materiality shall be true and correct and
those that are not so qualified shall be true and correct in all material
respects, in each case, as of the date hereof and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing as
though made at and as of the Closing;
(b) each Seller shall have performed in all material respects the
covenants and agreements which Seller was required to perform or satisfy at or
prior to the Closing or performance of any such covenant or agreement not so
performed shall have been waived in writing by Purchaser;
(c) except for approvals not customarily and appropriately obtained from
the MMS prior to a closing, Purchaser shall have received evidence, in form
reasonably satisfactory to Purchaser and its counsel, that all permits,
consents, approvals, licenses, qualifications and orders required by
governmental authorities, or the terms of the Interests, for ownership of the
Interests by Purchaser to be obtained prior to the Closing have been obtained or
waived;
(d) no action or proceeding shall be pending or threatened before a
court, arbitrator or governmental authority seeking to restrain or prohibit the
consummation of the transactions contemplated by this Agreement or to obtain
substantial damages from Purchaser related to this Agreement;
24
(e) Since the Effective Time, there shall have been no material adverse
change in the condition of the Leases or the Equipment, except for Casualty
Losses to the extent coverage is provided under one or more policies of
insurance, depletion through normal production, changes in rates of production
that occur in the ordinary course of operation, depreciation of the Equipment
through ordinary wear and tear, and changes in general economic conditions and
product pricing generally affecting the offshore Gulf of Mexico oil and gas
industry;
(f) all consents listed in Schedule 3.1(o) shall have been obtained on
terms reasonably satisfactory to Purchaser; and
(g) HHOC shall be in compliance with its obligations under the Merger
Agreement, or such obligations shall have been waived in writing by Purchaser,
and the closing under the Merger Agreement shall have occurred simultaneously
with the Closing.
ARTICLE VII
CLOSING
7.1. Closing Date. Subject to applicable provisions of this Agreement, the
consummation of the transactions contemplated by this Agreement (the "Closing")
shall occur at a location mutually acceptable to Sellers and Purchaser on
January 8, 2002 at 9:00 a.m. local time, or on such other date or at such other
time as the parties hereto may agree) (any such date being the "Closing Date").
7.2. Closing Obligations. At the Closing, the following shall occur, each
being a condition precedent to the others and each being deemed to have occurred
simultaneously:
(a) Each Seller shall execute and deliver to Purchaser one or more
assignments in the forms attached to this Agreement as Exhibit B-1 and/or
Exhibit B-2 conveying the Interests to Purchaser (each of which assignments
shall provide that the Interests are conveyed by Sellers to Purchaser with a
special warranty of title, in which each Seller binds and obligates itself, its
successors and assigns to warrant and forever defend title to the Leases, to the
extent of the interests of such Seller specified in Schedule 1-A, unto
Purchaser, its successors and assigns, against every person or entity whomsoever
lawfully claiming or to claim the same or any part thereof by, through or under
such Seller, but not otherwise, and with full substitution and subrogation of
Purchaser in and to all warranties of predecessors in interest to such Seller).
Sellers shall also execute and deliver such other assignments on appropriate
forms as may be required by governmental authorities, subject to the terms of
the assignment forms attached as Exhibit B-1 and/or Exhibit B-2. The individual
forms of assignment prepared by Sellers, where relevant and appropriate, shall
contain provisions regarding assumption of obligations required by the Contracts
in the relevant chain of title.
(b) Purchaser shall deliver to each Seller its allocable share of the
Purchase Price, as provided in Section 2.3.
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(c) Sellers shall transfer and deliver to Purchaser possession of the
Interests.
(d) Sellers shall execute or cause HHOC to execute transfer orders or
letters-in-lieu on forms prepared by Purchaser, and reasonably satisfactory to
such Seller, directing purchasers of Substances produced under the terms of the
Leases on or after the Effective Time and attributable to the interest of such
Seller in the Leases, as set forth in Schedule 1-A, to make payment to Purchaser
for such Substances as contemplated by this Agreement.
(e) Each Seller shall furnish Purchaser an affidavit stating the United
States taxpayer identification number of such Seller and that such Seller is not
a foreign person, pursuant to Section 1445(b)(2) of the Code.
(f) Each Seller, which is other than a natural person, shall deliver to
Purchaser a certificate of an authorized representative of such Seller, dated
the Closing Date, certifying (i) that a true and correct copy of any resolutions
of the board of directors or partners of such Seller authorizing this Agreement
and the transactions contemplated hereby are attached thereto and have been duly
adopted and are in full force and effect and (ii) as to the incumbency and
authorization of the authorized representative of such Seller executing, on
behalf of such Seller, this Agreement and the other documents to be executed and
delivered by such Seller at the Closing.
(g) Purchaser shall deliver to each Seller a certificate of the
Secretary of Purchaser, dated the Closing Date, certifying (i) that a true and
correct copy of the resolutions of the board of directors of Purchaser
authorizing this Agreement and the transactions contemplated hereby are attached
thereto and have been duly adopted and are in full force and effect and (ii) as
to the incumbency and authorization of the officers of Purchaser executing, on
behalf of Purchaser, this Agreement and the other documents to be executed and
delivered by Purchaser at the Closing.
(h) In accordance with the provisions of Section 4.1(d), Sellers shall
deliver releases of all liens, mortgages and other encumbrances filed of record
against the Interests, if any, other than any Permitted Encumbrance.
(i) Sellers and Purchaser shall execute designation of operator forms
(Form MMS 1123), as applicable, and application forms (Form MMS 1017), as
applicable, and, to the extent Sellers have been able to arrange for such
execution prior to the Closing, as executed by each of the other owners of
interests in the Leases from which such designations or applications are
required designating Purchaser as operator or the applicant of the Leases.
(j) Sellers and Purchaser shall each execute and deliver such other
instruments and take such other actions as may be necessary to carry out or to
evidence their obligations under this Agreement.
7.3. Transfer of Risk of Loss. Upon the Closing, all risk of loss of or
damage to any portion of the Interests attributable to ownership, use or
operation by Purchaser, including any
26
Casualty Loss, shall pass to Purchaser as of the Closing Date and all losses,
costs, claims, suits, judgments, awards or damages on account of bodily injury,
illness, death or property damage or loss suffered by any persons or entities
other than Purchaser arising out of or related to the performance of such
operations on or after the Closing Date shall pass to and be assumed by
Purchaser as of the Closing Date.
ARTICLE VIII
TERMINATION
8.1. Termination. This Agreement and the transactions contemplated by this
Agreement may be terminated in the following situations:
(a) by Sellers or Purchaser, if the Merger Agreement shall have
terminated in accordance with its terms; and
(b) by Sellers and Purchaser pursuant to written agreement.
8.2. Liabilities Upon Termination.
(a) Notwithstanding anything provided to the contrary in this Agreement,
upon the failure by Purchaser to fulfill any undertaking or commitment provided
for herein on the part of Purchaser that is required to be fulfilled on or prior
to the Closing Date, each Seller, at its sole option, shall be entitled to any
remedy available at law or in equity.
(b) Notwithstanding anything provided to the contrary in this Agreement,
upon failure of Sellers to fulfill any undertaking or commitment provided for
herein on the part of Sellers that is required to be fulfilled on or prior to
the Closing Date, Purchaser, at its sole option, shall be entitled to any remedy
available at law or in equity.
(c) NOTWITHSTANDING ANYTHING CONTAINED TO THE CONTRARY IN ANY OTHER
PROVISION OF THIS AGREEMENT, SELLERS AND PURCHASER AGREE THAT THE RECOVERY BY
EITHER PARTY HERETO OF ANY DAMAGES SUFFERED OR INCURRED BY IT AS A RESULT OF ANY
BREACH BY THE OTHER PARTY OF ANY OF ITS REPRESENTATIONS, WARRANTIES OR
OBLIGATIONS UNDER THIS AGREEMENT SHALL BE LIMITED TO THE ACTUAL DAMAGES SUFFERED
OR INCURRED BY THE NON-BREACHING PARTY AS A RESULT OF THE BREACH BY THE
BREACHING PARTY OF ITS REPRESENTATIONS, WARRANTIES OR OBLIGATIONS HEREUNDER, AND
IN NO EVENT SHALL THE BREACHING PARTY BE LIABLE TO THE NON-BREACHING PARTY FOR
ANY INDIRECT, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES SUFFERED OR INCURRED
BY THE NON-BREACHING PARTY AS A RESULT OF THE BREACH BY THE BREACHING PARTY OF
ANY OF ITS REPRESENTATIONS, WARRANTIES OR OBLIGATIONS HEREUNDER.
ARTICLE IX
OBLIGATIONS AFTER CLOSING
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9.1. Post-Closing Adjustments. As soon as practicable after the Closing,
but in any event within ninety (90) days after the Closing, Purchaser shall
cause HHOC to prepare and submit to each Seller a statement, substantially in
the form of Exhibit A (the "Final Settlement Statement"), containing adjustments
to the Purchase Price contemplated by the provisions of Section 2.2 and the
resulting Adjustment Amount for each Seller, together with such supporting
documentation as is reasonably necessary to support the adjustments shown
therein. Purchaser shall cause HHOC to give representatives of each Seller
reasonable access to the premises of HHOC and to the books and records of HHOC
for purposes of reviewing the calculation of any such adjustments and will cause
appropriate personnel of HHOC to assist each Seller and representatives of any
Seller, at no cost to such Seller, in verification of such calculations. The
Final Settlement Statement shall become final and binding on Sellers and
Purchaser as to the calculation of the Adjusted Purchase Price forty five (45)
days following the date the Final Settlement Statement is received by Sellers,
except to the extent that, prior to the expiration of such forty five (45) day
period, any Seller shall deliver to Purchaser notice, as hereinafter required,
of its disagreement with the contents of the Final Settlement Statement. Such
notice shall be in writing and set forth all disagreements of any Seller with
respect to any portion of the Final Settlement Statement, together with any
changes thereto proposed by such Seller, and shall include an explanation in
reasonable detail of, and such supporting documentation as is reasonably
necessary to support, such changes. If any Seller has timely delivered such a
notice of disagreement to Purchaser, then, upon written agreement between
Purchaser and Sellers resolving all disagreements set forth in such notice, the
Final Settlement Statement shall become final and binding upon Purchaser and
Sellers as to the calculation of the Adjusted Purchase Price. If the Final
Settlement Statement has not become final and binding by the seventy fifth
(75th) day following its receipt by Sellers, then Purchaser or Sellers may
submit to a nationally-recognized firm of certified public accountants which
neither serves as the auditors for nor provides consulting services to HHOC or
any Sellers or Purchaser or such other independent public accounting firm
mutually satisfactory to Sellers and Purchaser for resolution any unresolved
disagreements of Sellers set forth in the notice from Sellers to Purchaser. The
fees and expenses of such accounting firm in making such determination shall be
shared equally by Purchaser, on the onehand, and Sellers, on the other. Upon
resolution of such unresolved disagreements of Purchaser, the Final Settlement
Statement (including any revisions thereto as are so resolved or agreed) shall
be conclusive, final and binding upon Purchaser and Sellers as to the
calculation of the Adjusted Purchase Price. Payment of any net amount due to
Sellers or Purchaser, as the case may be, on the basis thereof shall be made
within five (5) days after the Final Settlement Statement (as so resolved or
agreed) becomes final and binding on the parties hereto (the "Final Settlement
Date").
9.2. Subsequent Adjustments. Sellers and Purchaser recognize that either
Sellers or Purchaser may receive funds or pay expenses after the Final
Settlement Date which are properly the property or obligation of the other. Upon
receipt of net proceeds or payment of net expenses due to or payable by the
other party hereto, whichever occurs first, Sellers or Purchaser, as the case
may be, shall submit a statement to the other party hereto showing the relevant
items of
28
income and expense. Payment of any net amount due by Sellers or Purchaser, as
the case may be, on the basis thereof shall be made within ten (10) days of
receipt of the statement.
9.3. Reservation of Claims. Except as provided in this Agreement, each
Seller is entitled to all claims related to the Interests of such Seller prior
to the Effective Time regardless of when payment is made. Except as provided in
this Agreement, Purchaser is entitled to all claims related to the Interests
which arise after the Effective Time.
9.4. Files and Records. Upon the Closing, subject to the provisions of
Section 1.2(f), Sellers shall permit Purchaser, at the expense of Purchaser, to
take possession of originals, or with respect to accounting records relating to
periods prior to the Closing Date, copies, of all Records in the possession or
control of any Seller or HHOC and relating to the Interests. Each Seller shall
have the right to copy (at the expense of such Seller) and retain a copy of all
such files, records and data. Insofar as any Seller reasonably believes such
Records may be needed or useful in connection with federal, state or local
regulatory or tax matters or resolution of existing disputes or contract
compliance issues with third parties or for any other appropriate purposes, such
Seller shall have the right to make, at the expense of such Seller, and retain
copies of Records subsequent to the delivery of such Records to Purchaser;
provided, however, any such copies of Records retained by such Seller shall be
confidential and proprietary to Purchaser to the extent the relevant Records
were theretofore maintained as such by such Seller, and to such extent and
except as provided herein to the contrary, such Seller may not divulge any
matters contained therein or any other information provided by Purchaser to such
Seller pursuant to the terms of this Agreement, without the prior express
written consent of Purchaser, except (a) as required by applicable law, (b) as
required by order of any court, (c) to the extent otherwise previously made
public (other than by disclosure in breach of this Agreement) or (d) as is
necessary to enforce, or seek redress for breach of, this Agreement. Except as
may be otherwise required by any of the Contracts or applicable law, Purchaser
shall be obligated to maintain the Records for a period of seven years following
the Closing Date; provided, however, Purchaser shall not be obligated to
maintain any Records that relate in all material respects to any of the
Interests that cease to be owned by Purchaser if Purchaser has obligated its
successors and assigns of such Records to maintain and allow access to such
Records for the remainder of such seven-year period; and provided further,
however, Purchaser shall not be required to retain any Records that it has
offered to deliver to Sellers.
9.5. Further Assurances. After the Closing, Sellers and Purchaser agree to
execute and deliver such instruments and take such other actions as may be
necessary or advisable to carry out their obligations under this Agreement or
any other document delivered pursuant hereto. In particular, Sellers and
Purchaser agree to execute and deliver such instruments and take such other
actions as may be necessary and advisable to (a) make all filings,
registrations, and recordings which must be made with respect to the Leases in
the records of the MMS and all appropriate counties, parishes, and state
agencies and offices in order that the records maintained by the MMS and the
appropriate state agencies and the appropriate records of the relevant parishes
and counties shall accurately reflect the transfer of the Interests to
Purchaser, (b) enable
29
Sellers to take promptly all actions over which Sellers have control to allow
Purchaser to be designated as the operator with respect to those Interests as to
which any Seller or HHOC is the operator as of the Effective Time, and (c)
obtain prompt and unconditional approvals of transfers of the Leases by the MMS.
To the extent required by the MMS, Purchaser agrees to take promptly any and all
actions necessary to post with the MMS any supplemental bonds and provide any
and all documentation that may be required by the MMS to evidence the financial
responsibility of Purchaser under applicable federal regulations and MMS
policies.
9.6. Assumption and Indemnity.
(a) Upon the Closing, Purchaser hereby assumes responsibility for and
agrees to pay, perform and discharge all of the following (collectively, the
"Assumed Obligations"):
(i) all duties and obligations of Sellers arising out of or in
connection with the ownership or operation of the Interests on or after the
Closing Date, including (A) all costs, expenses, liabilities, claims and
obligations assumed or otherwise agreed to be paid by Purchaser pursuant to
the terms of this Agreement, excluding, however, any Environmental
Liabilities (as defined below in this Section 9.6(a), such Environmental
Liabilities, to the extent assumed by Purchaser, being exclusively
addressed in clause (ii) below in this Section 9.6(a) and (B) all
obligations regarding site clearance, plugging, abandoning, and removing
all existing and any future Wells, platforms, facilities and pipelines
located on or used in connection with the Interests in accordance with the
requirements of all applicable governmental authorities and the terms of
all applicable Leases and Contracts (such obligations in this clause (B)
being the "Abandonment and Clean-up Obligations");
(ii) all Environmental Liabilities (as defined below in this
Section 9.6(a)), whether accruing prior to, on or after the Closing Date;
and
(iii) the prompt and complete payment, performance and discharge of
all obligations and liabilities of Sellers attributable to or arising out
of any of the Leases and any of the Contracts listed on Schedule 1-C (the
"Assumed Contracts") for the period from and after the Closing, to the
extent such liabilities and obligations are (A) attributable to or arise
out of the ownership, use or operation of the Interests, (B) attributable
to the period of time on or after the Closing Date, and (C) are not the
result of any default of or failure to perform by any Seller under any of
the Assumed Contracts as to any point in time prior to the Closing;
provided, however, notwithstanding anything contained in clauses (i), (ii)
or (iii) of this Section 9.6(a) to the contrary, Purchaser shall not assume
and shall have no liability (contingent or otherwise) whatsoever with
respect to the Retained Obligations (as defined in Section 9.6(b)) or any
matter
30
with respect to which any Seller has indemnified Purchaser pursuant to
clause (ii) of Section 9.6(d).
(a) The term "Environmental Liabilities," as used herein, shall mean all
costs, expenses, liabilities, and obligations attributable to the Interests and
arising out of or in connection with any violation of Environmental Laws or any
Environmental Non-Violation of Laws Matters (as defined below in this Section
9.6(a). The term "Environmental Non-Violation of Laws Matters," as used herein,
shall mean any cost, expense, liability or obligation with respect to the
Interests (x) resulting from or attributable to actual, threatened, or alleged
emissions, discharges, or releases of Hazardous Substances (as defined below in
this Section 9.6(a)) into ambient air, surface water, groundwater or land, (y)
resulting from or attributable to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of Hazardous
Substances, or (z) otherwise arising under or related to Environmental Laws. The
term "Hazardous Substances" shall have the meaning given such term in the
Comprehensive Environmental, Response, Compensation, and Liability Act of 1980.
(b) Each Seller, severally and not jointly, shall retain responsibility
for and agrees to pay, perform and discharge all costs, expenses, liabilities,
claims and obligations (excluding, however, Abandonment and Clean-up
Obligations, Environmental Liabilities) arising out of or in connection with the
ownership or operation of the Interests of such Seller prior to the Closing Date
(the "Retained Obligations").
(c) To the extent Purchaser wishes to make adjustments to any audits
with respect to any of the Interests relating to any period prior to the
Effective Time, Purchaser shall do so only with the prior written consent of any
affected Seller.
(d) IN THE EVENT THAT THE CLOSING OCCURS, EXCEPT AS TO MATTERS WAIVED IN
WRITING BY THE PARTY HERETO AGAINST WHICH THE WAIVER IS SOUGHT TO BE ENFORCED,
(I) PURCHASER SHALL PROTECT, DEFEND, RELEASE, INDEMNIFY AND HOLD HARMLESS EACH
SELLER AND THE SHAREHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS OF EACH
SELLER AND THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS, AND ASSIGNS OF ANY
OF THE FOREGOING (EACH A "SELLER INDEMNIFIED PARTY") FROM AND AGAINST ANY AND
ALL DAMAGES, CLAIMS, LOSSES, DEMANDS, FINES, PENALTIES, JUDGMENTS (INCLUDING
INTEREST), COSTS, EXPENSES, ENVIRONMENTAL LIABILITIES, AND OTHER LIABILITIES,
DIRECT, CONTINGENT, OR OTHERWISE, INCLUDING CONSULTANT AND ATTORNEYS' FEES AND
COSTS OF COURT ("DAMAGES") WHICH MAY BE ALLEGED AGAINST ANY SELLER INDEMNIFIED
PARTY, ARISING OR ACCRUING WITH RESPECT TO (A) ANY REPRESENTATION OR WARRANTY
MADE BY PURCHASER IN OR PURSUANT TO THIS AGREEMENT BEING UNTRUE OR INCORRECT IN
ANY MATERIAL RESPECT, (B) ANY FAILURE BY PURCHASER TO PERFORM ANY COVENANT OR
AGREEMENT SET FORTH IN THIS AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT
EXECUTED BY IT IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY OR (C)
THE ASSUMED OBLIGATIONS AND (II) EACH SELLER, SEVERALLY AND NOT JOINTLY, (EXCEPT
THAT THE LIABILITY OF THE SELLERS OTHER THAN BRUCE R. SIDNER, WAYNE P. HALL AND
31
JOHN H. PEPER UNDER THIS SECTION 9.6 (SUCH SELLERS BEING THE "GARY HALL GROUP")
SHALL BE JOINT AMONG THEM, AS WELL AS SEVERAL) SHALL PROTECT, DEFEND, RELEASE,
INDEMNIFY AND HOLD HARMLESS PURCHASER AND THE SHAREHOLDERS, DIRECTORS, OFFICERS,
EMPLOYEES, AND AGENTS OF PURCHASER AND THE HEIRS, PERSONAL REPRESENTATIVES,
SUCCESSORS, AND ASSIGNS OF ANY OF THE FOREGOING (EACH A "PURCHASER INDEMNIFIED
PARTY") FROM ANY DAMAGES WHICH MAY BE ALLEGED AGAINST ANY PURCHASER INDEMNIFIED
PARTY, ARISING OR ACCRUING WITH RESPECT TO (A) ANY REPRESENTATION OR WARRANTY
(OTHER THAN ANY BREACH OF A REPRESENTATION OR WARRANTY BY SUCH SELLER AS TO
COMPLIANCE WITH ENVIRONMENTAL LAWS OR ENVIRONMENTAL PERMITS OR THE EXISTENCE OF
ABANDONMENT AND CLEAN-UP OBLIGATIONS OR ENVIRONMENTAL LIABILITIES) MADE BY SUCH
SELLER IN OR PURSUANT TO THIS AGREEMENT BEING UNTRUE OR INCORRECT IN ANY
MATERIAL RESPECT, (B) ANY FAILURE BY SUCH SELLER TO PERFORM ANY COVENANT OR
AGREEMENT SET FORTH IN THIS AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT
EXECUTED BY IT IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY OR (C)
THE RETAINED OBLIGATIONS OF SUCH SELLER. THE TERM "DAMAGES," AS USED IN THIS
SECTION 9.6, SHALL NOT INCLUDE (X) ANY AMOUNT WHICH WAS TAKEN INTO ACCOUNT AS AN
ADJUSTMENT TO THE PURCHASE PRICE PURSUANT TO ANY APPLICABLE PROVISION OF THIS
AGREEMENT OR (Y) COSTS AND EXPENSES OF EITHER PARTY HERETO AS DESCRIBED IN
SECTION 10.2.
(e) Neither any Seller Indemnified Party nor any Purchaser Indemnified
Party shall be entitled to indemnification under this Section 9.6 unless the
aggregate of all amounts for which indemnity would otherwise be due to the
Seller Indemnified Parties or the Purchaser Indemnified Parties, as the case may
be, exceeds $250,000 in the aggregate, in which case the Seller Indemnified
Parties or the Purchaser Indemnified Parties, as the case may be, shall be
entitled to recover in full with respect to all such amounts. This threshold
does not apply to (and shall not be satisfied by) defaults related to the
payment of money or other liquidated amounts. NOTWITHSTANDING ANYTHING IN THIS
AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL PURCHASER OR ANY SELLER BE LIABLE
HEREUNDER FOR ANY EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL,
INCIDENTAL, STATUTORY, REMOTE OR SPECULATIVE DAMAGES. FURTHER NOTWITHSTANDING
ANYTHING IN THIS AGREEMENT TO THE CONTRARY, EXCEPT AS TO THE MEMBERS OF THE GARY
HALL GROUP, THE LIABILITY OF EACH OF WHICH UNDER THIS SECTION 9.6 SHALL NOT
EXCEED THE SUM OF THE VALUE OF THE CONSIDERATION RECEIVED BY ALL SUCH SELLERS
HEREUNDER DETERMINED AS PROVIDED BELOW IN THIS SECTION 9.6, NO SELLER SHALL BE
OBLIGATED TO PROVIDE INDEMNIFICATION UNDER THIS SECTION 9.6 EXCEEDING IN THE
AGGREGATE AS TO ALL CLAIMS FOR SUCH INDEMNIFICATION, AN AMOUNT EQUAL TO THE
VALUE OF THE CONSIDERATION RECEIVED BY SUCH SELLER HEREUNDER DETERMINED AS
PROVIDED BELOW IN THIS SECTION 9.6. FOR PURPOSES OF THE FOREGOING SENTENCE, THE
VALUE OF THE CONSIDERATION RECEIVED BY EACH SELLER SHALL BE THE SUM OF THE BUYER
WARRANTS RECEIVED BY SUCH SELLER (VALUED AT $0.75 PER BUYER WARRANT) AND THE
EARNOUT PAYMENTS ACTUALLY MADE TO SUCH SELLER. TO THE EXTENT ANY CLAIM AGAINST A
SELLER UNDER THIS SECTION 9.6 EXCEEDS THE THEN EXISTING MAXIMUM LIABILITY OF
SUCH SELLER UNDER THIS SECTION 9.6, PURCHASER SHALL
32
HAVE THE RIGHT TO SET OFF ANY SUCH UNSATISFIED CLAIM AGAINST FUTURE EARNOUT
PAYMENTS DUE TO SUCH SELLER. SIMILARLY, NOTWITHSTANDING ANYTHING IN THIS
AGREEMENT TO THE CONTRARY, PURCHASER SHALL NOT BE OBLIGATED TO PROVIDE
INDEMNIFICATION UNDER THIS SECTION 9.6 TO ANY SELLER AND ITS RELATED SELLER
INDEMNIFIED PARTIES EXCEEDING IN THE AGGREGATE AN AMOUNT EQUAL TO THE MAXIMUM
LIABILITY OF THE RELEVANT SELLER UNDER THIS SECTION 9.6.
9.7 Express Negligence. THE DEFENSE, INDEMNIFICATION AND HOLD HARMLESS
PROVISIONS PROVIDED FOR IN THIS AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE
DAMAGES IN QUESTION AROSE SOLELY OR IN PART FROM THE ACTIVE, PASSIVE OR
CONCURRENT NEGLIGENCE, OR OTHER FAULT (INCLUDING STRICT LIABILITY), OF ANY
SELLER INDEMNIFIED PARTY OR PURCHASER INDEMNIFIED PARTY. PURCHASER AND EACH
SELLER ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE
AND IS CONSPICUOUS.
9.8. Indemnification Procedure. All claims for indemnification under the
provisions of Section 9.6 shall be asserted and resolved pursuant to the
provisions of this Section 9.8. Any person or entity claiming indemnification
hereunder is hereinafter referred to as the "Indemnified Party" and any person
or entity against whom such claims are asserted hereunder is hereinafter
referred to as the "Indemnifying Party." In the event that any Damages are
asserted against or sought to be collected from an Indemnified Party by a third
party, such Indemnified Party shall, with reasonable promptness, provide to the
Indemnifying Party a written notice of claim specifying, in reasonable detail,
the specific nature of and specific basis of the Damages and the estimated
amount of such Damages and including a copy of all papers served with respect to
such claim (if any) and the basis of such claim for indemnification under the
provisions of Section 9.6 (each a "Claim Notice"). Notwithstanding the preceding
sentence, failure of an Indemnified Party to give notice hereunder shall not
release the Indemnifying Party from its obligations under the provisions of
Section 9.6, except to the extent the Indemnifying Party is actually prejudiced
by such failure to give notice; provided that, the Indemnifying Party shall not
be obligated to defend, indemnify or otherwise hold harmless an Indemnified
Party with respect to a third party claim until a Claim Notice meeting the
foregoing requirements is furnished to the Indemnifying Party by the party
seeking indemnity hereunder. The Indemnifying Party shall have thirty (30) days
from the personal delivery or receipt of any Claim Notice (the "Notice Period")
in which to notify the Indemnified Party whether or not it disputes the
liability of the Indemnifying Party to the Indemnified Party hereunder with
respect to such Damages. If the Indemnifying Party fails to so notify the
Indemnified Party during the Notice Period, the Indemnifying Party shall be
deemed to have elected to dispute such liability. The Indemnified Party shall
have the duty to defend such third party claim by all appropriate proceedings,
and with counsel of its own choosing, which proceedings shall be promptly
settled or prosecuted to a final conclusion. If the Indemnifying Party desires
to participate in, but not control, any such defense or settlement, it may do so
at its sole cost and expense. If requested by the Indemnified Party, the
Indemnifying Party agrees to cooperate with the Indemnified Party and its
counsel in contesting any Damages that the Indemnified Party elects to contest.
No claim may be settled or otherwise compromised
33
without the prior written consent of the Indemnifying Party. If the Indemnifying
Party disputes whether a third party claim is an indemnified claim under the
provisions of Section 9.6, the determination of whether the Indemnified Party is
entitled to indemnification under the provisions of Section 9.6 shall be
resolved pursuant to arbitration as provided in Section 10.16.
9.9 Allocation of Proceeds. Sellers shall receive all proceeds from the
sale of Substances physically produced or allocable to the Interests prior to
the Effective Time. Purchaser shall receive all proceeds from the sale of
Substances physically produced or allocable to the Interests on or after the
Effective Time.
9.10. Termination of Confidentiality Agreements. Effective upon the
Closing, the obligations of Purchaser under the Confidentiality Agreements,
insofar and only insofar as they relate to the Interests, are terminated.
ARTICLE X
MISCELLANEOUS
10.1. Notices. All notices required or permitted under this Agreement shall
be effective upon receipt if personally delivered, if mailed by registered or
certified mail, postage prepaid, or if delivered by telegram, telecopy or
facsimile if directed to the relevant party hereto as follows:
To any Seller: [Name of relevant Seller]
c/o Hall-Houston Oil Company
700 Louisiana, Suite 2100
Houston, Texas 77002
Telephone: (713) 228-0711
Fax: (713) 225-7600
Attn: John H. Peper
Senior Vice President
To Purchaser: Energy Partners, Ltd.
201 St. Charles Avenue
Suite 3400
New Orleans, Louisiana 70170
Fax: (504) 569-1874
Attn: President
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
34
Fax: (212) 269-5420
Attn: John Schuster, Esq.
Any party hereto may give written notice to the others, in the aforesaid manner,
of a change in the address or individual to whom delivery to such party shall be
made.
10.2 Expenses. Except as otherwise provided in this Agreement, all fees,
costs and expenses incurred by any party hereto in negotiating this Agreement or
in consummating the transactions contemplated by this Agreement shall be paid by
the party hereto incurring them.
10.3. Amendment. This Agreement may not be altered or amended, nor may any
rights hereunder be waived, except by a written instrument executed by each of
the parties hereto. No waiver of any provision of this Agreement shall be
construed as a continuing waiver of the same provision or of any other provision
of this Agreement.
10.4. Assignment. Except as provided in the following sentence of this
Section 10.4, neither party hereto may assign or delegate any of its rights or
duties hereunder without the prior written consent of the other party hereto.
Purchaser shall have the right, without obtaining the prior written consent of
Sellers, to assign the rights of Purchaser hereunder to HHOC or an Affiliate (as
defined below in this Section 10.4) of Purchaser; provided, however, no such
assignment shall relieve Purchaser of any of its obligations under this
Agreement. In connection with any such assignment by Purchaser to HHOC made
prior to the Closing, Sellers agree to enter into an amendment to this
Agreement, in form mutually satisfactory to Sellers and HHOC and approved by
Purchaser, substituting shares of a new series of preferred stock of HHOC (the
"New HHOC Preferred Stock") as the purchase price to be paid for the Interests,
amending the provisions of Section 2.3 and Section 7.2 accordingly, and
committing Sellers, in connection with the closing of the merger which is the
subject of the Merger Agreement, to exchange such shares of the New HHOC
Preferred Stock for the Securities Consideration and the Earnout Consideration
as set forth in Section 2.1, which shall be allocable among Sellers as set forth
in Schedule 2.1. The term "Affiliate" as used herein shall mean, as to the
person or entity specified, any person or entity controlling, controlled by or
under common control with such specified person or entity. The concept of
control, controlling or controlled by as used in the aforesaid context means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of another, whether through the
ownership of voting securities, by contract or otherwise. No person or entity
shall be deemed an Affiliate of any person or entity by reason of the exercise
or existence of rights, interests or remedies under this Agreement.
10.5. Conditions. The inclusion in this Agreement of conditions to the
obligations of each Seller or Purchaser at the Closing shall not, in and of
itself, be a covenant of any party hereto to satisfy the conditions to the
obligations of any other party hereto at the Closing.
10.6. References. References in this Agreement to Schedule, Exhibit,
Article, or Section numbers shall be to Schedules, Exhibits, Articles, or
Sections of this Agreement, unless
35
expressly stated to the contrary. References in this Agreement to "hereby,"
"herein," "hereinafter," "hereinabove," "hereinbelow," "hereof," "hereunder" and
words of similar import shall be to this Agreement in its entirety and not only
to the particular Schedule, Exhibit, Article, or Section in which such reference
appears. Specific enumeration herein shall not exclude the general and, in such
regard, references in this Agreement to "includes" or "including" shall mean
"includes, without limitation," or "including, without limitation," as the case
may be. Except as otherwise indicated, references in this Agreement to statutes,
sections, or regulations are to be construed as including all statutory or
regulatory provisions consolidating, amending, replacing, succeeding, or
supplementing the statute, section, or regulation referred to. References in
this Agreement to "writing" include printing, typing, lithography, facsimile
reproduction, and other means of reproducing words in a tangible visible form.
References in this Agreement to agreements and other contractual instruments
shall be deemed to include all exhibits and appendices attached thereto and all
subsequent amendments and other modifications to such instruments, but only to
the extent such amendments and other modifications are not prohibited by the
terms of this Agreement. References in this Agreement to persons or entities
include their respective successors and permitted assigns.
10.7. Articles and Sections. This Agreement, for convenience only, has been
divided into Articles and Sections; and it is understood that the rights and
other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
10.8. Number and Gender. Whenever the context requires, reference herein
made to the single number shall be understood to include the plural; and
likewise, the plural shall be understood to include the singular. Definitions of
terms defined in the singular or plural shall be equally applicable to the
plural or singular, as the case may be, unless otherwise indicated. Words
denoting sex shall be construed to include the masculine, feminine and neuter,
when such construction is appropriate; and specific enumeration shall not
exclude the general but shall be construed as cumulative.
10.9. Incorporation of Schedules and Exhibits. The Schedules and Exhibits
attached to this Agreement are incorporated herein and shall be considered a
part of this Agreement for all purposes.
10.10. Counterparts. This Agreement may be executed in counterparts, each
of which shall be an original and which, taken together, shall constitute the
same instrument.
10.11. Governing Law. EXCEPT TO THE EXTENT THE LAWS OF ANOTHER JURISDICTION
MANDATORILY GOVERN ANY ASPECT OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT, THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
36
STATE OF LOUISIANA, WITHOUT GIVING EFFECT TO ANY PRINCIPLES OF SUCH LAWS
REGARDING CONFLICT OF LAWS.
10.12. Integration. THIS AGREEMENT AND THE DOCUMENTATION TO BE EXECUTED AND
DELIVERED AT THE CLOSING CONSTITUTE THE ENTIRE UNDERSTANDING BETWEEN SELLER AND
PURCHASER CONCERNING THE SUBJECT MATTER OF THIS AGREEMENT AND SUPERSEDE ALL
NEGOTIATIONS, DISCUSSIONS, REPRESENTATIONS, PRIOR AGREEMENTS AND UNDERSTANDINGS,
WHETHER ORAL OR WRITTEN, EXCEPT THE CONFIDENTIALITY AGREEMENT.
10.13. Parties in Interest. Except as otherwise expressly provided herein,
this Agreement is binding upon and shall inure to the benefit of Seller and
Purchaser and their respective successors, representatives, and permitted
assigns. Except as otherwise expressly provided herein, no other person or
entity is intended to have any benefits, rights or remedies under this Agreement
nor shall any person or entity other than Purchaser and Seller be entitled to
any claim, cause of action, remedy, or right of any kind under this Agreement.
10.14. Severability. If any provision of this Agreement is found to be
illegal or unenforceable, the other terms of this Agreement shall remain in
effect and this Agreement shall be construed as if the illegal or unenforceable
provision had not been included.
10.15. Survival. The covenants, agreements, representations, warranties and
indemnities contained in this Agreement shall survive the Closing of the
transactions contemplated hereby; provided, however, except as to the
representations and warranties made by each Seller in Sections 3.1(a), (b), (c),
(d) and (e), the representations and warranties made by each Seller in this
Agreement and indemnities by each Seller associated therewith shall survive the
Closing for eighteen months only.
10.16. Arbitration. Except as provided in Section 9.1 and below in this
Section 10.16, any dispute, controversy or claim arising out of or in relation
to or in connection with this Agreement, including any dispute as to the
construction, validity, interpretation, enforceability or breach of this
Agreement, shall be exclusively and finally settled by arbitration in accordance
with this Section 10.16. Any party may submit such a dispute, controversy or
claim to arbitration by notice to the other involved party and the administrator
for the American Arbitration Association ("AAA"). The arbitration proceedings
shall be conducted in New Orleans, Louisiana, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association as in effect on the
date hereof. The arbitration shall be heard and determined by three arbitrators.
Each side shall appoint an arbitrator of its choice within twenty (20) days of
the submission of the notice of arbitration. The party-appointed arbitrators
shall in turn appoint a presiding arbitrator for the tribunal within twenty (20)
days following the appointment of the second party-appointed arbitrator. If the
party-appointed arbitrators cannot reach agreement on a presiding arbitrator for
the tribunal and/or one party fails to appoint its party-appointed arbitrator
within the applicable period, the AAA shall act as appointing authority to
appoint an independent
37
arbitrator with at least ten (10) years experience in the legal and/or
commercial aspects of the petroleum exploration and production industry. None of
the arbitrators shall have been an employee or consultant to either party to the
arbitration or any of their respective Affiliates, or have any financial
interest in the dispute, controversy or claim. All decisions of the arbitral
tribunal shall be by majority vote. The arbitrators may not award consequential,
punitive or similar damages except those claimed by persons other than Sellers
and Purchaser for which responsibility is being allocated among the parties.
Expenses in connection with the arbitration and the compensation and expenses of
the arbitrators shall be borne in such manner as may be specified in the
arbitral award. Privileges protecting attorney-client communications and
attorney work product from compelled disclosure or use in evidence, as
recognized by the Federal Rules of Civil Procedure, shall apply to and be
binding in any arbitration proceeding conducted under this Section 10.16. This
Section 10.16 does not apply to any dispute, controversy or claim in which the
claimant seeks injunctive, declaratory or other equitable relief, and each party
hereto reserves its right to bring such action in court, which the parties
hereto agree shall be exclusively the U.S. Federal Courts sitting in the Eastern
District of Louisiana and each party hereto irrevocably consents to personal
jurisdiction in any and all such tribunals.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
38
IN WITNESS WHEREOF, Purchaser and Sellers have executed and delivered this
Agreement as of the date first set forth above.
SELLERS:
WITNESSES: HALL PARTNERS, L.P.
By: Hall Interests, Inc.
-----------------------------------------
its General Partner
Name: /s/ Karen Raif
---------------------------------------
Karen Raif
By: /s/ Gary L. Hall
-----------------------------------------
Name: /s/ Leslie D. Moore Name: Gary L. Hall
--------------------------------------- ---------------------------------------
Leslie D. Moore Title: President
--------------------------------------
WITNESSES: LPCR INVESTMENT GROUP, L.P.
By: Hall Interests, Inc.
--------------------------------------------
its General Partner
Name: /s/ Karen Raif
---------------------------------------
Karen Raif
By: /s/ Gary L. Hall
-----------------------------------------
Name: /s/ Leslie D. Moore Name: Gary L. Hall
--------------------------------------- ---------------------------------------
Leslie D. Moore Title: President
--------------------------------------
WITNESSES: HALL CONSULTING COMPANY, INC.
By: /s/ Gary L. Hall
--------------------------------------------------
Name: /s/ Karen Raif Name: Gary L. Hall
--------------------------------------- ------------------------------------------------
Karen Raif Title: President
-----------------------------------------------
Name: /s/ Leslie D. Moore
---------------------------------------
Leslie D. Moore
WITNESSES: HALL EQUITIES, INC.
By: /s/ Gary L. Hall
--------------------------------------------------
Name: /s/ Karen Raif Name: Gary Hall
--------------------------------------- ------------------------------------------------
Karen Raif Title: President
-----------------------------------------------
Name: /s/ Leslie D. Moore
---------------------------------------
Leslie D. Moore
S-39
WITNESSES: HALL FAMILY TRUST
By: /s/ Gary L. Hall
--------------------------------------------------
Name: /s/ Karen Raif Name: Gary L. Hall
--------------------------------------- ------------------------------------------------
Karen Raif Title: Trustee
-----------------------------------------------
Name: /s/ Leslie D. Moore
---------------------------------------
Leslie D. Moore
WITNESSES:
/s/ Bruce R. Sidner
-------------------------------------
Name: /s/ Karen Raif Bruce R. Sidner
---------------------------------------
Karen Raif
Name: /s/ Leslie D. Moore
---------------------------------------
Leslie D. Moore
WITNESSES:
/s/ Wayne P. Hall
-------------------------------------
Name: /s/ Karen Raif Wayne P. Hall
---------------------------------------
Karen Raif
Name: /s/ Leslie D. Moore
---------------------------------------
Leslie D. Moore
WITNESSES:
/s/ John H. Peper
-------------------------------------
Name: /s/ Karen Raif John H. Peper
---------------------------------------
Karen Raif
Name: Leslie D. Moore
---------------------------------------
Leslie D. Moore
PURCHASER:
WITNESSES: ENERGY PARTNERS, LTD.
By: /s/ Clinton W. Coldren
-----------------------------------------
Name: /s/ Dina M. Bracci Name: Clinton W. Coldren
--------------------------------------- ---------------------------------------
Dina M. Bracci Title: Executive Vice President
--------------------------------------
S-40
Name: /s/ Joseph H. Leblanc
---------------------------------------
Joseph N. Leblanc
The undersigned, Nancy F. Butte (spouse of Bruce R. Sidner), Valerie A.
Hall (spouse of Wayne P. Hall), and Ann M. Peper (spouse of John H. Peper), join
in execution of this Agreement to commit to this Agreement their respective
community property interests in the Interests of their respective spouses
committed to this Agreement.
WITNESSES:
/s/ Karen Raif
- -------------------------------------------- /s/ Nancy F. Butte
Name: Karen Raif Nancy F. Butte
Name: /s/ Leslie D. Moore
- ---------------------------------------
Leslie D. Moore
WITNESSES:
/s/ Valerie A. Hall
Name: /s/ Karen Raif Valerie A. Hall
---------------------------------------
Karen Raif
Name: /s/ Leslie D. Moore
---------------------------------------
Leslie D. Moore
WITNESSES:
/s/ Ann M. Peper
Name: /s/ Karen Raif Ann M. Peper
---------------------------------------
Karen Raif
Name: /s/ Leslie D. Moore
---------------------------------------
Leslie D. Moore
SCHEDULE 1-A
Attached to and made a part of that certain Purchase and Sale Agreement
dated December 16, 2001, by and between Hall Partners, L.P. et al., as
"Sellers", and Energy Partners, Ltd., as "Purchaser".
2. PROPERTY: EAST CAMERON BLOCK 161
SERIAL NO.: OCS-G 15141
Lease Description: Oil and Gas Lease effective
July 1, 1995, between the United States of
America, as Lessor, and Energy Development
Corporation and Hardy Oil & Gas USA Inc., as
Lessee, covering all of Block 161, East
Cameron Area, OCS Leasing Map, Louisiana Map
No. 2, INSOFAR AND ONLY INSOFAR as said
lease covers the NW/4 as to subsea depths
from the seafloor down to and including 100
feet below the stratigraphic equivalent of
8201 feet true vertical depth as seen in the
Hall-Houston Oil Company OCS-G 15141 No. 3
Well.
Hall Partners, L.P.:
-------------------
Working Interest: 6.00000% OPERATING RIGHTS
Net Revenue Interest: 4.28000%
LPCR Investment Group, L.P.:
Working Interest 1.00000% OPERATING RIGHTS
Net Revenue Interest: 0.71333%
Hall Consulting Company, Inc.:
Working Interest: 1.00000% OPERATING RIGHTS
Net Revenue Interest: 0.71333%
Hall Equities, Inc.:
Working Interest: 1.00000% OPERATING RIGHTS
Net Revenue Interest: 0.71333%
Hall Family Trust:
Working Interest: 1.00000% OPERATING RIGHTS
Net Revenue Interest: 0.71334%
Bruce R. Sidner:
Working Interest: 1.00000% OPERATING RIGHTS
Net Revenue Interest: 0.71334%
Wayne P. Hall:
Working Interest: 1.00000% OPERATING RIGHTS
Net Revenue Interest: 0.71333%
John H. Peper:
Working Interest: 1.00000% OPERATING RIGHTS
Net Revenue Interest: 0.71333%
Wells: OCS-G 15141 A-1 (aka #3)
Production Status: Producing
OCS-G 15141 A-2 (aka #4)
Production Status: Producing
3. PROPERTY: EAST CAMERON BLOCK 196
SERIAL NO.: OCS-G 16244
Lease Description: Oil and Gas Lease effective September 1, 1996, between the United States of
America, as Lessor, and Hardy Oil & Gas USA Inc. (predecessor in interest to
Mariner Energy, Inc.) and Forcenergy Gas Exploration, Inc., as Lessee,
covering all of Block 196, East Cameron Area, OCS Leasing Map, Louisiana Map
No. 2, containing approximately 5,000 acres, INSOFAR AND ONLY INSOFAR as to
the depths from the seafloor down to and including 100 feet below the
stratigraphic equivalent of 3200 feet true vertical depth as seen in the
Hall-Houston Oil Company OCS-G 16244 No. 2 Well.
Hall Partners, L.P.:
-------------------
Working Interest: 6.00000% OPERATING RIGHTS
Net Revenue Interest: 4.28000%
LPCR Investment Group, L.P.:
Working Interest 1.00000% OPERATING RIGHTS
Net Revenue Interest: 0.71333%
Hall Consulting Company, Inc.:
Working Interest: 1.00000% OPERATING RIGHTS
Net Revenue Interest: 0.71333%
Schedule A-1 Page 2 of 6
Hall Equities, Inc.:
Working Interest: 1.00000% OPERATING RIGHTS
Net Revenue Interest: 0.71334%
Hall Family Trust:
Working Interest: 1.00000% OPERATING RIGHTS
Net Revenue Interest: 0.71333%
Bruce R. Sidner:
Working Interest: 1.00000% OPERATING RIGHTS
Net Revenue Interest: 0.71333%
Wayne P. Hall:
Working Interest: 1.00000% OPERATING RIGHTS
Net Revenue Interest: 0.71334%
John H. Peper:
Working Interest: 1.00000% OPERATING RIGHTS
Net Revenue Interest: 0.71333%
Wells: OCS-G 16244 #2 (aka #A-1 ST 1)
Production Status: Producing
4. PROPERTY: EAST CAMERON BLOCK 263
SERIAL NO.: OCS-G 15147
Lease Description: Oil and Gas Lease effective July 1, 1995, between the United States of
America, as Lessor, and Hardy Oil & Gas USA Inc. and Nippon Oil Exploration
U.S.A. Limited, as Lessee, covering all of Block 263, East Cameron Area, South
Addition, OCS Leasing Map, Louisiana Map No. 2A, containing approximately
5,000 acres:
o INSOFAR AND ONLY INSOFAR as said Block 263 covers the N/2NW/4SW/4 and
the S/2SW/4NW/4 from those depths below 6520 feet subsea:
Hall Partners, L.P.:
-------------------
Working Interest: 6.00000% RECORD TITLE
Net Revenue Interest: 4.49000%
LPCR Investment Group, L.P.:
Schedule 1-A Page 3 of 6
Working Interest 1.00000% RECORD TITLE
Net Revenue Interest: 0.74834%
Hall Consulting Company, Inc.:
Working Interest: 1.00000% RECORD TITLE
Net Revenue Interest: 0.74834%
Hall Equities, Inc.:
Working Interest: 1.00000% RECORD TITLE
Net Revenue Interest: 0.74833%
Hall Family Trust:
Working Interest: 1.00000% RECORD TITLE
Net Revenue Interest: 0.74833%
Bruce R. Sidner:
Working Interest: 1.00000% RECORD TITLE
Net Revenue Interest: 0.74833%
Wayne P. Hall:
Working Interest: 1.00000% RECORD TITLE
Net Revenue Interest: 0.74833%
John H. Peper:
Working Interest: 1.00000% RECORD TITLE
Net Revenue Interest: 0.74833%
Wells: None
o INSOFAR AND ONLY INSOFAR as said Block 263 covers the remaining
aliquots and depths:
Hall Partners, L.P.:
Working Interest: 6.00000% RECORD TITLE
Net Revenue Interest: 4.58000%
LPCR Investment Group, L.P.:
Working Interest 1.00000% RECORD TITLE
Net Revenue Interest: 0.76334%
Hall Consulting Company, Inc.:
Working Interest: 1.00000% RECORD TITLE
schedule 1-A Page 4 of 6
Net Revenue Interest: 0.76334%
Hall Equities, Inc.:
Working Interest: 1.00000% RECORD TITLE
Net Revenue Interest: 0.76333%
Hall Family Trust:
Working Interest: 1.00000% RECORD TITLE
Net Revenue Interest: 0.76333%
Bruce R. Sidner:
Working Interest: 1.00000% RECORD TITLE
Net Revenue Interest: 0.76333%
Wayne P. Hall:
Working Interest: 1.00000% RECORD TITLE
Net Revenue Interest: 0.76333%
John H. Peper:
Working Interest: 1.00000% RECORD TITLE
Net Revenue Interest: 0.76333%
Wells: OCS-G 15147 #B-1 (aka #3)
Production Status: Producing
OCS-G 15147 #B-2
Production Status: Producing
1. PROPERTY: EUGENE ISLAND 247
SERIAL NO.: OCS-G 21111
o Lease Description: Oil and Gas Lease effective June 1, 1999 between
The United States of America, as Lessor, and Hall-Houston Oil Company,
as Lessee, covering all of Block 247, Eugene Island Area, OCS Leasing
Map, Louisiana Map No. 4.
Hall Partners, L.P.:
Working Interest: 6.00000% RECORD TITLE
Net Revenue Interest: 4.88001%
LPCR Investment Group, L.P.:
Working Interest 1.00000% RECORD TITLE
Net Revenue Interest: 0.81333%
Hall Consulting Company, Inc.:
Schedule 1-A page 5 of 6
Working Interest: 1.00000% RECORD TITLE
Net Revenue Interest: 0.81333%
Hall Equities, Inc.:
Working Interest: 1.00000% RECORD TITLE
Net Revenue Interest: 0.81333%
Hall Family Trust:
Working Interest: 1.00000% RECORD TITLE
Net Revenue Interest: 0.81333%
Bruce R. Sidner:
Working Interest: 1.00000% RECORD TITLE
Net Revenue Interest: 0.81333%
Wayne P. Hall:
Working Interest: 1.00000% RECORD TITLE
Net Revenue Interest: 0.81333%
John H. Peper:
Working Interest: 1.00000% RECORD TITLE
Net Revenue Interest: 0.81334%
Wells: OCS-G 21111 #1
Production Status: Junked and Abandoned
OCS-G 21111 #2
Production Status: Temporarily Abandoned
Schedule 1-A Page 6 of 6
SCHEDULE 1-B
LIST OF PIPELINES AND PLATFORMS
PIPELINES:
- --------------------------------------------------------------------------------------------------------
Pipeline Riser Proposed As
SEGMENT NO. COMES FROM GOES TO SIZE W.T./Grd W.T./Gr LENGTH BUILT
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
12734 EC 161 "A" (G-15141) EC1160 'A' 4.5 .337/ X. 42 .438 /x 42 7954' 7969'
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
12735 EC 161 "A" (G-15141) EC1160 'A' 4.5 .337 / x 42 .438 /x 42 7954' 7969'
- --------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
13521 EC 196 "A" (G-16244) EC4196 SSTI 30 6.625" .432 / GR B .432/ GR B 1013' 1026'
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
13086 EC 263 "B" (G-15147) 30"TETCO SSTI 6" 280 / GR B .432 / G$R 3,462.57' 3326'
- ---------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------
DOT/DOI
R-O-W NO. REMARKS Transfer Point CP
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
G22122 Installed November/December 200 TEPI sales PL DOI/CP
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
G22123 Installed November/Dece TEPI sales PL DOI/CP
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
-- Lease line installed 11/01 SSTI -Sea Robin DOI/CP
- ------------------------------------------------------------------------
- -----------------------------------------------------------------------
NA Lease line SSTI on TETCO DOI/CP
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
PLATFORMS:
- ------------------------------------------------------------------------------
Block Produces Produces Lat - Long
OCSG # Platform name From to Platform
- ------------------------------------------------------------------------------
15141 EAST CAMERON 161"A" ECA161 "A" EC 160 "A" 28-56'54.76 LD
60" X 48" CAISSON TRANSWORLD 92-43'27.769
30" CAISSON
16244 EAST CAMERON 196 ECA196"A" EC 196 SEA ROBI 28-46"31.391"
TRI-POD 2-WELL SSTI 30" 92-45"29.951"
15147 EAST CAMERON 263B EC 263"B" EC 263 "B" 28-26"04.440
4-PILE 4-WELL 92-58"23.394"
- ------------------------------------------------------------------------------------------------------------------------------------
# of Helipor Water Crane Platform Platform Platform DOT/DOI
wells size depth size Capacity Capacity Equipment CP
- ------------------------------------------------------------------------------------------------------------------------------------
MMCF BOPD
2 None 85' 1000# EC 160 "A" EC 160 "A" EC 161 "A" WELL PANEL TRANSWORL
CONTRACT VOLUME
1 24' x 24 100' TON 10MM 1500 WELL PANEL PPI
MASTER PANEL
30" X 10' SS TEST SEPARATOR
48" X 15' WATER SKIMMER
4' X 4' X 6' SUMP
10-3/4" X 6.5' FUEL SCRUBBER
48" X 10' VENT SCRUBBER
DUAL 3" GAS SALES SKID W/ CONDENSATE INJ.
HANOVER RENTAL COMPRESSOR 600 HP
TOOL HOUSE
2 24' x 24' 167' 6010#TON 10MM 1500 WELL PANEL PPI
MASTER PANEL
36" X 10' TEST SEPARATOR
42" X 10' PRODUCTION / TEST SEPARATOR
4-WELL HEADER
48" X 10 SKIMMER
20" X 6' FUEL SCRUBBER
48" X 8' VENT SCRUBBER
4' X 4' X 8' SUMP
3' X 8' WATER POLISHER
DUAL 6" GAS SALES SKID W/ CONDENSATE INJ.
HANOVER RENTAL COMPRESSOR 600HP
EMERGENCY QUARTERS
TOOL HOUSE
SCHEDULE 1-C
Attached to and made a part of that certain Purchase and Sale Agreement
dated December 16, 2001, by and between Hall Partners, L.P. et al., as
"Sellers" and Energy Partners, Ltd., as "Purchaser".
1. PROPERTY: EAST CAMERON BLOCK 161
SERIAL NO.: OCS-G 15141
A. Farmout Agreement effective February 18, 2000, between Energy
Development Corporation and Mariner Energy, Inc., as Farmors, and
Hall-Houston Oil Company, as Farmee.
B. Assignment of Operating Rights effective August 21, 2000, between
Energy Development Corporation and Mariner Energy, Inc., as
Assignors, and Hall-Houston Oil Company, as Assignee, which
provides for Assignors to retain an aggregate 10% of 6/6ths
overriding royalty interest.
C. Operating Agreement effective February 18, 2000, between
Hall-Houston Oil Company, as Operator, and Hall Partners, L.P.,
LPCR Investment Group, L.P., Hall Consulting Company, Inc., Hall
Equities, Inc., Hall Family Trust, Bruce R. Sidner, Wayne P.
Hall, John H. Peper and Transworld Exploration and Production,
Inc., as Non-Operators.
D. Letter Agreement dated June 27, 2000 between Hall-Houston Oil
Company, Hall Partners, L.P., LPCR Investment Group, L.P., Hall
Consulting Company, Inc., Hall Equities, Inc., Hall Family Trust,
Bruce R. Sidner, John H. Peper and Wayne P. Hall, as partially
amended by letter agreement dated September 12, 2000 between
Hall-Houston Oil Company and Transworld Exploration and
Production, Inc., as Non-Operators.
E. Assignment of Overriding Royalty Interest effective August 21,
2000, between Hall-Houston Oil Company, as Assignor, and Gary L.
Hall and Wayne P. Hall, as Trustees, acting on behalf of the
Hall-Houston Oil Company Employee Royalty Trust, as Assignee,
which conveys a 2% of 6/6ths overriding royalty interest (such
Assignee subsequently having conveyed a 1.5% of 6/6ths overriding
royalty interest to Falfurrias, L.P. in that certain Assignment
of Overriding Royalty Interest effective August 22, 2000, between
Gary L. Hall and Wayne P. Hall, as Trustees, acting on behalf of
the Hall-Houston Oil Company Employee Royalty Trust, as Assignor,
and Falfurrias, L.P., as Assignee).
Schedule 1-C Page 2 of 5
F. Production Handling Agreement dated effective February 18, 2000,
between Transworld Exploration and Production, Inc., as
Processor, and Hall-Houston Oil Company, Hall Partners, L.P.,
LPCR Investment Group, L.P., Hall Consulting Company, Inc., Hall
Equities, Inc., Hall Family Trust, Bruce R. Sidner, Wayne P.
Hall, John H. Peper and Transworld Exploration and Production,
Inc., as Producer.
G. Crude Oil Contract dated September 2, 1999, between Plains
Marketing, L.P. (formerly Scurlock/Permian LLC) and Hall-Houston
Oil Company, as amended by Amendment dated February 1, 2001
covering East Cameron 161 (Contract #0189-1005).
H. Right-of-Way granted as OCS-G 22122, Segment No. 12734, coming
from East Cameron 161 Platform "A", Well #A-1, going to the East
Cameron 160 Platform "A", 4.5" in size, being 7969' in length as
built.
I. Right-of-Way granted as OCS-G 22123, Segment No. 12735, coming
from East Cameron 161 Platform "A", Well #A-2, going to the East
Cameron 160 Platform "A", 4.5" in size, being 7971' in length as
built.
2. PROPERTY: EAST CAMERON BLOCK 196
SERIAL NO.: OCS-G 16244
A. Farmout Agreement dated August 28, 2000, between Forcenergy Inc.
(predecessor in interest to Forest Oil Corporation), Fidelity Oil
Holdings, Inc. and Mariner Energy, Inc., as Farmors, and
Hall-Houston Oil Company, as Farmee, as amended by letter
agreement dated November 9, 2000.
B. Operating Agreement dated August 28, 2000, between Hall-Houston
Oil Company, as Operator, and Hall Partners, L.P., LPCR
Investment Group, L.P., Hall Consulting Company, Inc., Hall
Equities, Inc., Hall Family Trust, Bruce R. Sidner, Wayne P.
Hall, and John H. Peper, as Non-Operators.
C. Letter Agreement dated June 27, 2000 between Hall-Houston Oil
Company, Hall Partners, L.P., LPCR Investment Group, L.P., Hall
Consulting Company, Inc., Hall Equities, Inc., Hall Family Trust,
Bruce R. Sidner, John H. Peper and Wayne P. Hall.
D. Assignment of Operating Rights effective December 13, 2000,
between Forest Oil Corporation, Fidelity Oil Holdings, Inc. and
Mariner Energy, Inc., as Assignors, and Hall-Houston Oil Company,
as Assignee, which
Schedule 1-C Page 2 of 5
provides for Assignors to retain an aggregate of 10% of 6/6ths
overriding royalty interest.
E. Assignment of Overriding Royalty Interest effective December 13,
2000 between Hall-Houston Oil Company, as Assignor, and Gary L.
Hall and Wayne P. Hall, as Trustees acting on behalf of the
Hall-Houston Oil Company Employee Royalty Trust, which conveyed a
2% of 6/6ths overriding royalty interest (such Assignee
subsequently having conveyed a 1.5% of 6/6ths overriding royalty
interest in favor of Falfurrias, L.P. in that certain Assignment
of Overriding Royalty Interest effective December 15, 2000
between Gary L. Hall and Wayne P. Hall, as Trustees acting on
behalf of the Hall-Houston Oil Company Employee Royalty Trust, as
Assignor, and Falfurrias, L.P., as Assignee).
F. Facility Interconnect and Reimbursement Agreement dated June 18,
2001, between Sea Robin Pipeline Company and Hall-Houston Oil
Company (M&R 94098).
G. Services Agreement dated September 18, 2001 between Trunkline Gas
Company and Hall-Houston Oil Company (M&R 94098).
H. Gas Processing Agreement for the Sea Robin Gas Processing Plant
dated November 26, 2001, between Hall-Houston Oil Company,
Supplier, and Amerada Hess Corporation, as Plant Operator.
I. Master Service Agreement dated September 28, 1995, between
Hanover Compressor Company, as Lessor, and Hall-Houston Oil
Company, as Lessee, insofar as said agreement covers Unit No.
_____ (to be entered into).
J. Pipeline Segment #13521 going from Hall-Houston Oil Company's
Platform "A" in East Cameron Block 196 going to a subsea tie-in
on a 30" pipeline (Segment #3321) in East Cameron 196, 6-5/8" in
size, being 1,013' in length.
3. PROPERTY: EAST CAMERON BLOCK 263
SERIAL NO.: OCS-G 15147
A. Assignment of Record Title effective May 1, 2000, between Mariner
Energy, Inc., as Assignor, and Hall-Houston Oil Company, as
Assignee, with a 5% of 6/6ths overriding royalty interest
reserved by Assignor therein.
Schedule 1-C Page 3 of 5
B. Operating Agreement effective May 1, 2000, between Hall-Houston
Oil Company, as Operator, and Hall Partners, L.P., LPCR
Investment Group, L.P., Hall Consulting Company, Inc., Hall
Equities, Inc., Hall Family Trust, Bruce R. Sidner, Wayne P.
Hall, and John H. Peper, as Non-Operators.
C. Letter Agreement dated June 27, 2000 between Hall-Houston Oil
Company, Hall Partners, L.P., LPCR Investment Group, L.P., Hall
Consulting Company, Inc., Hall Equities, Inc., Hall Family Trust,
Bruce R. Sidner, John H. Peper and Wayne P. Hall.
D. Assignment of Overriding Royalty Interest effective May 1, 2000,
between Hall-Houston Oil Company, as Assignor, and Gary L. Hall
and Wayne P. Hall, as Trustees, acting on behalf of Hall-Houston
Oil Company Employee Royalty Trust, as Assignee, which conveys a
2% of 6/6ths overriding royalty interest (such Assignee
subsequently having conveyed a 1.5% of 6/6ths overriding royalty
interest in favor of Falfurrias, L.P. in that certain Assignment
of Overriding Royalty Interest effective May 1, 2000, between
Gary L. Hall and Wayne P. Hall, as Trustees, acting on behalf of
Hall-Houston Oil Company Employee Royalty Trust, as Assignor, and
Falfurrias, L.P., as Assignee).
E. Assignment of Overriding Royalty Interest to be made by
Hall-Houston Oil Company in favor of Tom Englehart, creating a
1.5% of 6/6ths overriding royalty interest limited to the
N/2NW/4SW/4 and the S/2SW/4NW/4 of said Block 263 as to those
depths below 6520' subsea.
F. Facilities Interconnect and Reimbursement Agreement dated
February 1, 2001, between Texas Eastern Transmission and
Hall-Houston Oil Company (M&R 73281).
G. Operations and Maintenance Agreement dated April 5, 2001 between
Duke Energy Operating Company and Hall-Houston Oil Company (M&R
73274).
H. Contract Gas Compressor Services Agreement dated April 10, 2001
between Production Operators, Inc. and Hall-Houston Oil Company.
I. Crude Oil Purchase Contract effective September 2, 1999 between
Scurlock Permian, L.L.C. (predecessor in interest to Plains
Marketing, L.P.) and Hall-Houston Oil Company, Contract No.
0189-1005, insofar as said agreement is amended by letter
agreement effective July 1, 2001 covering the East Cameron Block
263 property.
Schedule 1-C Page 4 of 5
J. Pipeline Segment # 13086 going from East Cameron 263 Platform "B"
going to a subsea tie-in on a 30" Texas Eastern Transmission
Company pipeline in East Cameron 160, 6" in size, being 3326.04'
in length as built.
K. Assignment and Bill of Sale effective August 25, 2000, between El
Paso Production GOM Inc., as Assignor, and Hall-Houston Oil
Company, as Assignee, regarding the purchase of the East Cameron
280 "A" Platform for use as the East Cameron 263 "A" Platform.
L. Supplemental Bonds in the aggregate of $1,100,000.
4. PROPERTY: EUGENE ISLAND 247
SERIAL NO.: OCS-G 21111
A. Operating Agreement effective June 1, 1999 between Hall-Houston
Oil Company, as Operator, and Hall Partners, L.P., LPCR
Investment Group, L.P., Hall Consulting Company, Inc., Hall
Equities, Inc., Hall Family Trust, Bruce R. Sidner, John H.
Peper, PetroPro Energy Partners, L.P., and Wayne P. Hall, as
Non-Operators.
B. Letter Agreement dated June 27, 2000 between Hall-Houston Oil
Company, Hall Partners, L.P., LPCR Investment Group, L.P., Hall
Consulting Company, Inc., Hall Equities, Inc., Hall Family Trust,
Bruce R. Sidner, John H. Peper, PetroPro Energy Partners, L.P.
and Wayne P. Hall.
C. Assignment of Overriding Royalty Interest effective June 1, 1999,
between Hall-Houston Oil Company, as Assignor, and Gary L. Hall
and Wayne P. Hall, as Trustees acting on behalf of the
Hall-Houston Oil Company Employee Royalty Trust, as Assignee,
which conveyed a 2% of 6/6ths overriding royalty interest (such
Assignee subsequently having conveyed all of its interest in that
certain Assignment of Overriding Royalty Interest effective June
1, 1999, between Gary L. Hall and Wayne P. Hall, as Trustees
acting on behalf of the Hall-Houston Oil Company Employee Royalty
Trust, as Assignor, and Falfurrias, L.P., as Assignee).
D. Supplemental Bond of $300,000.
INSERT NOTARIZATION FORM???????
SCHEDULE 2.1
to
Purchase and Sale Agreement
dated December 16, 2001
between Hall Partners, L.P.,
et al., as Sellers, and
Energy Partners, Ltd.,
as Purchaser
Seller $9 Buyer Warrants $11 Buyer Warrants Earnout Consideration
------ ----------------- ------------------ ---------------------
Hall Partners, L.P. 57,691.5 173,074.5 11.5383% of Earnout
LPCR Investment Group. L.P. 9,615.5 28,846.5 1.9231% of Earnout
Hall Consulting Company, Inc. 9,615.5 28,846.5 1.9231% of Earnout
Hall Equities, Inc. 9,615.5 28,846.5 1.9231% of Earnout
Hall Family Trust 9,615.5 28,846.5 1.9231% of Earnout
Bruce R. Sidner 9,615.5 28,846.5 1.9231% of Earnout
Wayne P. Hall 9,615.5 28,846.5 1.9231% of Earnout
John H. Peper 9,615.5 28,846.5 1.9231% of Earnout
------- -------- ------------------
125,000 375,000 25% of Earnout
Schedule 1-C Page 5 of 5
SCHEDULE 3.1(a)
Assignments in Non-Approvable Form
NONE
SCHEDULE 3.1(m)
Outstanding Authorities for Expenditures
None
SCHEDULE 3.1(n)
Imbalances
As of November 1, 2001
-----------------------
MMBTU's Settlement
Over / (Under) Value
Hall Partner's, L.P.
East Cameron 161 A-1 (579) ($6,121.96)
East Cameron 161 A-2 1,107 $5,673.80
LPCR Investment Group, L.P.
East Cameron 161 A-1 (96) ($1,020.33)
East Cameron 161 A-2 184 $945.64
Hall Consulting Company, L.P.
East Cameron 161 A-1 (96) ($1,020.33)
East Cameron 161 A-2 184 $945.64
Hall Equities, Inc.
East Cameron 161 A-1 (96) ($1,020.33)
East Cameron 161 A-2 184 $945.64
Hall Family Trust
East Cameron 161 A-1 (96) ($1,020.33)
East Cameron 161 A-2 184 $945.64
Bruce R. Sidner
East Cameron 161 A-1 (96) ($1,020.33)
East Cameron 161 A-2 184 $945.64
Wayne P. Hall
East Cameron 161 A-1 (96) ($1,020.33)
East Cameron 161 A-2 184 $945.64
John H. Peper
East Cameron 161 A-1 (96) ($1,020.33)
East Cameron 161 A-2 184 $945.64
Hall-Houston Oil Company Employee Royalty Trust
Not Applicable
Hall-Houston 1996 Exploration and Development Facility Overriding Royalty Trust
South Timbalier 185 A-6 ????????????
------------
Hall-Houston Oil Company 2000 Exploration and Development Facility Overriding
Royalty Trust
Not Applicable
The settlement values for East Cameron 161 A-1 & A-2 were calculated in
accordance with the terms of the Production Handling Agreement. (See Schedule
1-C, Item #1G.)
(Cheyenne Petroleum Company has been contacted about imbalances relative to the
1996 E & D ORRI; however, they were unaware of the current imbalance position
relative to their takes.)
SCHEDULE 3.1(o)
Attached to the Purchase and Sale Agreement dated December 16, 2001,
between Hall Partners, L.P. et al., as "Sellers," and Energy Partners,
Ltd., as "Purchaser."
SCHEDULE OF CONSENTS
- ----------------- ------------------------------ ----------------------- ------------------- ---------------------------------
DATE PARTIES FROM WHOM CONSENTS ARE
TYPE OF OF REQUIRED
OCS-G# AREA/BLOCK AGREEMENT AGREEMENT
- ----------------- ------------------------------ ----------------------- ------------------- ---------------------------------
G-15141 East Cameron 161 Farmout Agreement 02/18/00 Energy Development Co. &
Mariner Energy, Inc.
- ----------------- ------------------------------ ----------------------- ------------------- ---------------------------------
Operating Agreement 02/18/00 Transworld Exploration and
Production, Inc., Hall
Partners, L.P., LPCR Investment
Group, Inc., Hall Consulting
Company, Inc., Hall Equities,
Inc., Hall Family Trust, Bruce
R. Sidner, Wayne P. Hall and
John P. Peper
- ----------------- ------------------------------ ----------------------- ------------------- ---------------------------------
G-16244 East Cameron 196 Farmout Agreement 08/28/00 Forest Oil Corporation,
Fidelity Oil Holdings, Inc. and
Mariner Energy, Inc.
- ----------------- ------------------------------ ----------------------- ------------------- ---------------------------------
Operating Agreement 08/28/00 Hall Partners, L.P., LPCR
Investment Group, Inc., Hall
Consulting Company, Inc., Hall
Equities, Inc., Hall Family
Trust, Bruce R. Sidner, Wayne
P. Hall and John P. Peper
- ----------------- ------------------------------ ----------------------- ------------------- ---------------------------------
G-15147 East Cameron 263 Operating Agreement 05/01/00 Hall Partners, L.P., LPCR
Investment Group, Inc., Hall
Consulting Company, Inc., Hall
Equities, Inc., Hall Family
Trust, Bruce R. Sidner, Wayne
P. Hall and John P. Peper
- ----------------- ------------------------------ ----------------------- ------------------- ---------------------------------
12/19/01 Page 1 of 2
- ----------------- ------------------------------ ----------------------- ------------------- ---------------------------------
G-21111 Eugene Island 247 Operating Agreement 06/01/99 Hall Partners, L.P., LPCR
Investment Group, Inc., Hall
Consulting Company, Inc., Hall
Equities, Inc., Hall Family
Trust, Bruce R. Sidner, Wayne
P. Hall and John P. Peper
- ----------------- ------------------------------ ----------------------- ------------------- ---------------------------------
12/19/01 Page 2 of 2
EXHIBIT A
FINAL SETTLEMENT STATEMENT
Seller: Hall Partners, L.P.
-----------------------------------------
Buyer: Energy Partners, Ltd.
Effective Date: November 1, 2001 7:00 am
Closing Date:
-----------------------------------------
Property Description: Seller's right, title and interest in and
to the Oil and Gas Lease, Lands, and wells,
together with the equipment and facilities
appurtenant to the lease located at:
East Cameron 196 OCS-G 16244
East Cameron 161 OCS-G 15141
East Cameron 263 OCS-G 15147
Eugene Island 247 OCS-G 21111
- --------------------------------------------------------------------------------
Cash Purchase Price:
Working Interest: None
ADJUSTMENTS:
Increases to Purchase Price:
Seller's Net Revenue Interest Share of
Merchantable Oil produced from Leases and in
Storage at the Effective Time (Section 2.2(a)(ii)) $0
Seller's Working Interest Share of
Post-Effective Direct Capital Expenses
paid by the Seller: (Sec 2.2(a)(ii)) $0
Seller's Working Interest Share of
Post-Effective Direct Lease Operating Expenses
paid by the Seller: (Sec 2.2(a)(ii)) $0
Seller's Working Interest Share of
Post-Effective Third Party Direct G & A Expenses
paid by the Seller: (Sec 2.2(a)(ii)) $0
Seller's Working Interest Share of
Post-Effective Insurance Premiums
paid by the Seller: (Sec 2.2(a)(iii)) $0
Seller's Working Interest Share of
Net Undertaken Imbalances as of
the Effective Time (Section 2.2(a)(iv)) $0
-----------------
-----------------
Total Increases: $0
=================
Decreases to Purchase Price:
Seller's Net Revenue Interest Share of
Post-effective related Proceeds
received by the Seller: (Sec 2.2(b)(i)) $0
Post-effective related Proceeds related
to the sale in any portion on Interest (Sec 2.2(b)(ii)) $0
Amount related to any Casualty Loss pursuant to
Section 5.6 of the Agreement $0
-----------------
-----------------
Total Decreases: $0
=================
-------------------
Total Adjustments to Purchase Price: $0
Adjusted Cash Purchase Price: $0
-------------------
Amount Due From/(To) Buyer: $0
===================
Purchase Price Allocated to be Paid in Cash: $0
-------------------
-------------------
Purchase Price Allocated to be Paid in Shares of Purchaser Stock: $0
-------------------
Buyer's Initials:
--------------------------
Seller's Initials:
--------------------------
EXHIBIT B-1
ASSIGNMENT OF OIL AND GAS LEASE
AND BILL OF SALE
[______________ Block ___]
OCS-G _______
THE UNITED STATES OF AMERICA '
'
OUTER CONTINENTAL SHELF '
'
OFFSHORE LOUISIANA '
This Assignment of Oil and Gas Lease and Bill of Sale (this "Assignment"),
dated effective as of 7:00 a.m. Houston, Texas Time, on November 1, 2001 (the
"Effective Time"), is from [list one or more Assignors here and their respective
addresses and taxpayer identification numbers] ("Assignor," whether one or
more), to [___________________], a _________ corporation ("Assignee"), the
address for which is _____________________ and the Taxpayer Identification No.
for which is ______________.
W I T N E S S E T H:
- - - - - - - - - -
For One Thousand and No/100 Dollars ($1,000.00) and other good and valuable
consideration, the receipt and sufficiency of which Assignor hereby
acknowledges, Assignor has granted, transferred, bargained, sold, conveyed, and
assigned, and does hereby grant, transfer, bargain, sell, convey, and assign, to
Assignee, effective for all purposes as of the Effective Time, the following
properties and assets (the "Interests"):
(a) the interests of Assignor set forth in Schedule 1-A in and to the
oil and gas lease more particularly described in Schedule 1-A (the
"Lease");
(b) an equal undivided interest in all oil, gas, injection or disposal
wells (including, without limitation, the interest of Assignor in the wells
described on Schedule 1-A hereto), equipment, fixtures, platforms,
pipelines, and other personal property and improvements (including, without
limitation, plants, gathering and processing systems and salt water
disposal systems) which are located on, appurtenant to or used in
connection with the Lease (the "Equipment");
(c) all of Assignor's right, title, and interest in all contracts,
escrowed funds for the abandonment of the Interests, agreements,
instruments, payout balances, commitments, licenses, permits, easements,
rights-of-way, and other rights of Assignor relating to the Lease and the
Equipment, together with all of
1
Assignor's rights, claims and causes of action, if any, under such items
existing or arising at or after the Effective Time, including, without
limitation, the contracts specifically described in Exhibit A hereto
(collectively, the "Contracts");
(d) all of Assignor's right, title and interest in oil, gas,
condensate, natural gas liquids, related hydrocarbons, and other minerals
produced, on or after the Effective Time, from or attributable to the
Lease, including, without limitation, all oil in storage (all the foregoing
in this clause (d), collectively, "Substances");
(e) all accounts of Assignor, including, without limitation, the share
of each Assignor in any gas imbalance, makeup obligation, abandonment
escrow account, instrument, general intangible, lien, or security interest,
arising from the sale or other disposition, on or after the Effective Time,
of any Substances; and
(f) to the extent available and assignable pursuant to the terms of
applicable law and third party agreements (without the payment of any funds
or other consideration), all information, books, records, files, muniments
of title, reports documents and materials of Assignor that are related to
the portion of the Interests of Assignor described in clauses (a) - (e)
above, including, without limitation, (i) all reservoir, land, lease,
prospect, well, operation, and production files, drilling reports and other
data including geological, engineering, and geophysical data, (ii) maps,
logs, core analyses, and formation tests; (iii) production records; and
(iv) title and contract files.
TO HAVE AND TO HOLD, the Interests unto Assignee, its successors and
assigns, forever, subject to the terms, exceptions and provisions of the
Contracts affecting part or all of the Interests and subject to the following
terms, exceptions and other provisions:
1. Special Warranty. Assignor binds and obligates itself, and its heirs,
personal representatives, successors and assigns, to warrant and forever defend
title to the Interests unto Assignee, its successors and assigns, against every
person whomsoever lawfully claiming or to claim the same or any part thereof,
even as to the return of the purchase price or other consideration, but with
full substitution and subrogation of Assignee, and all persons claiming by,
through and under Assignee, to the extent assignable, in and to all warranties
of Assignor's predecessors in title and with full subrogation of all rights
accruing under the applicable statutes of limitation or prescription under the
laws of the state in or offshore from which the Lease is located and all rights
of actions or warranty against all former owners of the Interests.
2. Further Disclaimers. Assignor and Assignee agree that, to the extent
required by applicable law to be operative, the disclaimers of certain
warranties contained in this paragraph are "conspicuous" disclaimers. EXCEPT AS
PROVIDED IN THE PURCHASE AGREEMENT (AS SUCH TERM IS DEFINED HEREINAFTER),
ASSIGNOR HEREBY EXPRESSLY DISCLAIMS AND NEGATES ANY REPRESENTATION OR
2
WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE, OR OTHERWISE RELATING TO
() THE CONDITION OF THE EQUIPMENT (INCLUDING, WITHOUT LIMITATION, ANY IMPLIED OR
EXPRESS WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OR FREEDOM FROM REDHIBITORY VICES),
AND () ANY INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED TO
ASSIGNEE BY OR ON BEHALF OF ASSIGNOR RELATED TO QUANTITY OR QUALITY OF RESERVES
OF SUBSTANCES, THE RECOVERABILITY OF OR THE COST OF RECOVERING ANY SUBSTANCES,
THE VALUE OF SUBSTANCES, ANY PRODUCT PRICING ASSUMPTIONS, AND THE ABILITY TO
SELL PRODUCTION OF SUBSTANCES AFTER DELIVERY OF THIS ASSIGNMENT. As used in the
disclaimer provisions of this Section 2.2, "Assignor" shall include Assignor's
agents, representatives and consultants.
3. Assumption of Obligations. Without in any manner intending to limit,
modify or supersede provisions of the Purchase Agreement regarding the
assumption of obligations by Assignee, Assignee hereby expressly assumes, and
agrees to perform on a timely basis, all obligations of Assignor accruing
subsequent to the Effective Time under the terms of the Contracts listed in
Schedule 1-C attached hereto.
4. Successors and Assigns. This Assignment shall bind and inure to the
benefit of Assignor and Assignee and their respective successors and assigns.
5. No Third Party Beneficiaries. Except as expressly provided herein, this
Assignment is not intended to create, nor shall it be construed to create, any
rights in any third party under doctrines concerning third-party beneficiaries.
6. Governing Law. THIS ASSIGNMENT SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF LOUISIANA, WITHOUT GIVING EFFECT TO ANY
PRINCIPLES THEREOF WITH REGARD TO ANY CONFLICT OF LAW RULES THAT WOULD DIRECT
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
7. Schedules. All Schedules attached hereto are hereby made a part hereof
and incorporated herein by this reference. Unless provided otherwise, all
recording references in such Schedules are to the appropriate records of the
United States Department of Interior, Minerals Management Service or the
parishes in or offshore from which the Lease is located.
8. Captions. The captions in this Assignment are for convenience only and
shall not be considered a part of or affect the construction or interpretation
of any provision of this Assignment.
9. Counterparts. This Assignment may be executed in one or more originals,
each of which shall be an original and which taken together shall constitute the
same instrument.
3
10. Governmental Assignments. Separate assignments of certain parts of the
Interests may be executed on officially approved forms by Assignor in sufficient
counterparts to satisfy applicable statutory and regulatory requirements. Any
such assignments shall be deemed to contain the special or limited warranty of
Assignor and all of the exceptions, reservations, rights, titles, powers and
privileges set forth herein as fully as though they were set forth in each such
assignment. The interests conveyed by such separate assignments are the same as,
and not in addition to, the Interests conveyed herein.
11. Purchase Agreement. This Assignment is made and accepted pursuant to
all of the terms, conditions and provisions of that certain Purchase and Sale
[and Debt Exchange] Agreement between Assignor [,others] and Assignee, dated as
of December 16, 2001 (the "Purchase Agreement"). In the event any of the terms
and provisions of this Assignment conflict with the terms and provisions of the
Purchase Agreement, the terms and conditions of the Purchase Agreement shall
prevail.
EXECUTED in the presence of the undersigned competent witnesses on
______________, 2002, to be effective for all purposes as of the Effective Time,
subject to the approval by the United States Department of Interior, Minerals
Management Service.
WITNESSES TO ALL SIGNATURES: ASSIGNOR:
______________________________ [LIST ALL]
- ------------------------------
Printed Name of Witness By:_______________________________
ASSIGNEE:
[LIST NAME HERE]
- --------------------------------
- --------------------------------
Printed Name of Witness By:_______________________________
STATE OF ________ '
'
COUNTY/PARISH OF _________ '
4
On this ____ day of _____________, 2002, before me appeared
_________________ to me personally known, who being by me fully sworn, did say
that he is the ______________ of _________________, and that the foregoing
instrument was signed on behalf of such _____________ by authority of its
______________ and that _______________ acknowledged the instrument to be the
free act and deed of such ______________.
------------------------------------
Notary Public in and for
the State of _________
[INSERT ACKNOWLEDGEMENTS FOR ALL PARTIES HERE]
SCHEDULE 1-A
Attached to and made a part of that certain Assignment of Oil and Gas Lease
and Bill of Sale effective November 1, 2001 between ___________, as
Assignor, and ______________, as Assignee.
THE LEASE:
Oil and Gas Lease effective [legal description of lease here]
RECORD TITLE INTEREST: _____________
NET REVENUE INTEREST: _____________
Wells: OCS-G _________ #___
SCHEDULE 1-C
Attached to and made a part of that certain Assignment of Oil and Gas Lease
and Bill of Sale effective November 1, 2001 between ___________, as
Assignor, and ______________, as Assignee.
CONTRACTS
1. The aforementioned Oil and Gas Lease.
2.
3
4.
5
EXHIBIT B-2
ASSIGNMENT OF OPERATING RIGHTS
AND BILL OF SALE
[______________ Block ___]
OCS-G _______
THE UNITED STATES OF AMERICA '
'
OUTER CONTINENTAL SHELF '
'
OFFSHORE LOUISIANA '
This Assignment of Operating Rights and Bill of Sale (this "Assignment"),
dated effective as of 7:00 a.m. Houston, Texas Time, on November 1, 2001 (the
"Effective Time"), is from [list one or more Assignors here and their respective
addresses and taxpayer identification numbers] ("Assignor," whether one or
more), to [___________________], a _________ corporation ("Assignee"), the
address for which is _____________________ and the Taxpayer Identification No.
for which is ______________.
W I T N E S S E T H:
- - - - - - - - - -
For One Thousand and No/100 Dollars ($1,000.00) and other good and valuable
consideration, the receipt and sufficiency of which Assignor hereby
acknowledges, Assignor has granted, transferred, bargained, sold, conveyed, and
assigned, and does hereby grant, transfer, bargain, sell, convey, and assign, to
Assignee, effective for all purposes as of the Effective Time, the following
properties and assets (the "Interests"):
(a) the operating rights interests of Assignor set forth in Schedule
1-A in and to the oil and gas lease more particularly described in Schedule
1-A (the "Lease");
(b) an equal undivided interest in all oil, gas, injection or disposal
wells (including, without limitation, the interest of Assignor in the wells
described on Schedule 1-A hereto), equipment, fixtures, platforms,
pipelines, and other personal property and improvements (including, without
limitation, plants, gathering and processing systems and salt water
disposal systems) which are located on, appurtenant to or used in
connection with the Lease (the "Equipment");
(c) all of Assignor's right, title, and interest in all contracts,
escrowed funds for the abandonment of the Interests, agreements,
instruments, payout balances, commitments, licenses, permits, easements,
rights-of-way, and other
1
rights of Assignor relating to the Lease and the Equipment, together with
all of Assignor's rights, claims and causes of action, if any, under such
items existing or arising at or after the Effective Time, including,
without limitation, the contracts specifically described in Exhibit A
hereto (collectively, the "Contracts");
(d) all of Assignor's right, title and interest in oil, gas,
condensate, natural gas liquids, related hydrocarbons, and other minerals
produced, on or after the Effective Time, from or attributable to the
Lease, including, without limitation, all oil in storage (all the foregoing
in this clause (d), collectively, "Substances");
(e) all accounts of Assignor, including, without limitation, the share
of each Assignor in any gas imbalance, makeup obligation, abandonment
escrow account, instrument, general intangible, lien, or security interest,
arising from the sale or other disposition, on or after the Effective Time,
of any Substances; and
(f) to the extent available and assignable pursuant to the terms of
applicable law and third party agreements (without the payment of any funds
or other consideration), all information, books, records, files, muniments
of title, reports documents and materials of Assignor that are related to
the portion of the Interests of Assignor described in clauses (a) - (e)
above, including, without limitation, (i) all reservoir, land, lease,
prospect, well, operation, and production files, drilling reports and other
data including geological, engineering, and geophysical data, (ii) maps,
logs, core analyses, and formation tests; (iii) production records; and
(iv) title and contract files.
TO HAVE AND TO HOLD, the Interests unto Assignee, its successors and
assigns, forever, subject to the terms, exceptions and provisions of the
Contracts affecting part or all of the Interests and subject to the following
terms, exceptions and other provisions:
1. Special Warranty. Assignor binds and obligates itself, and its heirs,
personal representatives, successors and assigns, to warrant and forever defend
title to the Interests unto Assignee, its successors and assigns, against every
person whomsoever lawfully claiming or to claim the same or any part thereof,
even as to the return of the purchase price or other consideration, but with
full substitution and subrogation of Assignee, and all persons claiming by,
through and under Assignee, to the extent assignable, in and to all warranties
of Assignor's predecessors in title and with full subrogation of all rights
accruing under the applicable statutes of limitation or prescription under the
laws of the state in or offshore from which the Lease is located and all rights
of actions or warranty against all former owners of the Interests.
2. Further Disclaimers. Assignor and Assignee agree that, to the extent
required by applicable law to be operative, the disclaimers of certain
warranties contained in this paragraph are "conspicuous" disclaimers. EXCEPT AS
PROVIDED IN THE PURCHASE AGREEMENT (AS SUCH TERM IS DEFINED HEREINAFTER),
ASSIGNOR HEREBY
2
EXPRESSLY DISCLAIMS AND NEGATES ANY REPRESENTATION OR WARRANTY, EXPRESS,
IMPLIED, AT COMMON LAW, BY STATUTE, OR OTHERWISE RELATING TO () THE CONDITION OF
THE EQUIPMENT (INCLUDING, WITHOUT LIMITATION, ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY TO MODELS OR
SAMPLES OF MATERIALS OR FREEDOM FROM REDHIBITORY VICES), AND () ANY INFORMATION,
DATA OR OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED TO ASSIGNEE BY OR ON BEHALF
OF ASSIGNOR RELATED TO QUANTITY OR QUALITY OF RESERVES OF SUBSTANCES, THE
RECOVERABILITY OF OR THE COST OF RECOVERING ANY SUBSTANCES, THE VALUE OF
SUBSTANCES, ANY PRODUCT PRICING ASSUMPTIONS, AND THE ABILITY TO SELL PRODUCTION
OF SUBSTANCES AFTER DELIVERY OF THIS ASSIGNMENT. As used in the disclaimer
provisions of this Section 2.2, "Assignor" shall include Assignor's agents,
representatives and consultants.
3. Assumption of Obligations. Without in any manner intending to limit,
modify or supersede provisions of the Purchase Agreement regarding the
assumption of obligations by Assignee, Assignee hereby expressly assumes, and
agrees to perform on a timely basis, all obligations of Assignor accruing
subsequent to the Effective Time under the terms of the Contracts listed in
Schedule 1-C attached hereto.
4. Successors and Assigns. This Assignment shall bind and inure to the
benefit of Assignor and Assignee and their respective successors and assigns.
5. No Third Party Beneficiaries. Except as expressly provided herein, this
Assignment is not intended to create, nor shall it be construed to create, any
rights in any third party under doctrines concerning third-party beneficiaries.
6. Governing Law. THIS ASSIGNMENT SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF LOUISIANA, WITHOUT GIVING EFFECT TO ANY
PRINCIPLES THEREOF WITH REGARD TO ANY CONFLICT OF LAW RULES THAT WOULD DIRECT
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
7. Schedules. All Schedules attached hereto are hereby made a part hereof
and incorporated herein by this reference. Unless provided otherwise, all
recording references in such Schedules are to the appropriate records of the
United States Department of Interior, Minerals Management Service or the
parishes in or offshore from which the Lease is located.
8. Captions. The captions in this Assignment are for convenience only and
shall not be considered a part of or affect the construction or interpretation
of any provision of this Assignment.
3
9. Counterparts. This Assignment may be executed in one or more originals,
each of which shall be an original and which taken together shall constitute the
same instrument.
10. Governmental Assignments. Separate assignments of certain parts of the
Interests may be executed on officially approved forms by Assignor in sufficient
counterparts to satisfy applicable statutory and regulatory requirements. Any
such assignments shall be deemed to contain the special or limited warranty of
Assignor and all of the exceptions, reservations, rights, titles, powers and
privileges set forth herein as fully as though they were set forth in each such
assignment. The interests conveyed by such separate assignments are the same as,
and not in addition to, the Interests conveyed herein.
11. Purchase Agreement. This Assignment is made and accepted pursuant to
all of the terms, conditions and provisions of that certain Purchase and Sale
[and Debt Exchange] Agreement between Assignor [,others] and Assignee, dated as
of December 16, 2001 (the "Purchase Agreement"). In the event any of the terms
and provisions of this Assignment conflict with the terms and provisions of the
Purchase Agreement, the terms and conditions of the Purchase Agreement shall
prevail.
EXECUTED in the presence of the undersigned competent witnesses on
______________, 2002, to be effective for all purposes as of the Effective Time,
subject to the approval by the United States Department of Interior, Minerals
Management Service.
WITNESSES TO ALL SIGNATURES: ASSIGNOR:
______________________________ [LIST ALL]
- ------------------------------
Printed Name of Witness By:_______________________________
ASSIGNEE:
[LIST NAME HERE]
- --------------------------------
- --------------------------------
Printed Name of Witness By:_______________________________
STATE OF ________ '
'
COUNTY/PARISH OF _________ '
4
On this ____ day of _____________, 2002, before me appeared
_________________ to me personally known, who being by me fully sworn, did say
that he is the ______________ of _________________, and that the foregoing
instrument was signed on behalf of such _____________ by authority of its
______________ and that _______________ acknowledged the instrument to be the
free act and deed of such ______________.
------------------------------------
Notary Public in and for
the State of _________
[INSERT ACKNOWLEDGEMENTS FOR ALL PARTIES HERE]
SCHEDULE 1-A
Attached to and made a part of that certain Assignment of Operating Rights
and Bill of Sale effective November 1, 2001 between ___________, as
Assignor, and ______________, as Assignee.
THE LEASE:
Oil and Gas Lease effective [legal description of lease here]
OPERATING RIGHTS: _____________
NET REVENUE INTEREST: _____________
Wells: OCS-G _________ #___
SCHEDULE 1-C
Attached to and made a part of that certain Assignment of Operating Rights
and Bill of Sale effective November 1, 2001 between ___________, as
Assignor, and ______________, as Assignee.
CONTRACTS
1. The aforementioned Oil and Gas Lease.
2.
3
4.
5
Exhibit G-2
to Merger Agreement
This Agreement requires that EACH Seller indemnify Purchaser
and certain other parties and that Purchaser indemnify each
Seller and certain other parties. Such requirements
are found in Section 9.6 and
Section 9.7, respectively, of this Agreement
- --------------------------------------------------------------------------------
PURCHASE AND SALE AGREEMENT
between
HALL-HOUSTON 1996 EXPLORATION AND DEVELOPMENT
FACILITY OVERRIDING ROYALTY TRUST
AND
HALL-HOUSTON OIL COMPANY 2000 EXPLORATION AND DEVELOPMENT
FACILITY OVERRIDING ROYALTY TRUST
("sellers")
AND
ENERGY PARTNERS, LTD.
("Purchaser")
December 16, 2001
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
ARTICLE I PURCHASE AND SALE........................................ 1
1.1 Purchase and Sale........................................ 1
1.2 Interests................................................ 1
1.3 Effective Time........................................... 2
ARTICLE II PURCHASE PRICE........................................... 2
2.1 Purchase Price........................................... 2
2.2 Adjustment to Cash Purchase Price........................ 2
2.3 Payment of Adjusted Purchase Price....................... 3
ARTICLE III REPRESENTATIONS AND WARRANTIES........................... 3
3.1 Representations and Warranties by Sellers................ 3
3.2 Representations and Warranties by Purchaser.............. 6
ARTICLE IV COVENANTS................................................ 8
4.1 Covenants of Seller...................................... 8
4.2 Covenants of Purchaser................................... 9
ARTICLE V REVIEW BY PURCHASER......................................10
5.1 Due Diligence............................................10
5.2 Defensible Title.........................................10
5.3 Waiver of Consumer Rights................................11
ARTICLE VI CONDITIONS TO CLOSING....................................11
6.1 Conditions to Obligations of Sellers.....................11
6.2 Conditions to Obligations of Purchaser...................12
ARTICLE VII CLOSING..................................................13
7.1 Closing Date.............................................13
7.2 Closing Obligations......................................13
7.3 Transfer of Risk of Loss.................................14
ARTICLE VIII TERMINATION..............................................14
8.1 Termination..............................................14
8.2 Liabilities Upon Termination.............................15
ARTICLE IX OBLIGATIONS AFTER CLOSING................................15
9.1 Post-Closing Adjustments.................................15
9.2 Subsequent Adjustments...................................16
9.3 Reservation of Claims....................................16
i
TABLE OF CONTENTS
(continued)
Page
9.4 Files and Records........................................16
9.5 Further Assurances.......................................17
9.6 Assumption and Indemnity.................................17
9.7 Express Negligence.......................................19
9.8 Indemnification Procedure................................19
9.9 Allocation of Proceeds...................................20
9.10 Termination of Confidentiality Agreement.................20
ARTICLE X MISCELLANEOUS............................................20
10.1 Notices..................................................20
10.2 Expenses.................................................21
10.3 Amendment................................................21
10.4 Assignment...............................................21
10.5 Conditions...............................................21
10.6 References...............................................21
10.7 Articles and Sections....................................22
10.8 Number and Gender........................................22
10.9 Incorporation of Schedules and Exhibits..................22
10.10 Counterparts.............................................22
10.11 Governing Law............................................22
10.12 Integration..............................................22
10.13 Parties in Interest......................................23
10.14 Severability.............................................23
10.15 Survival.................................................23
10.16 Arbitration..............................................23
ii
TABLE OF CONTENTS
(continued)
Page
LISTING OF SCHEDULES AND EXHIBITS
Schedule 1-A - Listing of Leases and Wells, including Overriding
Royalty Interests of Each Seller
Schedule 1-B - Assignments of Overriding Royalty Interests in favor
Schedule 2.1 - Allocation of Purchase Price among Sellers
Schedule 3.1(a) - Assignments Not Approved by MMS
Exhibit A - Form of Preliminary Closing Statement
Exhibit B - Form of Assignment of Overriding Royalty Interests
iii
PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT (as amended, supplemented, restated or
otherwise modified from time to time in accordance with applicable provisions
hereof, this "Agreement") dated December 16, 2001, is between Hall-Houston 1996
Exploration and Development Facility Overriding Royalty Trust, a trust
established under the laws of the State of Texas, Hall-Houston Oil Company 2000
Exploration and Development Facility Overriding Royalty Trust, a trust
established under the laws of the State of Texas (collectively, "Sellers" and
individually a "Seller"), and Energy Partners, Ltd., a Delaware corporation
("Purchaser").
In consideration of the mutual agreements set forth herein, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Sellers and Purchaser hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1. Purchase and Sale. In accordance with the terms of this Agreement,
each Seller agrees to sell the interests, rights, and property of such Seller
described in Section 1.2 (collectively as to all Sellers, the "Interests") to
Purchaser and Purchaser agrees to purchase the Interests from Sellers.
1.2. Interests. The following interests, rights, and property, collectively
as to all Sellers, comprise the Interests:
(a) the overriding royalty interests of each Seller listed in Schedule
1-A (each an "ORI") relating to the oil and gas leases described in such
Schedule 1-A, as therein limited in depths or aerial extent (collectively, the
"Leases");
(b) all right, title, and interest of each Seller in oil, gas,
condensate, natural gas liquids, related hydrocarbons, and other minerals
produced, on or after the Effective Time, from or attributable to the Leases and
attributable to the ORIs of such Seller, including all oil in storage as
described in clause (i) of Section 2.2(a) (all of the foregoing in this clause
(b), collectively, "Substances");
(c) all accounts of each Seller, including the share of each Seller in
any instrument, general intangible, lien or security interest, arising from the
sale or other disposition, on or after the Effective Time, of any of the items
described in this Section 1.2 (the "Accounts"); provided, however, this clause
shall not entitle any Seller to make any disposition of any portion of the
Interests of such Seller not otherwise permitted under other provisions of this
Agreement; and
(d) to the extent available and assignable pursuant to the terms of
applicable law and third party agreements (without the payment of any funds or
other consideration), all information,
books, records, files, muniments of title, reports, documents and materials of
each Seller that are related to the portion of the Interests of such Seller
described in clauses (a)-(c) of this Section 1.2, (all of the foregoing in this
clause (d), collectively, the "Records").
1.3. Effective Time. The purchase and sale of the Interests shall be
effective for all purposes on November 1, 2001, at 7:00 a.m., Central Standard
time (the "Effective Time").
ARTICLE II
PURCHASE PRICE
2.1. Purchase Price. The purchase price for the Interests (the "Purchase
Price") is $1,100,002.41 in cash (the "Cash Purchase Price") and 574,931 shares
of Purchaser Common Stock (as defined in Section 3.1(1)) (the "Stock Purchase
Price"). The Cash Purchase Price and the Stock Purchase Price are allocable
among the Sellers as set forth in Schedule 2.1.
2.2. Adjustment to Cash Purchase Price. The Cash Purchase Price shall be
adjusted as provided in this Section 2.2 and the resulting amount shall be
referred to as the "Adjusted Purchase Price." Not less than five (5) days prior
to the Closing Date (as defined in Section 2.1), Seller shall deliver to
Purchaser a preliminary closing statement (the "Preliminary Closing Statement"),
substantially in the form of Exhibit A, setting forth adjustments to the
Purchase Price using the best information then available and prepared in
accordance with customary accounting principles used in the oil and gas
industry.
(a) The Cash Purchase Price, as allocated to each Seller on Schedule
2.1, shall be increased by an amount equal to the product of (i) the relevant
Seller's relevant ORI share of the quantity of merchantable oil produced from or
allocable to the Leases and in storage at the Effective Time and not sold or
disposed of prior to the Closing (as defined in Section 2.1), multiplied by (ii)
the market price for such oil at the Effective Time, with such product being
reduced by an amount equal to the sum of all applicable taxes;
(b) The Cash Purchase Price, as allocated to each Seller on Schedule
2.1, shall be decreased by the following:
(i) an amount equal to the sum of net proceeds (being gross
proceeds less applicable taxes, other than income taxes, actually paid by
the relevant Seller or deducted in any remittance of proceeds to the
relevant Seller) or other value received by the relevant Seller for the
sale or disposition of Substances, including net proceeds from the sale of
liquids and other constituents removed in gas plants or other processing
facilities, produced after the Effective Time and allocable to any of the
ORI of the relevant Seller; and
(ii) an amount equal to the proceeds or other value (in excess of
reasonable and necessary transaction costs, including fees and expenses of
attorneys, accountants, engineers and other professionals) received by the
relevant Seller for the
-2-
sale or disposition, after the Effective Time, of any portion of the
Interests of the relevant Seller; provided, however, provision for such
adjustment shall not entitle any Seller to make any disposition of any of
the Interests not otherwise permitted under other provisions of this
Agreement.
2.3. Payment of Adjusted Purchase Price. At the Closing, Purchaser shall
pay to each Seller (by wire transfer to an account of such Seller designated in
writing by such Seller received by Purchaser no less than two (2) days prior to
the Closing Date) an amount, in immediately available funds, equal to the
portion of the Cash Purchase Price allocated to such Seller as adjusted on the
basis of the Preliminary Closing Statement, and shall deliver to each Seller one
or more certificates evidencing as registered in the name of such Seller on the
books of Purchaser the number of shares of the Stock Purchase Price due to such
Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties by Sellers. Each Seller, severally and
not jointly, represents and warrants to Purchaser (which representations and
warranties shall survive the Closing and the execution and delivery of the
documentation to be executed and delivered at the Closing, to the extent
provided below in this Section 3.1 and in Section 10.15) that:
(a) Such Seller is a trust duly created and existing under the laws of
the State of Texas. Such Seller has and will have as of the Closing Defensible
Title (as defined in Section 5.2) to the Interests of such Seller; provided,
however, as to that portion of the Interests of such Seller relating to South
Timbalier Blocks 184 and 185 other than that acquired by Hall-Houston Oil
Company ("HHOC") from CNG Producing Company, such warranty is expressly limited
to claims arising by, through or under such Seller or HHOC, Notwithstanding the
preceding sentence or any other provision of this Agreement to the contrary, for
purposes of Section 9.6 and otherwise subsequent to the Closing, such Seller
warrants and agrees to defend title to the Interests of such Seller unto
Purchaser, its successors, and permitted assigns against the lawful claims of
all persons or entities claiming or to claim the same or any part thereof by,
through or under such Seller, but not otherwise. Except as set forth in Schedule
3.1(a), all prior assignments of interests in any of the Leases or other
Interests in the chain of title to the Interests of such Seller have been
approved by the United States of America, Department of Interior, Minerals
Management Service (the "MMS").
(b) Such Seller has the full legal power, right and authority to carry
on its business as presently conducted, to enter into this Agreement and to
perform its obligations under this Agreement.
(c) The execution, delivery and performance by such Seller of this
Agreement and the documentation to be executed and delivered by such Seller at
the Closing have been authorized by all necessary action on the part of such
Seller. Execution, delivery and performance by such Seller of this Agreement do
not, and execution, delivery and performance by such Seller of the
-3-
documentation to be executed and delivered by such Seller at the Closing will
not, and the consummation of the transactions contemplated by this Agreement
will not, (i) violate or be in conflict with any (A) agreement, instrument,
judgment, order, decree, law or regulation applicable to such Seller or the
Interests of such Seller or (B) any provision of the trust agreement of any
Seller or (ii) result in the creation of any lien or other encumbrance on the
Interests of such Seller.
(d) Subject to laws and equitable principles affecting the rights of
creditors, this Agreement is and the documentation to be executed and delivered
by such Seller at the Closing will be, upon execution and delivery thereof by
all parties thereto, legal, valid and binding obligations of such Seller
enforceable according to their respective terms.
(e) No suit, arbitration, inquiry, proceeding, audit, claim, demand or
investigation is pending or, to the knowledge of such Seller, threatened that
might result in impairment or loss or diminution of the title of such Seller to
the Interests of such Seller or otherwise adversely affect, in any material
respect, any of the Interests of such Seller. There are no bankruptcy or
reorganization proceedings pending or threatened against such Seller.
(f) Except for the Assignments of Overriding Royalty Interest in favor
of such Seller listed in Schedule 1-B, there are no contracts or agreements
which burden or will burden or encumber or are otherwise material to the
ownership of the Interests of such Seller.
(g) Such Seller is timely receiving its share of proceeds from the sale
of Substances produced from or allocable to the Leases without suspense,
counterclaim or set-off.
(h) Such Seller has incurred no liability for brokers' or finders' fees
related to the transactions contemplated by this Agreement for which Purchaser
shall be liable.
(i) No consents or approvals of any third persons are required in
connection with the transfer of the Interests of such Seller from such Seller to
Purchaser and there are no preferential purchase rights applicable to the sale
of the Interests of such Seller by such Seller to Purchaser pursuant to this
Agreement.
(j) During the period from the Effective Time to the date of execution
of this Agreement, Such Seller has not waived, compromised or settled any claim
that diminishes or adversely burdens any Interest of such Seller.
(k) Such Seller is not a nonresident alien of the United States.
(l) The shares of common stock of Purchaser, par value $0.01 per share
(the "Purchaser Common Stock") representing the portion of the Stock Purchase
Price allocable to such Seller to be acquired by such Seller pursuant to this
Agreement are being acquired for the account of such Seller and without a view
to distribution. Such Seller understands that the transfer of any of such shares
of Purchaser Common Stock by such Seller has not been registered under the
Securities Act of 1933 (the "Securities Act") or the securities laws of any
state and that such Seller cannot offer, sell, transfer, pledge, hypothecate or
otherwise dispose of any or all of such shares unless the transaction
-4-
is subsequently registered under the Securities Act and the securities laws of
relevant states or exemptions from such registrations are available. Such Seller
further understands that the certificate or certificates representing such
shares will bear a legend substantially as follows, and agrees to comply with
such legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE
TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR UNLESS THE ISSUER RECEIVES AN
OPINION OF COUNSEL (WHO MAY BE AN EMPLOYEE OF THE HOLDER) REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION, QUALIFICATION OR OTHER
SUCH ACTIONS ARE NO REQUIRED UNDER SAID ACT. THE OFFERING OF THIS
SECURITY HAS NOT BEEN REVIEWED OR APPROVED BY ANY STATE SECURITIES
ADMINISTRATOR."
(m) Such Seller has such knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of its
investment in the Purchaser Common Stock, and such Seller is capable of bearing
the economic risks of such investment. Each trustee of each Seller is an
"Accredited Investor" within the meaning of Rule 501(a) of the Securities Act.
Such Seller:
(i) understands that (A) the issuance of the Purchaser Common
Stock hereunder is intended to be exempt from registration under the
Securities Act and (B) there is only a limited market for such Purchaser
Common Stock, and there can be no assurance that such Seller will be able
to sell or dispose of the Purchaser Common Stock to be acquired by such
Seller hereunder;
(ii) can afford to bear the economic risk of holding the Purchaser
Common Stock acquired by such Seller hereunder for an indefinite period of
time and can afford to suffer the complete loss of the investment by such
Seller in the Purchaser Common Stock;
(iii) understands that the Purchaser Common Stock acquired by such
Seller hereunder is a speculative investment which involves a high degree
of risk of loss of the entire investment therein and that for an indefinite
period following the date hereof there will be no public market for the
Purchaser Common Stock acquired by such Seller hereunder and that,
accordingly, it may not be possible for such Seller to sell the Purchaser
Common Stock acquired by such Seller hereunder in case of emergency or
otherwise;
(iv) and its representatives, including to the extent it deems
appropriate its professional, financial, tax and other advisors, have
reviewed all
-5-
documents provided to them in connection with the investment by such Seller
hereunder in the Purchaser Common Stock by such Seller; and
(v) and its representatives have been given the opportunity to
examine all documents and to ask questions of, and to receive answers from,
Purchaser and its representatives concerning the terms and conditions of
the acquisition hereunder of the Purchaser Common Stock by such Seller and
related matters and to obtain all additional information which such Seller
or its representatives deem necessary.
(n) No representation or warranty of such Seller contained in this
Agreement and no statement contained in any certificate or schedule furnished or
to be furnished by or on behalf of such Seller or any of its representatives
pursuant thereto contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact necessary, in light of
the circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading or necessary in order to fully and
fairly provide the information required to be provided in any such document,
certificate or schedule.
3.2. Representations and Warranties by Purchaser. Purchaser represents and
warrants to Seller (which representations and warranties shall survive the
Closing and the execution and delivery of the documentation to be executed and
delivered at the Closing) that:
(a) Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and is qualified to do
business in, and is in good standing under, the laws of each state wherein the
failure to be so qualified and in good standing could reasonably be expected to
have a material adverse effect on Purchaser.
(b) Purchaser has the full legal power, right and authority to carry on
its business as presently conducted, to enter into this Agreement and to perform
its obligations under this Agreement.
(c) The execution, delivery and performance by Purchaser of this Agreement
and the documentation to be executed and delivered by Purchaser at the Closing
have been authorized by all necessary action, corporate and otherwise, on the
part of Purchaser and execution, delivery and performance by Purchaser of this
Agreement do not, and execution, delivery and performance by Purchaser of the
documentation to be executed and delivered by Purchaser at the Closing will not,
and the consummation of the transactions contemplated by this Agreement will
not, violate or be in conflict with any (i) agreement, instrument, judgment,
order, decree, law or regulation applicable to Purchaser or (ii) any provision
of the certificate of incorporation or bylaws of Purchaser.
(d) Subject to laws and equitable principles affecting the rights of
creditors, this Agreement is and the documentation to be executed and delivered
by Purchaser at the Closing will be, upon execution and delivery thereof by all
parties thereto, legal, valid and binding obligations of Purchaser enforceable
according to their terms. There are no bankruptcy or reorganization proceedings
pending or, to the knowledge of Purchaser, threatened against Purchaser.
-6-
(e) Purchaser has incurred no liability for brokers' or finders' fees
related to the transactions contemplated by this Agreement for which any Seller
shall be liable.
(f) There are no pending suits, actions or other proceedings to which
Purchaser is a party (or, to the knowledge of Purchaser, which have been
threatened to be instituted against Purchaser) which affect the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
(g) Purchaser is a knowledgeable purchaser, owner and operator of oil
and gas properties, has the ability to evaluate the Interests for purchase, and
is acquiring the Interests for its own account and not with the intent to make a
distribution thereof in violation of the Securities Act or any applicable state
securities law.
(h) The authorized and outstanding capital stock of Purchaser is as set
forth in the SEC Documents (as defined in subsection (j) below), as of September
30, 2001. All of such issued and outstanding shares are validly issued, fully
paid and nonassessable and free of preemptive rights. Except as reflected in the
SEC Documents, Purchaser has no other equity securities of any class issued,
reserved for issuance or outstanding, and there are no outstanding options,
warrants, agreements or rights to subscribe for or to purchase, or commitments
to issue, or other securities of Purchaser which, pursuant to their terms, are
convertible into or exchangeable for, equity securities of Purchaser.
(i) The shares of Purchaser Common Stock to be issued as the Stock
Purchase Price have been duly authorized, and when issued at the Closing under
the terms of this Agreement, will be validly issued, fully paid and
non-assessable and not issued in violation of any preemptive rights.
(j) Since December 31, 2000, Purchaser has filed all documents (the "SEC
Documents") required to be filed by it with the Securities and Exchange
Commission (the "Commission"), pursuant to the Securities Exchange Act of 1934
(the "Exchange Act"). As of their respective filing dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act, and
none of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading except to the extent corrected by a subsequently filed
SEC Document. The financial statements of Purchaser included in the SEC
Documents complied as to form in all material respects with then applicable
accounting requirements and with the published rules and regulations of the
Commission with respect thereto, were prepared in accordance with generally
accepted accounting principles during the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q and Regulation S-X of the Commission) and fairly present
the consolidated financial position of Purchaser and its consolidated
subsidiaries as at the dates thereof and the consolidated results of their
operations and changes in financial position for the periods then ended
(subject, in the case of unaudited statements, to normal, recurring audit
adjustments). Since December 31, 2000, there has not been any change which,
individually or in the aggregate, could
-7-
reasonably be expected to have a material adverse effect on Purchaser that has
not been reflected in the SEC Documents, publicly announced or otherwise
disclosed.
(k) No representation or warranty of Purchaser contained in this
Agreement and no statement contained in any certificate or schedule furnished or
to be furnished by or on behalf of Purchaser or any of its representatives
pursuant thereto contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact necessary, in light of
the circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading or necessary in order to fully and
fairly provide the information required to be provided in any such document,
certificate or schedule.
ARTICLE IV
COVENANTS
4.1. Covenants of Seller. Each Seller, severally and not jointly, covenants
and agrees with Purchaser as follows:
(a) Following execution of this Agreement and until the Closing, such
Seller shall (i) notify Purchaser of any suit, arbitration, inquiry, proceeding,
audit, claim, demand or investigation becoming known to such Seller which might
adversely affect any of the Interests of such Seller and (ii) use reasonable
efforts to obtain any consents, waivers, and approvals required of third
persons, governmental authorities or other entities in connection with
consummation of the transactions contemplated by this Agreement.
(b) Following execution of this Agreement, such Seller shall not,
without the consent of Purchaser (i) create a lien, security interest or other
encumbrance on any of the Interests of such Seller; (ii) sell or dispose of any
of the Interests of such Seller, other than Substances sold,
consumed or produced in the ordinary course of business; or (iii) waive,
compromise or settle any claim that diminishes or adversely burdens any Interest
of such Seller.
(c) Following the execution of this Agreement and until the Closing,
such Seller shall provide Purchaser and its attorneys, employees, accountants,
engineers, consultants and agents (collectively "representatives") access,
during normal business hours and at the offices of HHOC, to (and the right to
copy, at the expense of Purchaser) the records pertaining to the ownership of
the Interests of such Seller (including title files and production, severance
and ad valorem tax records), insofar as any of such are in the possession or
control of such Seller or HHOC or insofar as such Seller or HHOC has access
thereto, and to the extent, in each case, that such Seller or HHOC may do so
without violating legal constraints or any legal obligation, for the purpose of
the conducting, by or at the direction of Purchaser, of due diligence reviews of
the Interests of such Seller. Subsequent to the Closing, such Seller shall
cooperate with Purchaser in any efforts by Purchaser to obtain (at the expense
of Purchaser) such additional title information as Purchaser may reasonably
require.
(d) At or prior to the Closing, with respect to matters that are not
Permitted Encumbrances (as defined in Section 5.2), such Seller shall cause the
owners and holders of any
-8-
liens, security interests and other encumbrances filed of record against any of
the Interests of such Seller to execute and deliver such releases and other
instruments, in form and substance reasonably satisfactory to Purchaser, as
shall be necessary or appropriate to release of record, or to the extent not of
record, known to such Seller, all liens, security interests, and other
encumbrances filed against any of the Interests of such Seller.
(e) Such Seller shall take or cause to be taken all reasonable actions
within its control as may be necessary or advisable to consummate and make
effective the purchase of the Interests of such Seller and the transactions
contemplated by this Agreement and to assure that, as of the Closing Date, it
will not be under any material organizational, legal or contractual restriction
that would prohibit or delay the timely consummation of such transactions.
(f) Such Seller shall take or cause to be taken all reasonable actions
to cause all the representations and warranties of such Seller contained in this
Agreement to be true and correct on and as of the Closing Date, other than those
as are made as of a specific date. To the extent the conditions precedent to the
obligations of Purchaser are within the control of such Seller, such Seller
shall cause such conditions to be satisfied on or prior to the Closing Date and,
to the extent the conditions precedent to the obligations of Purchaser are not
within the control of such Seller, such Seller shall take or cause to be taken
all such commercially reasonable actions as may be necessary to cause such
conditions to be satisfied on or prior to the Closing Date.
(g) Such Seller shall notify Purchaser promptly (i) upon learning of any
change in fact or circumstance that causes any representation or warranty of
such Seller contained in this Agreement to no longer be accurate and complete or
(ii) if such Seller fails to perform or comply with any covenant or agreement
contained in this Agreement or it is reasonably anticipated that
such Seller will be unable to perform or comply with any covenant or agreement
contained in this Agreement.
4.2. Covenants of Purchaser. Purchaser agrees with each Seller as follows:
(a) Until the Closing, Purchaser shall comply with the Confidentiality
Agreements (as such term is defined in the Agreement and Plan of Merger referred
to in clause (e) of Section 6.1), except as otherwise permitted in this Section
4.2(a), which Confidentiality Agreements shall be deemed by Sellers and
Purchaser to cover the transactions contemplated by this Agreement. After the
Closing nothing contained in this Agreement or the Confidentiality Agreements
shall restrict the right of Purchaser, as between Purchaser and any Seller, to
use or disclose information regarding the Interests. Notwithstanding anything
contained in this Section 4.2(a) to the contrary and insofar as it relates to
the Interests, Purchaser may disclose any of the information subject to the
first sentence of this Section 4.2(a) or covered by the Confidentiality
Agreements to the extent (i) necessary to enforce, or seek redress for breach
of, this Agreement, (ii) required by applicable law or the rules of a national
securities exchange, (iii) necessary for financing, reserve engineering or
accounting purposes, (iv) to comply with any law or legal process, or (v)
otherwise previously made public (without breach of the preceding sentence of
this Section 4.2(a) or of the Confidentiality Agreements). In addition, each
Seller acknowledges and agrees that Purchaser may issue one or more press
releases and may make other public statements with respect to this Agreement or
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the transactions contemplated by this Agreement. If a proposed press release or
other public statement will contain information not previously disclosed,
Purchaser shall provide HHOC, pursuant to the Agreement and Plan of Merger
referred to in clause (e) of Section 6.1, with any and all proposed forms of
press release or other public statement and consult with HHOC before issuing any
press release or otherwise making any public statement with respect to this
Agreement or the transactions contemplated by this Agreement and shall not issue
any such press release or make any such public statement prior to providing the
proposed form of such press release or public statements and having such
consultation; provided, however, that Purchaser may, without providing the
proposed form of such press release or public statement or consulting with HHOC,
issue such a press release or make such a public statement if required by
applicable law or the rules of a national securities exchange if Purchaser has
used reasonable efforts to provide HHOC with the proposed form of press release
or public statement and consult with HHOC but has been unable to do so in a
timely manner.
(b) Purchaser shall take or cause to be taken all reasonable actions
within its control as may be necessary or advisable to consummate and make
effective the purchase of the Interests and the transactions contemplated by
this Agreement and to assure that, as of the Closing Date, it will not be under
any material corporate, legal or contractual restriction that would prohibit or
delay the timely consummation of such transactions.
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(c) Purchaser shall take or cause to be taken all reasonable actions to
cause all the representations and warranties of Purchaser contained in this
Agreement to be true and correct on and as of the Closing Date, other than such
as are made as of a specific date.
(d) Purchaser shall notify each Seller promptly (i) upon learning of any
change in fact or circumstance that causes any representation or warranty of
Purchaser contained in this Agreement to no longer be accurate and complete or
(ii) if Purchaser fails to perform or comply with any covenant or agreement
contained in this Agreement or it is reasonably anticipated that Purchaser will
be unable to perform or comply with any covenant or agreement contained in this
Agreement.
ARTICLE V
REVIEW BY PURCHASER
5.1. Due Diligence. Purchaser may conduct, prior to the Closing and at its
cost, such further review of data and information pertaining to the Interests
and title examination and other examinations and investigations in respect of
the Interests as Purchaser desires.
5.2. Defensible Title.
(a) "Defensible Title" means such title and ownership of each Seller
(pursuant to instruments filed with and, to the extent required, approved by the
MMS and filed of record in the appropriate county or parish records or, in the
case of those instruments not yet approved by the MMS or not in approvable form
and listed in Schedule 3.1(a), pursuant to instruments filed with the MMS and
filed of record in the appropriate county or parish records) that, in each case
(i) will entitle Purchaser, as the successor to each Seller, to receive and
retain now and, except as the result of any action by Purchaser subsequent to
the Closing, in the future, without suspension, reduction or termination, not
less than the relevant ORI amount of such Seller listed in Schedule 1-A of
Substances produced under the terms of the relevant Lease and the proceeds from
the sale thereof for the duration of such Lease and (ii) is free of all claims,
liens, security interests, encumbrances, irregularities and defects, except for
Permitted Encumbrances (as defined below in this Section 5.2).
(b) "Permitted Encumbrances" are:
(i) mechanics', materialmen's, operator's and non-operators', tax
and similar liens or charges arising in the ordinary course of business
related to an Interest, if such liens or charges secure payments not yet
due;
(ii) all consents from, notices to, approvals by or other actions
by any governmental authority in connection with the sale or transfer of
the Interests of any Seller by such Seller to Purchaser pursuant to this
Agreement if such matters are customarily and appropriately obtained after
the sale or transfer;
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(iii) rights of a governmental entity to control or regulate the
Interests, together with all applicable laws, rules and regulations; and
(iv) easements, rights-of-way, surface leases and other surface
use restrictions if such restrictions will not materially adversely affect
the use, value or operation of the Interests.
5.3. Waiver of Consumer Rights. To the extent sale of any of the Interests
is mandatorily governed by the laws of the State of Texas, Purchaser waives its
rights under the Texas Deceptive Trade Practices-Consumer Protection Act,
Section 17.41 et seq., Texas Business & Commerce Code, a law that gives
consumers special rights and protections. After consultation with an attorney
selected by Purchaser, Purchaser voluntarily consents to this waiver. In order
to evidence its ability to grant such waiver, Purchaser hereby represents and
warrants to each Seller that Purchaser (i) is in the business of seeking or
acquiring, by purchase or lease, goods or services for commercial or business
use, (ii) has knowledge and experience in financial and business matters that
enable it to evaluate the merits and risks of the transaction contemplated
hereby and (iii) is not in a significantly disparate bargaining position.
ARTICLE VI
CONDITIONS TO CLOSING
6.1. Conditions to Obligations of Sellers. The obligations of Sellers at
the Closing are subject to the satisfaction, at or prior to the Closing, of the
following conditions, which shall be deemed satisfied upon the occurrence of the
Closing:
(a) the representations and warranties of Purchaser set forth in this
Agreement that are qualified as to materiality shall be true and correct and
those that are not so qualified shall be true and correct in all material
respects, in each case, as of the date hereof and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing as
though made at and as of the Closing;
(b) Purchaser shall have performed in all material respects the
covenants and agreements which Purchaser was required to perform or satisfy at
or prior to the Closing or performance of any such covenant or agreement not so
performed shall have been waived in writing by all Sellers;
(c) except for approvals not customarily and appropriately obtained from
the MMS prior to a Closing, Sellers shall have received evidence, in form
reasonably satisfactory to each Seller and its counsel, that all permits,
consents, approvals, licenses, qualifications and orders required by
governmental authorities, or the terms of the Interests, for ownership of the
Interests by Purchaser to be obtained prior to the Closing have been obtained or
waived;
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(d) no action or proceeding shall be pending or threatened before a
court, arbitrator or governmental authority seeking to restrain or prohibit the
consummation of the transactions contemplated by this Agreement or to obtain
substantial damages from any Seller related to this Agreement; and
(e) Purchaser shall be in compliance with all of its obligations under
that certain Agreement and Plan of Merger between Purchaser and HHOC (the
"Merger Agreement"), or such obligations shall have been waived in writing by
HHOC (with the approval of any Seller impacted by the effect of any such
waiver), and the closing under the Merger Agreement (including execution by the
parties thereto of the Registration Rights Agreement contemplated in the Merger
Agreement, under which Sellers are third party beneficiaries) shall have
occurred simultaneously with the Closing.
6.2. Conditions to Obligations of Purchaser. The obligations of Purchaser
at the Closing are subject to the satisfaction, at or prior to the Closing, of
the following conditions, which shall be deemed satisfied upon the occurrence of
the Closing:
(a) the representations and warranties of each Seller set forth in this
Agreement that are qualified as to materiality shall be true and correct and
those that are not so qualified shall be true and correct in all material
respects, in each case, as of the date hereof and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing as
though made at and as of the Closing;
(b) Each Seller shall have performed in all material respects the
covenants and agreements which Seller was required to perform or satisfy at or
prior to the Closing or performance of any such covenant or agreement not so
performed shall have been waived in writing by Purchaser;
(c) Purchaser shall have received evidence, in form reasonably
satisfactory to Purchaser and its counsel, that all permits, consents,
approvals, licenses, qualifications and orders required by governmental
authorities, or the terms of the Interests, for ownership of the Interests by
Purchaser to be obtained prior to the Closing have been obtained or waived;
(d) no action or proceeding shall be pending or threatened before a
court, arbitrator or governmental authority seeking to restrain or prohibit the
consummation of the transactions contemplated by this Agreement or to obtain
substantial damages from Purchaser related to this Agreement;
(e) Since the Effective Time, there shall have been no material adverse
change in the Interests, except for depletion through normal production, changes
in rates of production that occur in the ordinary course of operation, and
changes in general economic conditions and product pricing generally affecting
the offshore Gulf of Mexico oil and gas industry; and
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(f) HHOC shall be in compliance with its obligations under the Merger
Agreement, or such obligations shall have been waived in writing by Purchaser,
and the closing under the Merger Agreement shall have occurred simultaneously
with the Closing.
ARTICLE VII
CLOSING
7.1. Closing Date. Subject to applicable provisions of this Agreement, the
consummation of the transactions contemplated by this Agreement (the "Closing")
shall occur at a location mutually acceptable to Seller and Purchaser on January
8, 2002, at 9:00 a.m. local time, or on such other date or at such other time as
the parties hereto may agree (any such date being the "Closing Date").
7.2. Closing Obligations. At the Closing, the following shall occur, each
being a condition precedent to the others and each being deemed to have occurred
simultaneously:
(a) Each Seller shall execute and deliver to Purchaser one or more
assignments in the form attached to this Agreement as Exhibit B conveying the
Interests to Purchaser (each of which assignments shall provide that the
Interests are conveyed by Sellers to Purchaser with a special warranty of title,
in which each Seller binds and obligates itself, its successors and assigns to
warrant and forever defend title to the Interests unto Purchaser, its successors
and assigns, against every person or entity whomsoever lawfully claiming or to
claim the same or any part thereof by, through or under such Seller, but not
otherwise, and with full substitution and subrogation of Purchaser in and to all
warranties of predecessors in interest to such Seller).
(b) Purchaser shall deliver to each Seller its allocable share of the
Purchase Price as adjusted on the basis of the Preliminary Closing Statement, as
provided in Section 2.3.
(c) Sellers shall execute or cause HHOC to execute transfer orders or
letters-in-lieu on forms prepared by Purchaser, and reasonably satisfactory to
such Seller, directing purchasers of Substances produced under the terms of the
Leases on or after the Effective Time and attributable to the interest of such
Seller in the Leases, as set forth in Schedule 1-A, to make payment to Purchaser
for such Substances as contemplated by this Agreement.
(d) Each Seller shall furnish Purchaser an affidavit stating the United
States taxpayer identification number of such Seller and that such Seller is not
a foreign person, pursuant to Section 1445(b)(2) of the Code.
(e) Each Seller shall deliver to Purchaser a certificate of the trustees
of such Seller, dated the Closing Date, certifying (i) that a true and correct
copy of the Trust Agreement of such Seller is attached thereto and is in full
force and effect and (ii) as to the incumbency and authorization of the trustees
of such Seller executing, on behalf of such Seller, this Agreement and the other
documents to be executed and delivered by such Seller at the Closing.
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(f) Purchaser shall deliver to each Seller a certificate of the
Secretary of Purchaser, dated the Closing Date, certifying (i) that a true and
correct copy of the resolutions of the board of directors of Purchaser
authorizing this Agreement and the transactions contemplated hereby are attached
thereto and have been duly adopted and are in full force and effect and (ii) as
to the incumbency and authorization of the officers of Purchaser executing, on
behalf of Purchaser, this Agreement and the other documents to be executed and
delivered by Purchaser at the Closing.
(g) In accordance with the provisions of Section 4.1(d), Sellers shall
deliver releases of all liens, mortgages and other encumbrances filed of record
against the Interests, if any, other than any Permitted Encumbrance.
(h) Sellers and Purchaser shall each execute and deliver such other
instruments and take such other actions as may be necessary to carry out or to
evidence their obligations under this Agreement.
7.3. Transfer of Risk of Loss. Upon the Closing, all risk of loss of or
damage to any portion of the Interests attributable to ownership, use or
operation by Purchaser, including any Casualty Loss, shall pass to Purchaser as
of the Closing Date and all losses, costs, claims, suits, judgments, awards or
damages on account of bodily injury, illness, death or property damage or loss
suffered by any persons or entities other than Purchaser arising out of or
related to the performance of such operations on or after the Closing Date shall
pass to and be assumed by Purchaser as of the Closing Date.
ARTICLE VIII
TERMINATION
8.1. Termination. This Agreement and the transactions contemplated by this
Agreement may be terminated in the following situations:
(a) by Sellers or Purchaser, if the Merger Agreement shall have
terminated in accordance with its terms; and
(b) by Sellers and Purchaser pursuant to written agreement.
8.2. Liabilities Upon Termination.
(a) Notwithstanding anything provided to the contrary in this Agreement,
upon the failure by Purchaser to fulfill any undertaking or commitment provided
for herein on the part of Purchaser that is required to be fulfilled on or prior
to the Closing Date, each Seller, at its sole option, shall be entitled to any
remedy available at law or in equity.
(b) Notwithstanding anything provided to the contrary in this Agreement,
upon failure of Sellers to fulfill any undertaking or commitment provided for
herein on the part of Sellers that is
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required to be fulfilled on or prior to the Closing Date, Purchaser, at its sole
option, shall be entitled to any remedy available at law or in equity.
(c) NOTWITHSTANDING ANYTHING CONTAINED TO THE CONTRARY IN ANY OTHER
PROVISION OF THIS AGREEMENT, SELLERS AND PURCHASER AGREE THAT THE RECOVERY BY
EITHER PARTY HERETO OF ANY DAMAGES SUFFERED OR INCURRED BY IT AS A RESULT OF ANY
BREACH BY THE OTHER PARTY OF ANY OF ITS REPRESENTATIONS, WARRANTIES OR
OBLIGATIONS UNDER THIS AGREEMENT SHALL BE LIMITED TO THE ACTUAL DAMAGES SUFFERED
OR INCURRED BY THE NON-BREACHING PARTY AS A RESULT OF THE BREACH BY THE
BREACHING PARTY OF ITS REPRESENTATIONS, WARRANTIES OR OBLIGATIONS HEREUNDER, AND
IN NO EVENT SHALL THE BREACHING PARTY BE LIABLE TO THE NON-BREACHING PARTY FOR
ANY INDIRECT, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES SUFFERED OR INCURRED
BY THE NON-BREACHING PARTY AS A RESULT OF THE BREACH BY THE BREACHING PARTY OF
ANY OF ITS REPRESENTATIONS, WARRANTIES OR OBLIGATIONS HEREUNDER.
ARTICLE IX
OBLIGATIONS AFTER CLOSING
9.1. Post-Closing Adjustments. Sellers and Purchaser acknowledge that the
amount of all adjustments to the Purchase Price under Section 2.2 may not be
available prior to the Closing. As soon as practicable after the Closing, but in
any event within ninety (90) days after the Closing, Purchaser shall cause HHOC
to prepare and submit to each Seller a statement containing adjustments to the
Purchase Price contemplated by the provisions of Section 2.2 that were not
finally determined as of the Closing (the "Final Settlement Statement") and such
supporting documentation as is reasonably necessary to support the adjustments
shown therein. Purchaser shall cause HHOC to give representatives of each Seller
reasonable access to the premises of HHOC and to the books and records of HHOC
for purposes of reviewing the calculation of any such adjustments and will cause
appropriate personnel of HHOC to assist each Seller and representatives of any
Seller, at no cost to such Seller, in verification of such calculations. The
Final Settlement Statement shall become final and binding on Sellers and
Purchaser as to the calculation of the Adjusted Purchase Price forty five (45)
days following the date the Final Settlement Statement is received by Sellers,
except to the extent that, prior to the expiration of such forty five (45) day
period, any Seller shall deliver to Purchaser notice, as hereinafter required,
of its disagreement with the contents of the Final Settlement Statement. Such
notice shall be in writing and set forth all disagreements of any Seller with
respect to any portion of the Final Settlement Statement, together with any
changes thereto proposed by such Seller, and shall include an explanation in
reasonable detail of, and such supporting documentation as is reasonably
necessary to support, such changes. If any Seller has timely delivered such a
notice of disagreement to Purchaser, then, upon written agreement between
Purchaser and Sellers resolving all disagreements set forth in such notice, the
Final Settlement Statement shall become final and binding upon Purchaser and
Sellers as to the calculation of the Adjusted Purchase Price. If the Final
Settlement Statement has not become final and binding by the seventy fifth
(75th) day
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following its receipt by Sellers, then Purchaser or Sellers may submit to a
nationally-recognized firm of certified public accountants which neither serves
as the auditors for nor provides consulting services to HHOC or any Sellers or
Purchaser or such other independent public accounting firm mutually satisfactory
to Sellers and Purchaser for resolution any unresolved disagreements of Sellers
set forth in the notice from Sellers to Purchaser. The fees and expenses of such
accounting firm in making such determination shall be shared equally by
Purchaser, on the onehand, and Sellers, on the other. Upon resolution of such
unresolved disagreements of Purchaser, the Final Settlement Statement (including
any revisions thereto as are so resolved or agreed) shall be conclusive, final
and binding upon Purchaser and Sellers as to the calculation of the Adjusted
Purchase Price. Payment of any net amount due to Sellers or Purchaser, as the
case may be, on the basis thereof shall be made within five (5) days after the
Final Settlement Statement (as so resolved or agreed) becomes final and binding
on the parties hereto (the "Final Settlement Date").
9.2. Subsequent Adjustments. Sellers and Purchaser recognize that either
Sellers or Purchaser may receive funds or pay expenses after the Final
Settlement Date which are properly the property or obligation of the other. Upon
receipt of net proceeds or payment of net expenses due to or payable by the
other party hereto, whichever occurs first, Sellers or Purchaser, as the case
may be, shall submit a statement to the other party hereto showing the relevant
items of income and expense. Payment of any net amount due by Sellers or
Purchaser, as the case may be, on the basis thereof shall be made within ten
(10) days of receipt of the statement.
9.3. Reservation of Claims. Except as provided in this Agreement, each
Seller is entitled to all claims related to the Interests of such Seller prior
to the Effective Time regardless of when payment is made. Except as provided in
this Agreement, Purchaser is entitled to all claims related to the Interests
which arise after the Effective Time.
9.4. Files and Records. Upon the Closing, subject to the provisions of
Section 1.2(d), Sellers shall permit Purchaser, at the expense of Purchaser, to
take possession of originals, or with respect to accounting records relating to
periods prior to the Closing Date, copies, of all Records in the possession or
control of any Seller or HHOC and relating to the Interests. Each Seller shall
have the right to copy (at the expense of such Seller) and retain a copy of all
such files, records and data. Insofar as any Seller reasonably believes such
Records may be needed or useful in connection with federal, state or local
regulatory or tax matters or resolution of existing disputes or contract
compliance issues with third parties or for any other appropriate purposes, such
Seller shall have the right to make, at the expense of such Seller, and retain
copies of Records subsequent to the delivery of such Records to Purchaser;
provided, however, any such copies of Records retained by such Seller shall be
confidential and proprietary to Purchaser to the extent the relevant Records
were theretofore maintained as such by such Seller, and to such extent and
except as provided herein to the contrary, such Seller may not divulge any
matters contained therein or any other information provided by Purchaser to such
Seller pursuant to the terms of this Agreement, without the prior express
written consent of Purchaser, except (a) as required by applicable law, (b) as
required by order of any court, (c) to the extent otherwise
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previously made public (other than by disclosure in breach of this Agreement) or
(d) as is necessary to enforce, or seek redress for breach of, this Agreement.
Except as may be otherwise required by any of the Contracts or applicable law,
Purchaser shall be obligated to maintain the Records for a period of seven years
following the Closing Date; provided, however, Purchaser shall not be obligated
to maintain any Records that relate in all material respects to any of the
Interests that cease to be owned by Purchaser if Purchaser has obligated its
successors and assigns of such Records to maintain and allow access to such
Records for the remainder of such seven-year period; and provided further,
however, Purchaser shall not be required to retain any Records that it has
offered to deliver to Sellers.
9.5. Further Assurances. After the Closing, Sellers and Purchaser agree to
execute and deliver such instruments and take such other actions as may be
necessary or advisable to carry out their obligations under this Agreement or
any other document delivered pursuant hereto. In particular, Sellers and
Purchaser agree to execute and deliver such instruments and take such other
actions as may be necessary and advisable to make all filings, registrations,
and recordings which must be made with respect to the ORIs in the records of the
MMS and all appropriate counties, parishes, and state agencies and offices in
order that the records maintained by the MMS and the appropriate state agencies
and the appropriate records of the relevant parishes and counties shall
accurately reflect the transfer of the Interests to Purchaser.
9.6. Assumption and Indemnity.
(a) Upon the Closing, Purchaser hereby assumes responsibility for and
agrees to pay, perform and discharge all duties and obligations of Sellers
arising out of or in connection with the ownership of the Interests on or after
the Closing Date (collectively, the "Assumed Obligations").
(b) Each Seller, severally and not jointly, shall retain responsibility
for and agrees to pay, perform and discharge all costs, expenses, liabilities,
claims and obligations arising out of or in connection with the ownership of the
Interests of such Seller prior to the Closing Date (the "Retained Obligations").
(c) To the extent Purchaser wishes to make adjustments to any audits
with respect to any of the Interests relating to any period prior to the
Effective Time, Purchaser shall do so only with the prior written consent of any
affected Seller.
(d) IN THE EVENT THAT THE CLOSING OCCURS, EXCEPT AS TO MATTERS WAIVED IN
WRITING BY THE PARTY HERETO AGAINST WHICH THE WAIVER IS SOUGHT TO BE ENFORCED,
(I) PURCHASER SHALL PROTECT, DEFEND, RELEASE, INDEMNIFY AND HOLD HARMLESS EACH
SELLER AND THE TRUSTEES, BENEFICIARIES, EMPLOYEES, AND AGENTS OF EACH SELLER AND
THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS, AND ASSIGNS OF ANY OF THE
FOREGOING (EACH A "SELLER INDEMNIFIED PARTY") FROM AND AGAINST ANY AND ALL
DAMAGES, CLAIMS, LOSSES, DEMANDS, FINES, PENALTIES, JUDGMENTS (INCLUDING
INTEREST),
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COSTS, EXPENSES, ENVIRONMENTAL LIABILITIES, AND OTHER LIABILITIES, DIRECT,
CONTINGENT, OR OTHERWISE, INCLUDING CONSULTANT AND ATTORNEYS' FEES AND COSTS OF
COURT ("DAMAGES") WHICH MAY BE ALLEGED AGAINST ANY SELLER INDEMNIFIED PARTY,
ARISING OR ACCRUING WITH RESPECT TO (A) ANY REPRESENTATION OR WARRANTY MADE BY
PURCHASER IN OR PURSUANT TO THIS AGREEMENT BEING UNTRUE OR INCORRECT IN ANY
MATERIAL RESPECT, (B) ANY FAILURE BY PURCHASER TO PERFORM ANY COVENANT OR
AGREEMENT SET FORTH IN THIS AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT
EXECUTED BY IT IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY OR (C)
THE ASSUMED OBLIGATIONS AND (II) EACH SELLER, SEVERALLY AND NOT JOINTLY, SHALL
PROTECT, DEFEND, RELEASE, INDEMNIFY AND HOLD HARMLESS PURCHASER AND THE
SHAREHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS OF PURCHASER AND THE
HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS, AND ASSIGNS OF ANY OF THE FOREGOING
(EACH A "PURCHASER INDEMNIFIED PARTY") FROM ANY DAMAGES WHICH MAY BE ALLEGED
AGAINST ANY PURCHASER INDEMNIFIED PARTY, ARISING OR ACCRUING WITH RESPECT TO (A)
ANY REPRESENTATION OR WARRANTY MADE BY SUCH SELLER IN OR PURSUANT TO THIS
AGREEMENT BEING UNTRUE OR INCORRECT IN ANY MATERIAL RESPECT, (B) ANY FAILURE BY
SUCH SELLER TO PERFORM ANY COVENANT OR AGREEMENT SET FORTH IN THIS AGREEMENT OR
ANY OTHER AGREEMENT OR DOCUMENT EXECUTED BY IT IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED HEREBY OR (C) THE RETAINED OBLIGATIONS OF SUCH SELLER.
THE TERM "DAMAGES," AS USED IN THIS SECTION 9.6, SHALL NOT INCLUDE (X) ANY
AMOUNT WHICH WAS TAKEN INTO ACCOUNT AS AN ADJUSTMENT TO THE PURCHASE PRICE
PURSUANT TO ANY APPLICABLE PROVISION OF THIS AGREEMENT OR (Y) COSTS AND EXPENSES
OF EITHER PARTY HERETO AS DESCRIBED IN SECTION 10.2.
(e) Neither any Seller Indemnified Party nor any Purchaser Indemnified
Party shall be entitled to indemnification under this Section 9.6 unless the
aggregate of all amounts for which indemnity would otherwise be due to the
Seller Indemnified Parties or the Purchaser Indemnified Parties, as the case may
be, exceeds $150,000 in the aggregate, in which case the Seller Indemnified
Parties or the Purchaser Indemnified Parties, as the case may be, shall be
entitled to recover in full with respect to all such amounts. This threshold
does not apply to (and shall not be satisfied by) defaults related to the
payment of money or other liquidated amounts. NOTWITHSTANDING ANYTHING IN THIS
AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL PURCHASER OR ANY SELLER BE LIABLE
HEREUNDER FOR ANY EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL,
INCIDENTAL, STATUTORY, REMOTE OR SPECULATIVE DAMAGES FURTHER NOTWITHSTANDING
ANYTHING IN THIS AGREEMENT TO THE CONTRARY, NEITHER OF SELLERS NOR PURCHASER
SHALL BE OBLIGATED TO PROVIDE INDEMNIFICATION TO THE OTHER UNDER THIS SECTION
9.6 EXCEEDING IN THE AGGREGATE AS TO ALL CLAIMS FOR SUCH INDEMNIFICATION, THE
AMOUNT SET FORTH BELOW FOR SUCH PARTY:
CLAIMS AGAINST OR BY
HALL-HOUSTON 1996 EXPLORATION
AND DEVELOPMENT FACILITY
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OVERRIDING ROYALTY TRUST $ 1,923,000
CLAIMS AGAINST OR BY
HALL-HOUSTON OIL COMPANY 2000
EXPLORATION AND DEVELOPMENT
FACILITY OVERRIDING ROYALTY
TRUST $ 2,530,000
9.7. Express Negligence. THE DEFENSE, INDEMNIFICATION AND HOLD HARMLESS
PROVISIONS PROVIDED FOR IN THIS AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE
DAMAGES IN QUESTION AROSE SOLELY OR IN PART FROM THE ACTIVE, PASSIVE OR
CONCURRENT NEGLIGENCE, OR OTHER FAULT (INCLUDING STRICT LIABILITY), OF ANY
SELLER INDEMNIFIED PARTY OR PURCHASER INDEMNIFIED PARTY. PURCHASER AND EACH
SELLER ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE
AND IS CONSPICUOUS.
9.8. Indemnification Procedure. All claims for indemnification under the
provisions of Section 9.6 shall be asserted and resolved pursuant to the
provisions of this Section 9.8. Any person or entity claiming indemnification
hereunder is hereinafter referred to as the "Indemnified Party" and any person
or entity against whom such claims are asserted hereunder is hereinafter
referred to as the "Indemnifying Party." In the event that any Damages are
asserted against or sought to be collected from an Indemnified Party by a third
party, such Indemnified Party shall, with reasonable promptness, provide to the
Indemnifying Party a written notice of claim specifying, in reasonable detail,
the specific nature of and specific basis of the Damages and the estimated
amount of such Damages and including a copy of all papers served with respect to
such claim (if any) and the basis of such claim for indemnification under the
provisions of Section 9.6 (each a "Claim Notice"). Notwithstanding the preceding
sentence, failure of an Indemnified Party to give notice hereunder shall not
release the Indemnifying Party from its obligations under the provisions of
Section 9.6, except to the extent the Indemnifying Party is actually prejudiced
by such failure to give notice; provided that, the Indemnifying Party shall not
be obligated to defend, indemnify or otherwise hold harmless an Indemnified
Party with respect to a third party claim until a Claim Notice meeting the
foregoing requirements is furnished to the Indemnifying Party by the party
seeking indemnity hereunder. The Indemnifying Party shall have thirty (30) days
from the personal delivery or receipt of any Claim Notice (the "Notice Period")
in which to notify the Indemnified Party whether or not it disputes the
liability of the Indemnifying Party to the Indemnified Party hereunder with
respect to such Damages. If the Indemnifying Party fails to so notify the
Indemnified Party during the Notice Period, the Indemnifying Party shall be
deemed to have elected to dispute such liability. The Indemnified Party shall
have the duty to defend such third party claim by all appropriate proceedings,
and with counsel of its own choosing, which proceedings shall be promptly
settled or prosecuted to a final conclusion. If the Indemnifying Party desires
to participate in, but not control, any such defense or settlement, it may do so
at its sole cost and expense. If requested by the Indemnified Party, the
Indemnifying
-24-
Party agrees to cooperate with the Indemnified Party and its counsel in
contesting any Damages that the Indemnified Party elects to contest. No claim
may be settled or otherwise compromised without the prior written consent of the
Indemnifying Party. If the Indemnifying Party disputes whether a third party
claim is an indemnified claim under the provisions of Section 9.6, the
determination of whether the Indemnified Party is entitled to indemnification
under the provisions of Section 9.6 shall be resolved pursuant to arbitration as
provided in Section 10.16.
9.9. Allocation of Proceeds. Sellers shall receive all proceeds from the
sale of Substances physically produced or allocable to the Interests prior to
the Effective Time. Purchaser shall receive all proceeds from the sale of
Substances physically produced or allocable to the Interests on or after the
Effective Time.
9.10. Termination of Confidentiality Agreement. Effective upon the Closing,
the obligations of Purchaser under the Confidentiality Agreement, insofar and
only insofar as they relate to the Interests, are terminated.
ARTICLE X
MISCELLANEOUS
10.1 Notices. All notices required or permitted under this Agreement shall
be effective upon receipt if personally delivered, if mailed by registered or
certified mail, postage prepaid, or if delivered by telegram, telecopy or
facsimile if directed to the relevant party hereto as follows:
To any Seller: [Name of relevant Seller]
c/o Hall-Houston Oil Company
700 Louisiana, Suite 2100
Houston, Texas 77002
Telephone: (713) 228-0711
Fax: (713) 225-7600
Attn: John H. Peper
Senior Vice President
To Purchaser: Energy Partners, Ltd.
201 St. Charles Avenue
Suite 3400
New Orleans, Louisiana 70170
Fax: (504) 569-1874
Attn: President
with a copy to:
-25-
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Fax: (212) 269-5420
Attn: John Schuster, Esq.
Any party hereto may give written notice to the others, in the aforesaid
manner, of a change in the address or individual to whom delivery to such party
shall be made.
10.2. Expenses. Except as otherwise provided in this Agreement, all fees,
costs and expenses incurred by any party hereto in negotiating this Agreement or
in consummating the transactions contemplated by this Agreement shall be paid by
the party hereto incurring them.
10.3. Amendment. This Agreement may not be altered or amended, nor may any
rights hereunder be waived, except by a written instrument executed by each of
the parties hereto. No waiver of any provision of this Agreement shall be
construed as a continuing waiver of the same provision or of any other provision
of this Agreement.
10.4. Assignment. Except as provided in the following sentence of this
Section 10.4, neither party hereto may assign or delegate any of its rights or
duties hereunder without the prior written consent of the other party hereto.
Purchaser shall have the right, without obtaining the prior written consent of
Sellers, to assign the rights of Purchaser hereunder to an Affiliate (as defined
below in this Section 10.4) of Purchaser; provided, however, no such assignment
shall relieve Purchaser of any of its obligations under this Agreement. The term
"Affiliate" as used herein shall mean, as to the person or entity specified, any
person or entity controlling, controlled by or under common control with such
specified person or entity. The concept of control, controlling or controlled by
as used in the aforesaid context means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
another, whether through the ownership of voting securities, by contract or
otherwise. No person or entity shall be deemed an Affiliate of any person or
entity by reason of the exercise or existence of rights, interests or remedies
under this Agreement.
10.5. Conditions. The inclusion in this Agreement of conditions to the
obligations of each Seller or Purchaser at the Closing shall not, in and of
itself, be a covenant of any party hereto to satisfy the conditions to the
obligations of any other party hereto at the Closing.
10.6. References. References in this Agreement to Schedule, Exhibit,
Article, or Section numbers shall be to Schedules, Exhibits, Articles, or
Sections of this Agreement, unless expressly stated to the contrary. References
in this Agreement to "hereby," "herein," "hereinafter," "hereinabove,"
"hereinbelow," "hereof," "hereunder" and words of similar import shall be to
this Agreement in its entirety and not only to the particular Schedule, Exhibit,
Article, or Section in which such reference appears. Specific enumeration herein
shall not exclude the general and, in such regard, references in this Agreement
to "includes" or "including" shall mean
-26-
"includes, without limitation," or "including, without limitation," as the case
may be. Except as otherwise indicated, references in this Agreement to statutes,
sections, or regulations are to be construed as including all statutory or
regulatory provisions consolidating, amending, replacing, succeeding, or
supplementing the statute, section, or regulation referred to. References in
this Agreement to "writing" include printing, typing, lithography, facsimile
reproduction, and other means of reproducing words in a tangible visible form.
References in this Agreement to agreements and other contractual instruments
shall be deemed to include all exhibits and appendices attached thereto and all
subsequent amendments and other modifications to such instruments, but only to
the extent such amendments and other modifications are not prohibited by the
terms of this Agreement. References in this Agreement to persons or entities
include their respective successors and permitted assigns.
10.7. Articles and Sections. This Agreement, for convenience only, has been
divided into Articles and Sections; and it is understood that the rights and
other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
10.8. Number and Gender. Whenever the context requires, reference herein
made to the single number shall be understood to include the plural; and
likewise, the plural shall be understood to include the singular. Definitions of
terms defined in the singular or plural shall be equally applicable to the
plural or singular, as the case may be, unless otherwise indicated. Words
denoting sex shall be construed to include the masculine, feminine and neuter,
when such construction is appropriate; and specific enumeration shall not
exclude the general but shall be construed as cumulative.
10.9. Incorporation of Schedules and Exhibits. The Schedules and Exhibits
attached to this Agreement are incorporated herein and shall be considered a
part of this Agreement for all purposes.
10.10. Counterparts. This Agreement may be executed in counterparts, each
of which shall be an original and which, taken together, shall constitute the
same instrument.
10.11. Governing Law. EXCEPT TO THE EXTENT THE LAWS OF ANOTHER JURISDICTION
MANDATORILY GOVERN ANY ASPECT OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT, THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
LOUISIANA, WITHOUT GIVING EFFECT TO ANY PRINCIPLES OF SUCH LAWS REGARDING
CONFLICT OF LAWS.
10.12. Integration. THIS AGREEMENT AND THE DOCUMENTATION TO BE EXECUTED AND
DELIVERED AT THE CLOSING CONSTITUTE THE ENTIRE UNDERSTANDING BETWEEN SELLER AND
PURCHASER CONCERNING THE SUBJECT MATTER OF THIS AGREEMENT AND SUPERSEDE
-28-
ALL NEGOTIATIONS, DISCUSSIONS, REPRESENTATIONS, PRIOR AGREEMENTS AND
UNDERSTANDINGS, WHETHER ORAL OR WRITTEN, EXCEPT THE CONFIDENTIALITY AGREEMENT.
10.13. Parties in Interest. Except as otherwise expressly provided herein,
this Agreement is binding upon and shall inure to the benefit of Sellers and
Purchaser and their respective successors, representatives, and permitted
assigns. Except as otherwise expressly provided herein, no other person or
entity is intended to have any benefits, rights or remedies under this Agreement
nor shall any person or entity other than Purchaser and Sellers be entitled to
any claim, cause of action, remedy, or right of any kind under this Agreement.
10.14. Severability. If any provision of this Agreement is found to be
illegal or unenforceable, the other terms of this Agreement shall remain in
effect and this Agreement shall be construed as if the illegal or unenforceable
provision had not been included.
10.15. Survival. The covenants, agreements, representations, warranties and
indemnities contained in this Agreement shall survive the Closing of the
transactions contemplated hereby; provided, however, except as to the
representations and warranties made by each Seller in Sections 3.1(a), (b), (c),
(d) and (e), the representations and warranties made by each Seller in this
Agreement and indemnities by each Seller associated therewith shall survive the
Closing for eighteen months only.
10.16.. Arbitration. Except as provided in Section 9.1 and below in this
Section 10.16, any dispute, controversy or claim arising out of or in relation
to or in connection with this Agreement, including any dispute as to the
construction, validity, interpretation, enforceability or breach of this
Agreement, shall be exclusively and finally settled by arbitration in accordance
with this Section 10.16. Any party may submit such a dispute, controversy or
claim to arbitration by notice to the other involved party and the administrator
for the American Arbitration Association ("AAA"). The arbitration proceedings
shall be conducted in New Orleans, Louisiana, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association as in effect on the
date hereof. The arbitration shall be heard and determined by three arbitrators.
Each side shall appoint an arbitrator of its choice within twenty (20) days of
the submission of the notice of arbitration. The party-appointed arbitrators
shall in turn appoint a presiding arbitrator for the tribunal within twenty (20)
days following the appointment of the second party-appointed arbitrator. If the
party-appointed arbitrators cannot reach agreement on a presiding arbitrator for
the tribunal and/or one party fails to appoint its party-appointed arbitrator
within the applicable period, the AAA shall act as appointing authority to
appoint an independent arbitrator with at least ten (10) years experience in the
legal and/or commercial aspects of the petroleum exploration and production
industry. None of the arbitrators shall have been an employee or consultant to
either party to the arbitration or any of their respective Affiliates, or have
any financial interest in the dispute, controversy or claim. All decisions of
the arbitral tribunal shall be by majority vote. The arbitrators may not award
consequential, punitive or similar damages except those claimed by persons other
than Seller and Purchaser for which
-28-
responsibility is being allocated between the parties. Expenses in connection
with the arbitration and the compensation and expenses of the arbitrators shall
be borne in such manner as may be specified in the arbitral award. Privileges
protecting attorney-client communications and attorney work product from
compelled disclosure or use in evidence, as recognized by the Federal Rules of
Civil Procedure, shall apply to and be binding in any arbitration proceeding
conducted under this Section 10.16. This Section 10.16 does not apply to any
dispute, controversy or claim in which the claimant seeks injunctive,
declaratory or other equitable relief, and each party hereto reserves its right
to bring such action in court, which the parties hereto agree shall be
exclusively the U.S. Federal Courts sitting in the Eastern District of Louisiana
and each party hereto irrevocably consents to personal jurisdiction in any and
all such tribunals.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, Sellers and Purchaser have executed and delivered this
Agreement as of the date first set forth above.
SELLERS:
WITNESSES: HALL-HOUSTON 1996 EXPLORATION
AND DEVELOPMENT FACILITY
OVERRIDING ROYALTY TRUST
Name: /s/ Karen Raif By: /s/ Gary L. Hall
--------------------------------------- ------------------------------
Karen Raif Gary L. Hall
Trustee
Name: /s/ Leslie D. Moore By: /s/ Wayne P. Hall
--------------------------------------- -----------------------------
Leslie D. Moore Wayne P. Hall
Trustee
WITNESSES: HALL-HOUSTON OIL COMPANY 2000
EXPLORATION AND DEVELOPMENT
FACILITY OVERRIDING ROYALTY TRUST
Name: /s/ Karen Raif By: /s/ Gary L. Hall
--------------------------------------- --------------------------------
Karen Raif Gary L. Hall
Trustee
Name: /s/ Leslie D. Moore By: /s/ Wayne P. Hall
--------------------------------------- --------------------------------
Leslie D. Moore Wayne P. Hall
Trustee
WITNESSES: PURCHASER:
ENERGY PARTNERS, LTD.
Name: /s/ Joseph H. Leblanc
-----------------------------------
Joseph H. Leblanc
By: /s/ Clinton W. Coldren
--------------------------------
Name: Clinton W. Coldren
------------------------------
Name: /s/ Dina M. Bracci Title: Executive Vice President
--------------------------------------- -----------------------------
Dina M. Bracci
S-i
SCHEDULE 1-A
Attached to and made a part of that certain Purchase and Sale Agreement
dated December 16, 2001, by and between Hall-Houston 1996 Exploration and
Development Facility Overriding Royalty Trust, et al., as "Sellers", and
Energy Partners, Ltd., as "Purchaser".
1. PROPERTY: EAST CAMERON BLOCK 160
SERIAL NO.: OCS 00541
Lease Description: Oil and Gas Lease effective September 1, 1955
between the United States of America, as
Lessor, and The California Company, as
Lessee, covering the E/2 of Block 160, East
Cameron Area, as shown on official leasing
map, Louisiana Map No. 2, Outer Continental
Shelf Leasing Map (Louisiana Offshore
Operations), INSOFAR AND ONLY INSOFAR as said
lease covers E/2SW/4NE/4 of said Block 160
from the surface down to 100 feet below the
stratigraphic equivalent of 8840 feet
measured depth ("MD")/7765 feet true vertical
depth ("TVD") as seen in the Hall-Houston Oil
Company OCS 541 #C-2 Well:
Hall-Houston 1996 Exploration
and Development Facility
Overriding Royalty Trust:
Overriding Royalty Interest 1.96000% of 6/6ths
Wells: OCS 00541 #C-2
Production Status: Producing
2. PROPERTY: EAST CAMERON BLOCK 161
SERIAL NO.: OCS-G 15141
Lease Description: Oil and Gas Lease
effective July 1, 1995, between the United
States of America, as Lessor, and Energy
Development Corporation and Hardy Oil & Gas
USA Inc., as Lessee, covering all of Block
161, East Cameron Area, OCS Leasing Map,
Louisiana, Map No. 2, INSOFAR AND ONLY
INSOFAR as said lease covers the NW/4 of
said Block 161 as to subsea depths from the
seafloor down to and including 100 feet
below the stratigraphic equivalent of 8201
feet TVD as seen in the Hall-Houston Oil
Company OCS-G 15141 No. 3 Well:
Schedule 1-A Page 1 of 12
o INSOFAR AND ONLY INSOFAR as said lease covers the E/2NW/4NW/4
and the NE/4SW/4NW/4NW/4 of said Block 161 as to subsea depths
from the surface down to and including 7970 feet subsea:
Hall-Houston Oil Company 2000 Exploration
and Development Facility Overriding Royalty
Trust:
Overriding Royalty Interest 1.74000% of 6/6ths
Wells: OCS-G 15141 A-1 (aka #3)
Production Status: Producing
o INSOFAR AND ONLY INSOFAR as said lease covers (i) the
NW/4SW/4NW/4 of said Block 161 as to subsea depths from the
seafloor down to and including 100 feet below the
stratigraphic equivalent of 8201 feet TVD as seen in the
Hall-Houston Oil Company OCS-G 15141 No. 3 Well and the (ii)
W/2SW/4NW/4NW/4 and SE/4SW/4NW/4NW/4 of said Block 161 from
5900 feet TVD down to and including 7500 feet TVD:
Hall-Houston Oil Company 2000 Exploration
and Development Facility Overriding Royalty
Trust:
Overriding Royalty Interest 1.24000% of 6/6ths
Wells: OCS-G 15141 A-2 (aka #4)
Production Status: Producing
3. PROPERTY: EAST CAMERON BLOCK 196
SERIAL NO.: OCS-G 16244
o Lease Description: Oil and Gas Lease effective September 1,
1996, between the United States of America,
as Lessor, and Hardy Oil & Gas USA Inc.
(predecessor in interest to Mariner Energy,
Inc.) and Forcenergy Gas Exploration, Inc.,
as Lessee, covering all of Block 196, East
Cameron Area, OCS Leasing Map, Louisiana Map
No. 2, containing approximately 5,000 acres,
INSOFAR AND ONLY INSOFAR as said lease covers
the NE/4 and W/2 of said Block 196 from the
seafloor down to and including 100 feet below
the stratigraphic equivalent of 3200 feet TVD
as seen in the Hall-Houston Oil Company OCS-G
16244 No. 2 Well:
Hall-Houston Oil Company 2000 Exploration
And Development Facility Overriding Royalty
Schedule 1-A Page 2 of 12
Trust:
Overriding Royalty Interest 1.74000% of 6/6ths
Wells: OCS-G 16244 #2 (aka #A-1 ST 1)
Production Status: Producing
4. PROPERTY: EAST CAMERON BLOCK 263
SERIAL NO.: OCS-G 15147
Lease Description: Oil and Gas Lease effective July 1, 1995,
between the United States of America, as
Lessor, and Hardy Oil & Gas USA Inc. and
Nippon Oil Exploration U.S.A. Limited, as
Lessee, covering all of Block 263, East
Cameron Area, South Addition, OCS Leasing
Map, Louisiana Map No. 2A, containing
approximately 5,000 acres, INSOFAR AND ONLY
INSOFAR as said lease covers the SW/4 and the
W/2SE/4 of said Block 263 from the surface
down to and including 6520 feet subsea:
Hall-Houston Oil Company 2000 Exploration
and Development Facility Overriding Royalty
Trust:
Overriding Royalty Interest: 1.74000% of 6/6ths
Wells: OCS-G 15147 #B-1 (aka #3)
Production Status: Producing
OCS-G 15147 #B-2
Production Status: Producing
5. PROPERTY: EUGENE ISLAND 247
SERIAL NO.: OCS-G 21111
o Lease Description: Oil and Gas Lease effective June 1, 1999
between The United States of America, as
Lessor, and Hall-Houston Oil Company, as
Lessee, covering all of Block 247, Eugene
Island Area, OCS Leasing Map, Louisiana Map
No. 4, INSOFAR AND ONLY INSOFAR as said lease
covers the NE/4 and the E/2NW/4 of said Block
247, limited to the depths from the surface
of the earth down to 9550 feet subsea:
Hall-Houston Oil Company 2000 Exploration
and Development Facility Overriding Royalty
Trust:
Schedule 1-A Page 3 of 12
Overriding Royalty Interest 1.70000% of 6/6ths
Wells: OCS-G 21111 #2
Production Status: Temporarily Abandoned
6. PROPERTY: HIGH ISLAND 72
SERIAL NO.: OCS-G 22231
o Lease Description: Oil and Gas Lease effective November 1, 2000,
between the United States of America, as
Lessor, and Hall-Houston Oil Company and
Juniper Energy L.P., as Lessee, covering all
of Block 72, High Island Area, OCS Leasing
Map, Texas Map No. 7, containing
approximately 5,760 acres, INSOFAR AND ONLY
INSOFAR as said lease covers the SW/4NW/4 of
said Block 72, limited in depth from the
surface of the earth down to 7125 feet
subsea:
Hall-Houston Oil Company 2000 Exploration
and Development Facility Overriding Royalty
Trust:
Overriding Royalty Interest 1.00000% of 6/6ths
Wells: OCS-G 22231 #1
Production Status: Temporarily Abandoned
7. PROPERTY: SOUTH PELTO 14
SERIAL NO.: OCS-G 18052
Lease Description: Oil and Gas Lease effective
July 1, 1997 between the United States of
America, as Lessor, and Zilkha Energy
Company, as Lessee, covering all of Block
14, South Pelto Area, OCS Leasing Map,
Louisiana Map No. 6B, containing
approximately 5,000.00 acres, INSOFAR AND
ONLY INSOFAR as said lease covers the
following described acreage and depths:
o Tract 1: E/2SE/4 of Block 14 as to those intervals from the
surface of the earth down to and including a depth of 18,000
feet subsea:
Hall-Houston 1996 Exploration
and Development Facility
Overriding Royalty Trust:
Overriding Royalty Interest 2.12000% of 6/6ths
Schedule 1-A Page 4 of 12
Before Elections & After Election 1
1.59000% of 6/6ths
After Election 2 & After
Payout
Wells: OCS-G 18052 Well #4
(contractual unit including these
aliquots with W/2SW/4 of South
Pelto 15)
Production Status: Shut in
The above-indicated elections are more fully set out in that certain
Farmout Agreement effective May 13, 1999, between Sonat Exploration GOM
Inc. ("Sonat") and Bois d'Arc Offshore, Ltd. ("Bois d'Arc) et al, as
Farmor, and Hall-Houston Oil Company, as Farmee, with each Farmor
retaining a 8.33333% of 6/6ths overriding royalty interest, with the
option to either increase its retained overriding royalty interest to
10% of 6/6ths (After Election 1) or convert the retained overriding
royalty interest to a 25% working interest (After Election 2), upon the
occurrence of certain events. Should Farmor elect to convert to a
working interest, the interest of Farmee is to bear its proportionate
share of overriding royalty interests in favor of certain designated
Sonat and Bois d'Arc employees, with only the overriding royalty
interest attributable to the Sonat employees increasing at project
payout as provided in the conveyance to such designated Sonat employees
(Payout 1). Pursuant to such Farmout Agreement, Sonat in South Pelto 14
and Bois d' Arc in South Pelto 15 each contribute 50% ownership to the
contractual unit and all the above mentioned interests are therefore
proportionately reduced accordingly.
o Tract 2: N/2, SW/4 and W/2SE/4 as to those intervals from the
surface of the earth down to and including a depth of 20,000
feet subsea:
Hall-Houston 1996 Exploration
and Development Facility
Overriding Royalty Trust:
Overriding Royalty Interest 2.12000% of 6/6ths
Before Elections & After
Election 1
1.59000% of 6/6ths
After Election 2 & After
Payout 1
Wells: None
Schedule 1-A Page 5 of 12
The above-indicated elections are more fully set out in that certain
Farmout Agreement effective May 13, 1999, between El Paso Production
GOM Inc., as Farmor, and Hall-Houston Oil Company, as Farmee, with
Farmor retaining a 10% of 6/6ths overriding royalty interest, with the
option to either retain its overriding royalty interest (After Election
1) or convert the retained overriding royalty interest to a 25% working
interest (After Election 2), upon the occurrence of certain events.
Should Farmor elect to convert to a working interest, the interest of
Farmee is to bear its proportionate share of overriding royalty
interests in favor of certain designated El Paso Production GOM Inc.'s
employees increasing at project payout as provided in the conveyance to
such designated El Paso Production GOM Inc.'s employees (Payout 1).
8. PROPERTY: SOUTH PELTO 15
SERIAL NO.: OCS-G 09652
o Lease Description: Oil and Gas Lease effective May 1, 1988
between the United States of America, as
Lessor, and Kerr-McGee Corporation, as
Lessee, covering all of Block 15, South Pelto
Area, OCS Leasing Map No. 6B, containing
approximately 5,000.00 acres, INSOFAR AND
ONLY INSOFAR as said lease covers the W/2SW/4
as to those intervals from the surface of the
earth down to and including a depth of 18,000
feet subsea.
Hall-Houston 1996 Exploration
and Development Facility
Overriding Royalty Trust:
Overriding Royalty Interest 2.12000% of 6/6ths
Before Elections & After
Election 1
1.59000% of 6/6ths
After Election 2 & After
Payout
Wells: OCS-G 18052 Well #4
(contractual unit including
these aliquots with W/2SW/4
of South Pelto 15)
Production Status: Shut in
The above-indicated elections are more fully set out in that certain
Farmout Agreement effective May 13, 1999, between Sonat Exploration GOM
Inc. ("Sonat") and Bois d'Arc Offshore, Ltd. ("Bois d'Arc) et al, as
Farmor, and Hall-Houston Oil Company, as Farmee, with each Farmor
retaining a 8.33333% of
Schedule 1-A Page 6 of 12
6/6ths overriding royalty interest, with the option to either increase
its retained overriding royalty interest to 10% of 6/6ths (After
Election 1) or convert the retained overriding royalty interest to a
25% working interest (After Election 2), upon the occurrence of
certain events. Should Farmor elect to convert to a working interest,
the interest of Farmee is to bear its proportionate share of
overriding royalty interests in favor of certain designated Sonat and
Bois d'Arc employees, with only the overriding royalty interest
attributable to the Sonat employees increasing at project payout as
provided in the conveyance to such designated Sonat employees (Payout
1). Pursuant to such Farmout Agreement, Sonat in South Pelto 14 and
Bois d' Arc in South Pelto 15 each contribute 50% ownership to the
contractual unit and all the above mentioned interests are therefore
proportionately reduced accordingly.
9. PROPERTY: SOUTH TIMBALIER 180
SERIAL NO.: OCS-G 18046
Lease Description: Oil and Gas Lease effective July 1, 1997,
between the United States of America, as
Lessor, Hall-Houston Oil Company and
Spinnaker Exploration Company, L.L.C., as
Lessee, covering all of Block 180, South
Timbalier Area, OCS Leasing Map, Louisiana
Map No. 6, containing approximately 5,000
acres.
Hall-Houston Oil Company
Employee Royalty Trust:
Overriding Royalty Interest 1.00000% of 6/6ths
Hall-Houston 1996 Exploration
and Development Facility
Overriding Royalty Trust:
Overriding Royalty Interest: 2.00000% of 6/6ths
Wells: None
10. PROPERTY: SOUTH TIMBALIER 184
SERIAL NO.: OCS-G 1568
o Lease Description: Oil and Gas Lease effective July 1, 1967,
between the United States of America, as
Lessor, and Cities Service Oil Company,
Atlantic Richfield Company and Continental
Oil Company, as Lessee, covering all of Block
184, South Timbalier Area, Official Leasing
Map, Louisiana Map No. 6, INSOFAR AND ONLY
INSOFAR as said lease covers the NW/4 of said
Block 184 as to the depths from the seafloor
down to and including 13,600 feet TVD.
Schedule 1-A Page 7 of 12
Hall-Houston 1996 Exploration and
Development Facility Overriding
Royalty Trust:
Overriding Royalty Interest 1.03459% of 6/6ths
Wells: None on South Timbalier 184; HBP by
OCS-G 1569 for 184/185 Unit Wells (#A-1
and #A-6)
11. PROPERTY: SOUTH TIMBALIER 185
SERIAL NO.: OCS-G 1569
Lease Description: Oil and Gas Lease effective
July 1, 1967, between the United States of
America, as Lessor, and Sinclair Oil & Gas
Company and Skelly Oil Company, as Lessees,
covering all of Block 185, South Timbalier
Area, Official Leasing Map, Louisiana Map
No. 6, INSOFAR AND ONLY INSOFAR as said
lease covers the following described acreage
and depths:
o Tract 1: NE/4 of Block 185 to the depths from the seafloor
down to and including 13,600 feet TVD, save and except the
aliquots and depths in Tracts 2 and 3 hereinbelow:
Hall-Houston 1996 Exploration and
Development Facility Overriding Royalty
Trust:
Overriding Royalty Interest 1.05459% of 6/6ths
Wells: OCS-G 1569 #A-4
Production Status:
Temporarily Abandoned.
To be plugged and abandoned
o Tract 2: (i) the SW/4NE/4 of Block 185 as to all depths from
the seafloor down to and including 13,600 feet TVD, save and
except all depths below 100 feet below the stratigraphic
equivalent of 13,164 feet TVD, as seen in the electric log of
the Hall-Houston Oil Company OCS-G 1569 #4 ST 1 well, down to
and including 13,600 feet TVD; and (ii) the NW/4SE/4NE/4 of
Block 185 from the stratigraphic equivalent of 12,789 feet TVD
down to and including 100 feet below the stratigraphic
equivalent of 13,164 feet TVD as seen in the electric log of
the Hall-Houston Oil Company OCS-G 1569 #4 ST 1 Well:
Hall-Houston 1996 Exploration and
Development Facility Overriding Royalty
Schedule 1-A Page 8 of 12
Trust:
Overriding Royalty Interest 3.22655% of 6/6ths
Wells: Hall-Houston Oil Company OCS-G
1569 #C-1 ST 3 (aka #4 ST 1)
Production Status: Producing
o
o Tract 3: E/2NE/4NE/4 to all depths from the seafloor down to and
including 13,600 feet TVD:
Hall-Houston 1996 Exploration and
Development Facility Overriding Royalty
Trust
Overriding Royalty Interest 1.00000% of 6/6ths
Wells: The Louisiana Land and
Exploration Company OCS-G-1569
#A-1 Well
Production Status: Temporarily
Abandoned
o Tract 4: S/2 and the NW/4 of Block 185 as said lease covers
the depths from the seafloor down to and including 13,600 feet
TVD, save and except the aliquots and depths in Tract 5
hereinbelow:
Hall-Houston 1996 Exploration and
Development Facility Overriding Royalty
Trust
Overriding Royalty Interest 1.10474% of 6/6ths
Wells: OCS-G 1569 #B-1, B-2, B-3,
B-4, B-6 B-7, B-8
Production Status: Temporarily
Abandoned. To be plugged and
abandoned
o Tract 5: NE/4NE/4SE/4 of Block 185 from the seafloor down to 12,750
feet TVD:
Hall-Houston 1996 Exploration and
Development Facility Overriding Royalty
Schedule 1-A Page 9 of 12
Trust
Overriding Royalty Interest 1.00000% of 6/6ths
Wells: The Louisiana Land and Exploration
Company OCS-G 1569 #A-6
Production Status: Producing
12. PROPERTY: VERMILION 320
SERIAL NO.: OCS-G 02087
o Lease Description: Oil and Gas Lease effective February 1,
1971 between the United States of America, as Lessor, and Sun
Oil Company, as Lessee, covering all of Block 320, Vermilion
Area, South Addition, Official Leasing Map, Louisiana Map No.
3B, INSOFAR AND ONLY INSOFAR as to the E/2SW/4; W/2NW/4SE/4;
SW/4SE/4 and E/2NW/4SE/4 of said Block 320, limited in depth
from the surface of the earth down to and including one
hundred feet (100') below the stratigraphic equivalent of 5427
feet TVD as encountered in the Hall-Houston Oil Company OCS-G
2087 No. 11 Well:
Hall-Houston 1996 Exploration and
Development Facility Overriding
Royalty Trust
Overriding Royalty Interest 4.00000% of 6/6ths
Wells: OCS-G 02087 #C-1
Production Status: Producing
OCS-G 19769 #C-2 ST 1 (originally bottomed in
OCS-G 19769 VR 325 from a surface location in
VR 320 and has been recompleted up the hole in
VR 320, all lease liability now in VR 320)
Production Status: Producing
OCS-G 02087 #C-3
Production Status: Producing
o INSOFAR AND ONLY INSOFAR as said lease covers the E/2SW/4,
W/2NW/4SE/4, SW/4SE/4 and the E/2NW/4SE/4 of said Block 320,
limited in depth from the surface of the earth down to and
including 1126 feet subsea:
Hall-Houston Oil Company 2000
Exploration and Development Facility
Overriding Royalty Trust
Overriding Royalty Interest 2.00000% of 6/6ths
Schedule 1-A Page 10 of 12
Wells: OCS-G 02087 #C-3
Production Status: Producing
o
13. PROPERTY: WEST CAMERON 427
SERIAL NO.: OCS-G 2846
o Lease Description: Oil and Gas Lease effective December 1, 1974,
between the United States of America, as
Lessor, and Columbia Gas Development
Corporation, as Lessee, covering all of Block
427, West Cameron Area, West Addition,
Official Leasing Map, Louisiana Map No. 1A,
containing approximately 5,000 acres, INSOFAR
AND ONLY INSOFAR as said lease covers the
NE/4, E/2NE/4NW/4 and the E/2SE/4NW/4 of said
Block 427, as to those depths from the
surface to the stratigraphic equivalent of
the base of "2250' Sand" [being defined for
purposes hereof as that interval seen in the
Huffco Petroleum Corporation OCS-G 2846 #A-4
Well between 2356 feet TVD (2239 feet subsea)
and 2480 feet TVD (2363 feet subsea)]:
Hall-Houston Oil Company 2000
Exploration and Development Facility
Overriding Royalty Trust
Overriding Royalty Interest 1.60000% of 6/6ths
Wells: OCS-G 2846 #B-1 (aka #2)
Production Status: Temporarily Abandoned
14. PROPERTY: WEST CAMERON 431
SERIAL NO.: OCS-G 10584
Lease Description: Oil and Gas Lease effective May
1, 1989 between The United States of
America, as Lessor, and Pelto Oil Company,
as Lessee, covering all of Block 431, West
Cameron Area, West Addition, OCS Leasing
Map, Louisiana Map No. 1A, INSOFAR AND ONLY
INSOFAR as said lease covers the N/2NE/4 of
said Block 431, from the surface of the
earth down to 6800 feet TVD:
Hall-Houston Oil Company 2000
Exploration and Development Facility
Overriding Royalty Trust
Overriding Royalty Interest 1.40000% of 6/6ths
Schedule 1-A Page 11 of 12
Wells: OCS-G 10584 #A-2/A-2D (aka #3)
Production Status: Temporarily Abandoned
Schedule 1-A Page 12 of 12
SCHEDULE 1-B
Attached to and made a part of that certain Purchase and Sale
Agreement dated December 16, 2001, by and between Hall-Houston 1996
Exploration and Development Facility Overriding Royalty Trust et al.,
as "Sellers", and Energy Partners, Ltd., as "Purchaser".
Assignments of Overriding Royalty Interests in favor of each indicated Seller:
Hall-Houston 1996 Exploration and Development
Facility Overriding Royalty Trust:
1. Assignment of Overriding Royalty Interest effective September 20,
1999, between Hall-Houston Oil Company, as Assignor, and Gary L. Hall
and Wayne P. Hall, as Trustees, acting on behalf of the Hall-Houston
1996 Exploration and Development Facility Overriding Royalty Trust, as
Assignee, recorded at Entry #264421, Conveyance Book 909 of the
records of Cameron Parish, Louisiana, and filed on April 6, 2000 in
the Non-Required Document Filings at the Minerals Management Service,
covering OCS 00541 Block 160, East Cameron Area.
2. Assignment of Overriding Royalty Interest effective May 13, 1999,
between Hall-Houston Oil Company, as Assignor, and Gary L. Hall and
Wayne P. Hall, as Trustees, acting on behalf of the Hall-Houston 1996
Exploration and Development Facility Overriding Royalty Trust, as
Assignee, recorded at Entry #1082382, Conveyance Book 1711 of the
records of Cameron Parish, Louisiana, and filed on [sent 12/15/01] in
the Non-Required Document Filings at the Minerals Management Service,
covering OCS-G 18052 E/2SE/4 of Block 14, South Pelto Area.
3. Assignment of Overriding Royalty Interest effective May 13, 1999,
between Hall-Houston Oil Company, as Assignor, and Gary L. Hall and
Wayne P. Hall, as Trustees, acting on behalf of the Hall-Houston 1996
Exploration and Development Facility Overriding Royalty Trust, as
Assignee, recorded at Entry #1082383, Conveyance Book 1711 of the
records of Cameron Parish, Louisiana, and filed on [sent 12/15/01] in
the Non-Required Document Filings at the Minerals Management Service,
covering OCS-G 18052 N/2, SW/4 and the W/2SE/4 of Block 14, South
Pelto Area.
4. Assignment of Overriding Royalty Interest effective May 13, 1999,
between Hall-Houston Oil Company, as Assignor, and Gary L. Hall and
Wayne P. Hall, as Trustees, acting on behalf of the Hall-Houston 1996
Exploration and
Schedule 1-B Page 1 of 4
Development Facility Overriding Royalty Trust, as Assignee, recorded
at Entry #1082384, Conveyance Book 1711 of the records of Cameron
Parish, Louisiana, and filed on [sent 12/15/01] in the Non-Required
Document Filings at the Minerals Management Service, covering OCS-G
09652 Block 15, South Pelto Area.
5. Assignment of Overriding Royalty Interest effective January 1, 1997,
between Hall-Houston Oil Company, as Assignor, and Gary L. Hall and
Wayne P. Hall, as Trustees, acting on behalf of the Hall-Houston 1996
Exploration and Development Facility Overriding Royalty Trust, as
Assignee, recorded at Entry #857709, Conveyance Book 1395, Folio 141
of the records of LaFourche Parish, Louisiana, and filed on August 13,
1999 in the Non-Required Document Filings at the Minerals Management
Service, covering OCS-G 1568 and OCS-G 1569, South Timbalier Area,
Blocks 184 and 185, respectively.
6. Assignment of Overriding Royalty Interest effective August 1, 1999,
between Hall-Houston Oil Company, as Assignor, and Gary L. Hall and
Wayne P. Hall, as Trustees, acting on behalf of the Hall-Houston 1996
Exploration and Development Facility Overriding Royalty Trust, as
Assignee, recorded at Entry #899090, Conveyance Book 1470, Folio 406
of the records of LaFourche Parish, Louisiana, and filed on August 13,
2001, in the Non-Required Document Filings at the Minerals Management
Service, covering OCS-G 1569, South Timbalier Area, Block 185.
7. Assignment of Overriding Royalty Interest effective December 8, 1997,
between Hall-Houston Oil Company, as Assignor, and Gary L. Hall and
Wayne P. Hall, as Trustees, acting on behalf of the Hall-Houston 1996
Exploration and Development Facility Overriding Royalty Trust, as
Assignee, recorded at Entry #9900245 in the Conveyance records of
Vermilion Parish, Louisiana, and filed on January 8, 1999 in the
Non-Required Document Filings at the Minerals Management Service,
covering OCS-G 02087 Vermilion Area, Block 320.
Hall-Houston Oil Company 2000 Exploration
and Development Facility Overriding Royalty Trust:
1. Assignment of Overriding Royalty Interest effective September 1, 2000,
between Hall-Houston Oil Company, as Assignor, and Gary L. Hall and
Wayne P. Hall, in their capacity as Trustees of the Hall-Houston Oil
Company 2000 Exploration and Development Facility Overriding Royalty
Trust, as Assignee, recorded at Entry #269096, Conveyance Book 925, of
the records of Cameron Parish, Louisiana, and filed on March 9, 2001
in the Non-Required Document Filings at the Minerals Management
Service, covering OCS-G 15141 East Cameron Area, Block 161.
Schedule 1-B Page 2 of 4
2. Assignment of Overriding Royalty Interest effective September 1, 2000,
between Hall-Houston Oil Company, as Assignor, and Gary L. Hall and
Wayne P. Hall, in their capacity as Trustees of the Hall-Houston Oil
Company 2000 Exploration and Development Facility Overriding Royalty
Trust, as Assignee, recorded at Entry #269350, Conveyance Book 926, of
the records of Cameron Parish, Louisiana, and filed on March 21, 2001
in the Non-Required Document Filings at the Minerals Management
Service, covering OCS-G 15147 East Cameron Area, Block 263.
3. Assignment of Overriding Royalty Interest effective July 1, 2001,
between Hall-Houston Oil Company, as Assignor, and Gary L. Hall and
Wayne P. Hall, in their capacity as Trustees of the Hall-Houston Oil
Company 2000 Exploration and Development Facility Overriding Royalty
Trust, as Assignee, recorded at Entry #275072, Conveyance Book 44-M,
Page 196 of the records of St. Mary Parish, Louisiana, and at Entry
#01-11833, Conveyance Book 1224 of the records of Iberia Parish,
Louisiana, and filed on September 26, 2001 in the Non-Required
Document Filings at the Minerals Management Service, covering OCS-G
21111 Eugene Island Area, Block 247.
4. Assignment of Overriding Royalty Interest effective November 1, 2000,
between Hall-Houston Oil Company, as Assignor, and Gary L. Hall and
Wayne P. Hall, in their capacity as Trustees of the Hall-Houston Oil
Company 2000 Exploration and Development Facility Overriding Royalty
Trust, as Assignee, recorded at Film Code #2001029113 of the records
of Jefferson County, Texas, and filed on August 13, 2001 in the
Non-Required Document Filings at the Minerals Management Service,
covering OCS-G 22231 High Island Area, Block 72.
5. Assignment of Overriding Royalty Interest effective March 1, 2001,
between Hall-Houston Oil Company, as Assignor, and Gary L. Hall and
Wayne P. Hall, in their capacity as Trustees of the Hall-Houston Oil
Company 2000 Exploration and Development Facility Overriding Royalty
Trust, as Assignee, recorded at Entry #20108576 in the Conveyance
records of Cameron Parish, Louisiana, and filed on August 13, 2001 in
the Non-Required Document Filings at the Minerals Management Service,
covering OCS-G 02087 Vermilion Area, Block 320.
6. Assignment of Overriding Royalty Interest effective October 4, 2000,
between Hall-Houston Oil Company, as Assignor, and Gary L. Hall and
Wayne P. Hall, in their capacity as Trustees of the Hall-Houston Oil
Company 2000 Exploration and Development Facility Overriding Royalty
Trust, as Assignee, recorded at Entry #272662, Conveyance Book 939 of
the records of Cameron Parish, Louisiana, and filed on October 16,
2001 in the Non-Required Document Filings at the Minerals Management
Service, covering OCS-G 02846 West Cameron Area, Block 427.
Schedule 1-B Page 3 of 4
7. Assignment of Overriding Royalty Interest effective, _____________,
between Hall-Houston Oil Company, as Assignor, and Gary L. Hall and
Wayne P. Hall, in their capacity as Trustees of the Hall-Houston Oil
Company 2000 Exploration and Development Facility Overriding Royalty
Trust, as Assignee, recorded at Entry #______, Conveyance Book ____,
of the records of Cameron Parish, Louisiana, and filed on__________,
2001 in the Non-Required Document Filings at the Minerals Management
Service, covering OCS-G 10584 West Cameron Area, Block 431.
Schedule 1-B Page 4 of 4
SCHEDULE 2.1
to
Purchase and Sale Agreement
Dated December 16, 2001 between
Hall-Houston 1996 Exploration and Development
Facility Overriding Royalty Trust, et al., as Sellers, and
Energy parnters, Ltd.,
as Purchaser
Seller Cash Purchaser
------ ----
Common
Stock
Hall-Houston 1996 Exploration and Development Facility $ 378,205.73 264,882 shares
Overriding Royalty Trust
Hall-Houston Oil Company 2000 Exploration and Development $ 721,796.68 310,049 shares
------------ -------
Facility Overriding Royalty Trust
$ 11,000,002.41 574,931 shares
SCHEDULE 3.1(a)
ASSIGNMENTS NOT APPROVED BY MMS
Pending Approval
Trust Affected: Hall-Houston 2000 Exploration and Development Facility
Overriding Royalty Trust
1. Assignment of Operating Rights effective February 16, 2001, between
EOG Resources, Inc., as Assignor, and Hall-Houston Oil Company, as
Assignee, covering the N/2N/2 of Block 431, West Addition, West
Cameron Area, OCS-G 10584.
Assignments Not in Approvable Form
None
EXHIBIT A
PRELIMINARY CLOSING STATEMENT
Sellers: Hall-Houston 1996 Exploration and Development
Facility Overriding Royalty Trust
Hall-Houston Oil Company 2000 Exploration and
Development Facility Overriding Royalty Trust
------------------------------------------
Buyer: Energy Partners, Ltd.
Effective Date: November 1, 2001 7:00 am
Closing Date:
------------------------------------------
Property Description: Seller's right, title and interest in and
to the properties as described in
Section 1.2 of the Purchase and Sale
Agreement, and as further described as
"Interests".
================================================================================
Cash Purchase Price:
Overriding Royalty Interest $0
ADJUSTMENTS:
Increases to Purchase Price:
Seller's Net Overriding Interest Share of
Merchantable Oil produced from Leases and in
Storage at the Effective Time (Section 2.2(a)) $0
----------
Total Increases: $0
==========
Decreases to Purchase Price:
Seller's Net Overriding Interest Share of
Post-effective related Proceeds
received by the Seller: (Sec 2.2(b)(i)) $0
Post-effective related Proceeds related
to the sale in any portion on Interest
(Sec 2.2(b)(ii)) $0
----------
Total Decreases: $0
==========
----------
Total Adjustments to Purchase Price: $0
Adjusted Purchase Price: $0
----------
Amount Due From/(To) Buyer: $0
==========
Purchase Price Allocated to be Paid in Cash: $0
----------
Purchase Price Allocated to be Paid in Shares of Purchaser Stock: $0
----------
Buyer's Initials:
-------------------------
Seller's Initials:
-------------------------
EXHIBIT B
ASSIGNMENT OF OVERRIDING ROYALTY INTERESTS
THE UNITED STATES OF AMERICA ss. [_______ Block ___]
ss. [_______ Block ___]
OUTER CONTINENTAL SHELF ss. [_______ Block ___]
ss.
OFFSHORE [LOUISIANA] [TEXAS] ss.
This Assignment of Overriding Royalty Interests (the "Assignment"), dated
effective as of 7:00 a.m., Central ____ Time, on ___________, 2001 (the
"Effective Time"), is from Gary L. Hall and Wayne P. Hall, as Trustees of the
Hall-Houston __________________ Royalty Trust, the address for which is 700
Louisiana, Suite 2100, Houston, Texas 77002, and the taxpayer identification
number for which is _____________ ("Assignor"), to [SAINTS], a Delaware
corporation, the address for which is ___________________________ and the
taxpayer identification number for which is __________ ("Assignee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, by way of the Assignments of Overriding Royalty Interests
described in Schedule 1-B attached hereto and made a part hereof (the "Prior
Assignments"), Assignor acquired overriding royalty interests in and to the oil
and gas leases described therein; and
WHEREAS, Assignor desires to convey to Assignee all or a portion of the
overriding royalty interests acquired by Assignor by way of the Prior
Assignments;
NOW THEREFORE, for ONE THOUSAND AND NO/100 DOLLARS ($1,000.00) and other
good and valuable consideration, the receipt and sufficiency of which Assignor
hereby acknowledges, Assignor has granted, transferred, bargained, sold,
conveyed, and assigned, and does hereby grant, transfer, bargain, sell, convey,
and assign, to Assignee, effective for all purposes as of the Effective Time, an
overriding royalty interest in and to all oil, gas, casinghead gas and other
hydrocarbons produced, saved and marketed pursuant to the terms and conditions
of each oil and gas lease more particularly described in Schedule 1-A made a
part hereof (each a "Lease") equal to the overriding royalty interest as to each
such Lease acquired by Assignor by way of the relevant Prior Assignment and
remaining vested in Assignor after giving effect to any subsequent assignment by
Assignor referred to in Schedule 1-B (collectively, the "Overriding Royalty
Interests"), which overriding royalty interest as to each such Lease Assignor
warrants to be not less than the interest set forth in Schedule 1-A for the
relevant Lease .
TO HAVE AND TO HOLD the Overriding Royalty Interests unto Assignee, its
successors and assigns, forever, subject to the following terms, exceptions, and
other provisions:
B-1
1. Special Warranty. Assignor binds and obligates itself, its successors and
assigns to warrant and forever defend title to the Overriding Royalty Interests
unto Assignee, its successors and assigns, against every person whomsoever
lawfully claiming or to claim the same or any part thereof by, through or under
Assignor, but not otherwise, but with full right of substitution and
subrogation, to the extent assignable, in and to all covenants and warranties of
Assignor's predecessors in title and with full subrogation of all rights
accruing under the applicable statutes of limitation or prescription under the
laws of the state in or offshore from which the interests conveyed hereby are
located and all rights of actions of warranty against all former owners of the
interests conveyed hereby.
2. Prior Assignments. This Assignment, as to each Overriding Royalty Interest,
is made expressly subject to the terms of the relevant Prior Assignment.
3. Successors and Assigns. This Assignment shall bind Assignor and its
successors and assigns and inure to the benefit of Assignee and its successors
and assigns.
4. No Third Party Beneficiaries. Except as expressly provided herein, this
Assignment is not intended to create, nor shall it be construed to create, any
rights in any third party under doctrines concerning third-party beneficiaries.
5. Governing Law. THIS ASSIGNMENT SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF __________, WITHOUT REGARD TO ANY
CONFLICT OF LAW RULES THAT WOULD DIRECT APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
6. Schedules. The Schedules attached hereto are hereby made a part hereof and
incorporated herein by this reference. Unless provided otherwise, all recording
references in such Schedules are to the appropriate records of the United States
Department of Interior, Minerals Management Service or the counties or parishes
adjacent to the location of the lands covered by the relevant Lease.
7. Captions. The captions in this Assignment are for convenience only and shall
not be considered a part of or affect the construction or interpretation of any
provision of this Assignment.
8. Counterparts. This Assignment may be executed in one or more originals, but
all of which together shall constitute one and the same instrument.
9. Purchase and Sale Agreement. This Assignment is made and accepted pursuant to
all of the terms, conditions and provisions of that certain Purchase and Sale
Agreement between Assignor and others, as sellers, and Assignee, as Purchaser,
dated as of December 16, 2001.
B-2
EXECUTED this ___ day of ___________ 200__, to be effective for all
purposes as of the Effective Time.
[WITNESSES TO BOTH SIGNATURES: ASSIGNOR:
Hall-Houston __________________
Royalty Trust
By:
- --------------------------------------- ---------------------------------
(Printed Name of Witness) Gary L. Hall, Trustee
By:
- --------------------------------------- ---------------------------------
Wayne P. Hall, Trustee
- ---------------------------------------
(Printed Name of Witness)]
B-3
STATE OF ___________ ss.
ss.
_________ OF ___________ ss.
[LOUISIANA]
On this ___ day of _________________, 200__, before me appeared Gary L.
Hall, to me personally known, who being by me fully sworn, did say that he is a
Trustee of Hall-Houston ______________________ Royalty Trust, and that the
foregoing instrument was signed on behalf of such Trust and in the presence of
the witnesses whose names appear above and Gary L. Hall acknowledged the
foregoing instrument to be the free act and deed of such Trust.
[TEXAS]
This instrument was acknowledged before me on this _____ day of
______________, 200__ by Gary L. Hall, Trustee of the Hall-Houston ___________
Royalty Trust on behalf of such Trust.
Notary Public in and for
the State of _________
STATE OF ___________ ss.
ss.
_________ OF ___________ ss.
[LOUISIANA]
On this ___ day of _________________, 200__, before me appeared Wayne P.
Hall, to me personally known, who being by me fully sworn, did say that he is a
Trustee of Hall-Houston ______________________ Royalty Trust, and that the
foregoing instrument was signed on behalf of such Trust and in the presence of
the witnesses whose names appear above and Wayne P. Hall acknowledged the
foregoing instrument to be the free act and deed of such Trust.
[TEXAS]
This instrument was acknowledged before me on ____ day of _____________,
200__ by Wayne P. Hall, Trustee of the Hall-Houston ___________ Royalty Trust on
behalf of such Trust.
Notary Public in and for
the State of _________
B-4
Exhibit G-3
to Merger Agreement
This Agreement requires that Seller indemnify Purchaser
and certain other parties and that Purchaser indemnify
Seller and certain other parties. Such requirements
are found in Section 9.6 and
Section 9.7, respectively, of this Agreement
PURCHASE AND SALE AGREEMENT
AND DEBT EXCHANGE
between
HALL-HOUSTON OIL COMPANY EMPLOYEE ROYALTY TRUST
("seller")
AND
ENERGY PARTNERS, LTD.
("Purchaser")
December 16, 2001
TABLE OF CONTENTS
Page
ARTICLE I PURCHASE AND SALE.........................................1
1.1 Purchase and Sale and Debt Exchange..................................1
1.2 Interests ........................................................1
1.3 Effective Time.......................................................2
ARTICLE II PURCHASE PRICE............................................2
2.1 Purchase Price.......................................................2
2.2 Adjustment to Cash Purchase Price....................................2
2.3 Payment of Adjusted Purchase Price...................................3
ARTICLE III REPRESENTATIONS AND WARRANTIES............................3
3.1 Representations and Warranties by Seller.............................3
3.2 Representations and Warranties by Purchaser..........................6
ARTICLE IV COVENANTS.................................................8
4.1 Covenants of Seller..................................................8
4.2 Covenants of Purchaser...............................................9
ARTICLE V REVIEW BY PURCHASER......................................10
5.1 Due Diligence ......................................................10
5.2 Defensible Title....................................................10
5.3 Waiver of Consumer Rights...........................................11
ARTICLE VI CONDITIONS TO CLOSING....................................11
6.1 Conditions to Obligations of Sellers................................11
6.2 Conditions to Obligations of Purchaser..............................12
ARTICLE VII CLOSING..................................................13
7.1 Closing Date .......................................................13
7.2 Closing Obligations.................................................13
7.3 Transfer of Risk of Loss............................................14
ARTICLE VIII TERMINATION..............................................14
8.1 Termination ........................................................14
8.2 Liabilities Upon Termination........................................15
ARTICLE IX OBLIGATIONS AFTER CLOSING................................15
9.1 Post-Closing Adjustments............................................15
9.2 Subsequent Adjustments..............................................16
9.3 Reservation of Claims...............................................16
i
TABLE OF CONTENTS
(continued)
Page
9.4 Files and Records...................................................16
9.5 Further Assurances..................................................17
9.6 Assumption and Indemnity............................................17
9.7 Express Negligence..................................................18
9.8 Indemnification Procedure...........................................19
9.9 Allocation of Proceeds..............................................19
9.10 Termination of Confidentiality Agreements...........................20
ARTICLE X MISCELLANEOUS............................................20
10.1 Notices .......................................................20
10.2 Expenses .......................................................20
10.3 Amendment ..........................................................20
10.4 Assignment .........................................................21
10.5 Conditions .......................................................21
10.6 References .......................................................21
10.7 Articles and Sections...............................................21
10.8 Number and Gender...................................................22
10.9 Incorporation of Schedules and Exhibits.............................22
10.10 Counterparts .......................................................22
10.11 Governing Law ......................................................22
10.12 Integration .......................................................22
10.13 Parties in Interest.................................................22
10.14 Severability .......................................................22
10.15 Survival .......................................................22
10.16 Arbitration .......................................................23
ii
LISTING OF SCHEDULES AND EXHIBITS
Schedule 1-A - Listing of Leases and Wells, including Overriding
Royalty Interests of Each Seller
Schedule 1-B - Assignments of Overriding Royalty Interests in favor
of Sellers
Schedule 1-C - Listing of Notes
Schedule 3.1(a) - Assignments Not Approved by MMS
Exhibit A - Form of Preliminary Closing Statement
Exhibit B - Form of Assignment of Overriding Royalty Interests
iii
PURCHASE AND SALE AND DEBT EXCHANGE AGREEMENT
This PURCHASE AND SALE AND DEBT EXCHANGE AGREEMENT (as amended,
supplemented, restated or otherwise modified from time to time in accordance
with applicable provisions hereof, this "Agreement") dated December 16, 2001, is
between Hall-Houston Oil Company Employee Royalty Trust, a trust established
under the laws of the State of Texas ("Seller"), and Energy Partners, Ltd., a
Delaware corporation ("Purchaser").
In consideration of the mutual agreements set forth herein, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller and Purchaser hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 Purchase and Sale and Debt Exchange. In accordance with the terms of
this Agreement, Seller agrees to sell the interests, rights, and property of
Seller described in Section 1.2 (collectively, the "Interests") to Purchaser and
Purchaser agrees to purchase the Interests from Seller. Further in accordance
with the terms of this Agreement, Seller will exchange the Promissory Notes
listed in Schedule 1-C (the "Notes"), each being issued by Hall-Houston Oil
Company, a Texas corporation ("HHOC"), and payable to Seller, including the
right to payment of all indebtedness, both principal and interest, evidenced
thereby and fees provided for therein (the "Note Indebtedness"), for a portion
of the Purchase Price (as defined in Section 2.1).
1.2 Interests. The following interests, rights, and property comprise the
Interests:
(a) the overriding royalty interests of each Seller listed in Schedule 1-A
(each an "ORI") relating to the oil and gas leases described in such Schedule
1-A, as therein limited in depths or aerial extent (collectively, the "Leases");
(b) all right, title, and interest of Seller in oil, gas, condensate,
natural gas liquids, related hydrocarbons, and other minerals produced, on or
after the Effective Time, from or attributable to the Leases and attributable to
the ORIs of Seller, including all oil in storage as described in clause (i) of
Section 2.2(a) (all of the foregoing in this clause (b), collectively,
"Substances");
(c) all accounts of Seller, including the share of Seller in any
instrument, general intangible, lien or security interest, arising from the sale
or other disposition, on or after the Effective Time, of any of the items
described in this Section 1.2 (the "Accounts"); provided, however, this clause
shall not entitle Seller to make any disposition of any portion of the Interests
of Seller not otherwise permitted under other provisions of this Agreement; and
(d) to the extent available and assignable pursuant to the terms of
applicable law and third party agreements (without the payment of any funds or
other consideration), all information,
1
books, records, files, muniments of title, reports, documents and materials of
Seller that are related to the portion of the Interests of Seller described in
clauses (a)-(c) of this Section 1.2, (all of the foregoing in this clause (d),
collectively, the "Records").
1.3 Effective Time. The purchase and sale of the Interests shall be
effective for all purposes on November 1, 2001, at 7:00 a.m., Central Standard
Time (the "Effective Time").
ARTICLE II
PURCHASE PRICE
2.1 Purchase Price. The purchase price for the Interests and the Notes (the
"Purchase Price") is $250,000 in cash (the "Cash Purchase Price") and 250,000 $9
Buyer Warrants and 750,000 $11 Buyer Warrants (such terms being defined in the
Agreement and Plan of Merger referred to in clause (e) of Section 6.1)
2.2 Adjustment to Cash Purchase Price. The Cash Purchase Price shall be
adjusted as provided in this Section 2.2 and the resulting amount shall be
referred to as the "Adjusted Purchase Price." Not less than five (5) days prior
to the Closing Date (as defined in Section 7.1), Seller shall deliver to
Purchaser a preliminary closing statement (the "Preliminary Closing Statement"),
substantially in the form of Exhibit A, setting forth adjustments to the Cash
Purchase Price using the best information then available and prepared in
accordance with customary accounting principles used in the oil and gas
industry.
(a) The Cash Purchase Price shall be increased by an amount equal to the
product of (i) Seller's relevant ORI share of the quantity of merchantable oil
produced from or allocable to the Leases and in storage at the Effective Time
and not sold or disposed of prior to the Closing (as defined in Section 7.1),
multiplied by (ii) the market price for such oil at the Effective Time, with
such product being reduced by an amount equal to the sum of all applicable
taxes;
(b) The Cash Purchase Price shall be decreased by the following:
(i) an amount equal to the sum of net proceeds (being gross proceeds
less applicable taxes, other than income taxes, actually paid by the
relevant Seller or deducted in any remittance of proceeds to the relevant
Seller) or other value received by the relevant Seller for the sale or
disposition of Substances, including net proceeds from the sale of liquids
and other constituents removed in gas plants or other processing
facilities, produced after the Effective Time and allocable to any of the
ORI of the relevant Seller; and
(ii) an amount equal to the proceeds or other value (in excess of
reasonable and necessary transaction costs, including fees and expenses of
attorneys, accountants, engineers and other professionals) received by the
relevant Seller for the sale or disposition, after the Effective Time, of
any portion of the Interests of the relevant Seller; provided, however,
provision for such adjustment shall not entitle
2
any Seller to make any disposition of any of the Interests not otherwise
permitted under other provisions of this Agreement.
2.3 Payment of Adjusted Purchase Price. At the Closing, Purchaser shall pay
to Seller (by wire transfer to an account of Seller designated in writing by
Seller received by Purchaser no less than two (2) days prior to the Closing
Date) an amount, in immediately available funds, equal to the Cash Purchase
Price as adjusted on the basis of the Preliminary Closing Statement, and shall
deliver to Seller the Buyer Warrants (such term being defined in the Agreement
and Plan of Merger referred to in clause (e) of Section 6.1) referred to in
Section 2.1 evidencing such Buyer Warrants as registered in the name of Seller
on the books of Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties by Seller. Seller represents and
warrants to Purchaser (which representations and warranties shall survive the
Closing and the execution and delivery of the documentation to be executed and
delivered at the Closing, to the extent provided below in this Section 3.1 and
in Section 10.15) that:
(a) Seller is a trust duly created and existing under the laws of the State
of Texas. Seller has and will have as of the Closing Defensible Title (as
defined in Section 5.2) to the Interests; provided, however, as to that portion
of the Interests of such Seller relating to South Timbalier Blocks 184 and 185
other than that acquired by Hall-Houston Oil Company ("HHOC") from CNG Producing
Company, such warranty is expressly limited to claims arising by, through or
under such Seller or HHOC and Seller only warrants that Seller holds a
contractual right to receive a conveyance of the ORI of Seller with respect to
that portion of West Cameron Block 431 described as Tract 2 in the description
of West Cameron Block 431 in Schedule 1-A upon HHOC's earning of an Assignment
of Operating Rights pursuant to the Farmout Agreement referred to in the
relevant portion of Schedule 1-A. Notwithstanding the preceding sentence or any
other provision of this Agreement to the contrary, for purposes of Section 9.6
and otherwise subsequent to the Closing, Seller warrants and agrees to defend
Defensible Title to the Interests unto Purchaser, its successors, and permitted
assigns against the lawful claims of all persons or entities claiming or to
claim the same or any part thereof by, through or under Seller, but not
otherwise. Except as set forth in Schedule 3.1(a), all prior assignments of
interests in any of the Leases or other Interests in the chain of title to the
Interests have been approved by the United States of America, Department of
Interior, Minerals Management Service (the "MMS"). Seller is the sole owner of
the Notes free and clear of any liens, claims, security interest, and
encumbrances of any kind or nature whatsoever and will have the complete power
to transfer and deliver the Notes to Purchaser, as contemplated by this
Agreement, free and clear of all liens, claims, security interests, mortgages,
charges, options, pledges and encumbrances. Upon transfer to Purchaser by Seller
of the Notes, Purchaser will have good and marketable title to the Notes, free
and clear of all liens, claims, security interests, mortgages, charges, options,
pledges and encumbrances.
3
(b) Seller has the full legal power, right and authority to carry on its
business as presently conducted, to enter into this Agreement and to perform its
obligations under this Agreement.
(c) The execution, delivery and performance by Seller of this Agreement and
the documentation to be executed and delivered by Seller at the Closing have
been authorized by all necessary action on the part of Seller. Execution,
delivery and performance by Seller of this Agreement do not, and execution,
delivery and performance by such Seller of the documentation to be executed and
delivered by Seller at the Closing will not, and the consummation of the
transactions contemplated by this Agreement will not, (i) violate or be in
conflict with any (A) agreement, instrument, judgment, order, decree, law or
regulation applicable to Seller or the Interests or (B) any provision of the
trust agreement of Seller or (ii) result in the creation of any lien or other
encumbrance on the Interests of Seller.
(d) Subject to laws and equitable principles affecting the rights of
creditors, this Agreement is and the documentation to be executed and delivered
by Seller at the Closing will be, upon execution and delivery thereof by all
parties thereto, legal, valid and binding obligations of Seller enforceable
according to their respective terms.
(e) No suit, arbitration, inquiry, proceeding, audit, claim, demand or
investigation is pending or, to the knowledge of Seller, threatened that might
result in impairment or loss or diminution of the title of Seller to the
Interests or otherwise adversely affect, in any material respect, any of the
Interests. There are no bankruptcy or reorganization proceedings pending or
threatened against Seller.
(f) Except for the Assignments of Overriding Royalty Interest in favor of
Seller listed in Schedule 1-B, there are no contracts or agreements which burden
or will burden or encumber or are otherwise material to the ownership of the
Interests.
(g) Seller is timely receiving its share of proceeds from the sale of
Substances produced from or allocable to the Leases without suspense,
counterclaim or set-off.
(h) Seller has incurred no liability for brokers' or finders' fees related
to the transactions contemplated by this Agreement for which Purchaser shall be
liable.
(i) No consents or approvals of any third persons are required in
connection with the transfer of the Interests from Seller to Purchaser and there
are no preferential purchase rights applicable to the sale of the Interests by
Seller to Purchaser pursuant to this Agreement.
(j) During the period from the Effective Time to the date of execution of
this Agreement, Seller has not waived, compromised or settled any claim that
diminishes or adversely burdens any Interest.
(k) Seller is not a nonresident alien of the United States.
4
(l) The Buyer Warrants to be acquired by Seller pursuant to this Agreement
are being acquired for the account of Seller and without a view to distribution,
except for the contemplated distribution to its beneficiaries by Seller in
connection with the termination of Seller following the Closing and delivery to
Purchaser in connection therewith of representation letters, customary for
private placements of securities in form and substance reasonably satisfactory
to Purchaser, from each beneficiary receiving such a distribution. Seller
understands that neither the transfer of any of such Buyer Warrants nor the
transfer of the shares of common stock of Purchaser, par value $0.01 per share
(the "Purchaser Common Stock") issuable upon exercise of any of such Buyer
Warrants has been registered under the Securities Act of 1933 (the "Securities
Act") or the securities laws of any state and that Seller cannot offer, sell,
transfer, pledge, hypothecate or otherwise dispose of any or all of such Buyer
Warrants or shares of the Purchaser Common Stock unless the transaction is
subsequently registered under the Securities Act and the securities laws of
relevant states or exemptions from such registrations are available. Seller
further understands that the certificate or certificates representing such
shares of the Purchaser Common Stock will bear a legend substantially as
follows, and agrees to comply with such legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE
TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR UNLESS THE ISSUER RECEIVES AN
OPINION OF COUNSEL (WHO MAY BE AN EMPLOYEE OF THE HOLDER) REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION, QUALIFICATION OR OTHER
SUCH ACTIONS ARE NO REQUIRED UNDER SAID ACT. THE OFFERING OF THIS
SECURITY HAS NOT BEEN REVIEWED OR APPROVED BY ANY STATE SECURITIES
ADMINISTRATOR."
(m) Seller has such knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its investment
in the Buyer Warrants, and Seller is capable of bearing the economic risks of
such investment. Each trustee of Seller is an "Accredited Investor" within the
meaning of Rule 501(a) of the Securities Act. Seller:
(i) understands that (A) the issuance of the Buyer Warrants hereunder
is intended to be exempt from registration under the Securities Act and (B)
there is only a limited market for such Buyer Warrants, and there can be no
assurance that Seller will be able to sell or dispose of the Buyer Warrants
to be acquired by Seller hereunder;
(ii) can afford to bear the economic risk of holding the Buyer
Warrants acquired by Seller hereunder for an indefinite period of time and
can afford to suffer the complete loss of the investment by Seller in the
Buyer Warrants;
(iii) understands that the Buyer Warrants acquired by Seller hereunder
are a speculative investment which involves a high degree of risk of loss
5
of the entire investment therein and that for an indefinite period
following the date hereof there will be no public market for the Buyer
Warrants acquired by Seller hereunder and that, accordingly, it may not be
possible for Seller to sell the Buyer Warrants acquired by Seller hereunder
in case of emergency or otherwise;
(iv) and its representatives, including to the extent it deems
appropriate its professional, financial, tax and other advisors, have
reviewed all documents provided to them in connection with the investment
by Seller hereunder in the Buyer Warrants by Seller; and
(v) and its representatives have been given the opportunity to examine
all documents and to ask questions of, and to receive answers from,
Purchaser and its representatives concerning the terms and conditions of
the acquisition hereunder of the Buyer Warrants by Seller and related
matters and to obtain all additional information which Seller or its
representatives deem necessary.
(n) No representation or warranty of Seller contained in this Agreement and
no statement contained in any certificate or schedule furnished or to be
furnished by or on behalf of Seller or any of its representatives pursuant
thereto contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading or necessary in order to fully and
fairly provide the information required to be provided in any such document,
certificate or schedule.
3.2 Representations and Warranties by Purchaser. Purchaser represents and
warrants to Seller (which representations and warranties shall survive the
Closing and the execution and delivery of the documentation to be executed and
delivered at the Closing) that:
(a) Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and is qualified to do business
in, and is in good standing under, the laws of each state wherein the failure to
be so qualified and in good standing could reasonably be expected to have a
material adverse effect on Purchaser.
(b) Purchaser has the full legal power, right and authority to carry on its
business as presently conducted, to enter into this Agreement and to perform its
obligations under this Agreement.
(c) The execution, delivery and performance by Purchaser of this Agreement
and the documentation to be executed and delivered by Purchaser at the Closing
have been authorized by all necessary action, corporate and otherwise, on the
part of Purchaser and execution, delivery and performance by Purchaser of this
Agreement do not, and execution, delivery and performance by Purchaser of the
documentation to be executed and delivered by Purchaser at the Closing will not,
and the consummation of the transactions contemplated by this Agreement will
not, violate or be in conflict with any (i) agreement, instrument, judgment,
order, decree, law or regulation applicable to Purchaser or (ii) any provision
of the certificate of incorporation or bylaws of Purchaser.
6
(d) Subject to laws and equitable principles affecting the rights of
creditors, this Agreement is and the documentation to be executed and delivered
by Purchaser at the Closing will be, upon execution and delivery thereof by all
parties thereto, legal, valid and binding obligations of Purchaser enforceable
according to their terms. There are no bankruptcy or reorganization proceedings
pending or, to the knowledge of Purchaser, threatened against Purchaser.
(e) Purchaser has incurred no liability for brokers' or finders' fees
related to the transactions contemplated by this Agreement for which any Seller
shall be liable.
(f) There are no pending suits, actions or other proceedings to which
Purchaser is a party (or, to the knowledge of Purchaser, which have been
threatened to be instituted against Purchaser) which affect the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
(g) Purchaser is a knowledgeable purchaser, owner and operator of oil and
gas properties, has the ability to evaluate the Interests for purchase, and is
acquiring the Interests for its own account and not with the intent to make a
distribution thereof in violation of the Securities Act or any applicable state
securities law.
(h) The authorized and outstanding capital stock of Purchaser is as set
forth in the SEC Documents (as defined in subsection (j) below), as of September
30, 2001. All of such issued and outstanding shares are validly issued, fully
paid and nonassessable and free of preemptive rights. Except as reflected in the
SEC Documents, Purchaser has no other equity securities of any class issued,
reserved for issuance or outstanding, and there are no outstanding options,
warrants, agreements or rights to subscribe for or to purchase, or commitments
to issue, or other securities of Purchaser which, pursuant to their terms, are
convertible into or exchangeable for, equity securities of Purchaser.
(i) The shares of Purchaser Common Stock to be issued as the Stock Purchase
Price have been duly authorized, and when issued at the Closing under the terms
of this Agreement, will be validly issued, fully paid and non-assessable and not
issued in violation of any preemptive rights.
(j) Since December 31, 2000, Purchaser has filed all documents (the "SEC
Documents") required to be filed by it with the Securities and Exchange
Commission (the "Commission"), pursuant to the Securities Exchange Act of 1934
(the "Exchange Act"). As of their respective filing dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act, and
none of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading except to the extent corrected by a subsequently filed
SEC Document. The financial statements of Purchaser included in the SEC
Documents complied as to form in all material respects with then applicable
accounting requirements and with the published rules and regulations of the
Commission with respect thereto, were prepared in accordance with generally
accepted accounting principles during the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
7
permitted by Form 10-Q and Regulation S-X of the Commission) and fairly present
the consolidated financial position of Purchaser and its consolidated
subsidiaries as at the dates thereof and the consolidated results of their
operations and changes in financial position for the periods then ended
(subject, in the case of unaudited statements, to normal, recurring audit
adjustments). Since December 31, 2000, there has not been any change which,
individually or in the aggregate, could reasonably be expected to have a
material adverse effect on Purchaser that has not been reflected in the SEC
Documents, publicly announced or otherwise disclosed.
(k) No representation or warranty of Purchaser contained in this Agreement
and no statement contained in any certificate or schedule furnished or to be
furnished by or on behalf of Purchaser or any of its representatives pursuant
thereto contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading or necessary in order to fully and
fairly provide the information required to be provided in any such document,
certificate or schedule.
ARTICLE IV
COVENANTS
4.1 Covenants of Seller. Seller , covenants and agrees with Purchaser as
follows:
(a) Following execution of this Agreement and until the Closing, Seller
shall (i) notify Purchaser of any suit, arbitration, inquiry, proceeding, audit,
claim, demand or investigation becoming known to Seller which might adversely
affect any of the Interests and (ii) use reasonable efforts to obtain any
consents, waivers, and approvals required of third persons, governmental
authorities or other entities in connection with consummation of the
transactions contemplated by this Agreement.
(b) Following execution of this Agreement, Seller shall not, without the
consent of Purchaser (i) create a lien, security interest or other encumbrance
on any of the Interests; (ii) sell or dispose of any of the Interests, other
than Substances sold, consumed or produced in the ordinary course of business;
or (iii) waive, compromise or settle any claim that diminishes or adversely
burdens any Interest.
(c) Following the execution of this Agreement and until the Closing, Seller
shall provide Purchaser and its attorneys, employees, accountants, engineers,
consultants and agents (collectively "representatives") access, during normal
business hours and at the offices of HHOC, to (and the right to copy, at the
expense of Purchaser) the records pertaining to the ownership of the Interests
(including title files and production, severance and ad valorem tax records),
insofar as any of such are in the possession or control of Seller or HHOC or
insofar as Seller or HHOC has access thereto, and to the extent, in each case,
that Seller or HHOC may do so without violating legal constraints or any legal
obligation, for the purpose of the conducting, by or at the direction of
Purchaser, of due diligence reviews of the Interests. Subsequent to the Closing,
Seller shall cooperate with Purchaser
8
in any efforts by Purchaser to obtain (at the expense of Purchaser) such
additional title information as Purchaser may reasonably require.
(d) At or prior to the Closing, with respect to matters that are not
Permitted Encumbrances (as defined in Section 5.2), Seller shall cause the
owners and holders of any liens, security interests and other encumbrances filed
of record against any of the Interests to execute and deliver such releases and
other instruments, in form and substance reasonably satisfactory to Purchaser,
as shall be necessary or appropriate to release of record, or to the extent not
of record, known to Seller, all liens, security interests, and other
encumbrances filed against any of the Interests.
(e) Seller shall take or cause to be taken all reasonable actions within
its control as may be necessary or advisable to consummate and make effective
the purchase of the Interests and the transactions contemplated by this
Agreement and to assure that, as of the Closing Date, it will not be under any
material organizational, legal or contractual restriction that would prohibit or
delay the timely consummation of such transactions.
(f) Seller shall take or cause to be taken all reasonable actions to cause
all the representations and warranties of Seller contained in this Agreement to
be true and correct on and as of the Closing Date, other than those as are made
as of a specific date.
(g) Seller shall notify Purchaser promptly (i) upon learning of any change
in fact or circumstance that causes any representation or warranty of Seller
contained in this Agreement to no longer be accurate and complete or (ii) if
Seller fails to perform or comply with any covenant or agreement contained in
this Agreement or it is reasonably anticipated that Seller will be unable to
perform or comply with any covenant or agreement contained in this Agreement.
4.2 Covenants of Purchaser. Purchaser agrees with each Seller as follows:
(a) Until the Closing, Purchaser shall comply with the Confidentiality
Agreements (as such term is defined in the Agreement and Plan of Merger referred
to in clause (e) of Section 6.1), except as otherwise permitted in this Section
4.2(a), which Confidentiality Agreements shall be deemed by Seller and Purchaser
to cover the transactions contemplated by this Agreement. After the Closing
nothing contained in this Agreement or the Confidentiality Agreements shall
restrict the right of Purchaser, as between Purchaser and Seller, to use or
disclose information regarding the Interests. Notwithstanding anything contained
in this Section 4.2(a) to the contrary and insofar as it relates to the
Interests, Purchaser may disclose any of the information subject to the first
sentence of this Section 4.2(a) or covered by the Confidentiality Agreements to
the extent (i) necessary to enforce, or seek redress for breach of, this
Agreement, (ii) required by applicable law or the rules of a national securities
exchange, (iii) necessary for financing, reserve engineering or accounting
purposes, (iv) to comply with any law or legal process, or (v) otherwise
previously made public (without breach of the preceding sentence of this Section
4.2(a) or of the Confidentiality Agreements). In addition, Seller acknowledges
and agrees that Purchaser may issue one or more press releases and may make
other public statements with respect to this Agreement or the
9
transactions contemplated by this Agreement. If a proposed press release or
other public statement will contain information not previously disclosed,
Purchaser shall provide HHOC, pursuant to the Agreement and Plan of Merger
referred to in clause (e) of Section 6.1, with any and all proposed forms of
press release or other public statement and consult with HHOC before issuing any
press release or otherwise making any public statement with respect to this
Agreement or the transactions contemplated by this Agreement and shall not issue
any such press release or make any such public statement prior to providing the
proposed form of such press release or public statements and having such
consultation; provided, however, that Purchaser may, without providing the
proposed form of such press release or public statement or consulting with HHOC,
issue such a press release or make such a public statement if required by
applicable law or the rules of a national securities exchange if Purchaser has
used reasonable efforts to provide HHOC with the proposed form of press release
or public statement and consult with HHOC but has been unable to do so in a
timely manner.
(b) Purchaser shall take or cause to be taken all reasonable actions within
its control as may be necessary or advisable to consummate and make effective
the purchase of the Interests and the transactions contemplated by this
Agreement and to assure that, as of the Closing Date, it will not be under any
material corporate, legal or contractual restriction that would prohibit or
delay the timely consummation of such transactions.
(c) Purchaser shall take or cause to be taken all reasonable actions to
cause all the representations and warranties of Purchaser contained in this
Agreement to be true and correct on and as of the Closing Date, other than such
as are made as of a specific date.
(d) Purchaser shall notify Seller promptly (i) upon learning of any change
in fact or circumstance that causes any representation or warranty of Purchaser
contained in this Agreement to no longer be accurate and complete or (ii) if
Purchaser fails to perform or comply with any covenant or agreement contained in
this Agreement or it is reasonably anticipated that Purchaser will be unable to
perform or comply with any covenant or agreement contained in this Agreement.
ARTICLE V
REVIEW BY PURCHASER
5.1 Due Diligence. Purchaser may conduct, prior to the Closing and at its
cost, such further review of data and information pertaining to the Interests
and title examination and other examinations and investigations in respect of
the Interests as Purchaser desires.
5.2 Defensible Title.
(a) "Defensible Title" means such title and ownership of Seller (pursuant
to instruments filed with and, to the extent required, approved by the MMS and
filed of record in the appropriate county or parish records or, in the case of
those instruments not yet approved by the MMS or not in approvable form and
listed in Schedule 3.1(a), pursuant to instruments filed with the MMS and filed
of record in the appropriate county or parish records) that, in each case (i)
will entitle Purchaser, as the successor to Seller, to receive and retain now
and, except as the result of any action by Purchaser
10
subsequent to the Closing, in the future, without suspension, reduction or
termination, not less than the relevant ORI amount of Seller listed in Schedule
1-A of Substances produced under the terms of the relevant Lease and the
proceeds from the sale thereof for the duration of such Lease and (ii) is free
of all claims, liens, security interests, encumbrances, irregularities and
defects, except for Permitted Encumbrances (as defined below in this Section
5.2).
(b) "Permitted Encumbrances" are:
(i) mechanics', materialmen's, operator's and non-operators', tax and
similar liens or charges arising in the ordinary course of business related
to an Interest, if such liens or charges secure payments not yet due;
(ii) all consents from, notices to, approvals by or other actions by
any governmental authority in connection with the sale or transfer of the
Interests by Seller to Purchaser pursuant to this Agreement if such matters
are customarily and appropriately obtained after the sale or transfer;
(iii) rights of a governmental entity to control or regulate the
Interests, together with all applicable laws, rules and regulations; and
(iv) easements, rights-of-way, surface leases and other surface use
restrictions if such restrictions will not materially adversely affect the
use, value or operation of the Interests.
5.3 Waiver of Consumer Rights. To the extent sale of any of the Interests
is mandatorily governed by the laws of the State of Texas, Purchaser waives its
rights under the Texas Deceptive Trade Practices-Consumer Protection Act,
Section 17.41 et seq., Texas Business & Commerce Code, a law that gives
consumers special rights and protections. After consultation with an attorney
selected by Purchaser, Purchaser voluntarily consents to this waiver. In order
to evidence its ability to grant such waiver, Purchaser hereby represents and
warrants to Seller that Purchaser (i) is in the business of seeking or
acquiring, by purchase or lease, goods or services for commercial or business
use, (ii) has knowledge and experience in financial and business matters that
enable it to evaluate the merits and risks of the transaction contemplated
hereby and (iii) is not in a significantly disparate bargaining position.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 Conditions to Obligations of Sellers. The obligations of Seller at the
Closing are subject to the satisfaction, at or prior to the Closing, of the
following conditions, which shall be deemed satisfied upon the occurrence of the
Closing:
(a) the representations and warranties of Purchaser set forth in this
Agreement that are qualified as to materiality shall be true and correct and
those that are not so qualified shall be true
11
and correct in all material respects, in each case, as of the date hereof and
(except to the extent such representations and warranties speak as of an earlier
date) as of the Closing as though made at and as of the Closing;
(b) Purchaser shall have performed in all material respects the covenants
and agreements which Purchaser was required to perform or satisfy at or prior to
the Closing or performance of any such covenant or agreement not so performed
shall have been waived in writing by Seller;
(c) except for approvals not customarily and appropriately obtained from
the MMS prior to a Closing, Seller shall have received evidence, in form
reasonably satisfactory to Seller and its counsel, that all permits, consents,
approvals, licenses, qualifications and orders required by governmental
authorities, or the terms of the Interests, for ownership of the Interests by
Purchaser to be obtained prior to the Closing have been obtained or waived;
(d) no action or proceeding shall be pending or threatened before a court,
arbitrator or governmental authority seeking to restrain or prohibit the
consummation of the transactions contemplated by this Agreement or to obtain
substantial damages from Seller related to this Agreement; and
(e) Purchaser shall be in compliance with all of its obligations under that
certain Agreement and Plan of Merger between Purchaser and HHOC (the "Merger
Agreement"), or such obligations shall have been waived in writing by HHOC (with
the approval of any Seller impacted by the effect of any such waiver), and the
closing under the Merger Agreement (including execution by the parties thereto
of the Registration Rights Agreement contemplated in the Merger Agreement, under
which Seller is a third party beneficiary) shall have occurred simultaneously
with the Closing.
6.2 Conditions to Obligations of Purchaser. The obligations of Purchaser at
the Closing are subject to the satisfaction, at or prior to the Closing, of the
following conditions, which shall be deemed satisfied upon the occurrence of the
Closing:
(a) the representations and warranties of Seller set forth in this
Agreement that are qualified as to materiality shall be true and correct and
those that are not so qualified shall be true and correct in all material
respects, in each case, as of the date hereof and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing as
though made at and as of the Closing;
(b) Seller shall have performed in all material respects the covenants and
agreements which Seller was required to perform or satisfy at or prior to the
Closing or performance of any such covenant or agreement not so performed shall
have been waived in writing by Purchaser;
(c) Purchaser shall have received evidence, in form reasonably satisfactory
to Purchaser and its counsel, that all permits, consents, approvals, licenses,
qualifications and orders required by governmental authorities, or the terms of
the Interests, for ownership of the Interests by Purchaser to be obtained prior
to the Closing have been obtained or waived;
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(d) no action or proceeding shall be pending or threatened before a court,
arbitrator or governmental authority seeking to restrain or prohibit the
consummation of the transactions contemplated by this Agreement or to obtain
substantial damages from Purchaser related to this Agreement;
(e) Since the Effective Time, there shall have been no material adverse
change in the condition of the Interests, except for depletion through normal
production, changes in rates of production that occur in the ordinary course of
operation, and changes in general economic conditions and product pricing
generally affecting the offshore Gulf of Mexico oil and gas industry; and
(f) HHOC shall be in compliance with its obligations under the Merger
Agreement, or such obligations shall have been waived in writing by Purchaser,
and the closing under the Merger Agreement shall have occurred simultaneously
with the Closing.
ARTICLE VII
CLOSING
7.1 Closing Date. Subject to applicable provisions of this Agreement, the
consummation of the transactions contemplated by this Agreement (the "Closing")
shall occur at a location mutually acceptable to Seller and Purchaser on January
8, 2002, at 9:00 a.m. local time, or on such other date or at such other time as
the parties hereto may agree (any such date being the "Closing Date").
7.2 Closing Obligations. At the Closing, the following shall occur, each
being a condition precedent to the others and each being deemed to have occurred
simultaneously:
(a) Seller shall execute and deliver to Purchaser one or more assignments
in the form attached to this Agreement as Exhibit B conveying the Interests to
Purchaser (each of which assignments shall provide that the Interests are
conveyed by Seller to Purchaser with a special warranty of title, in which
Seller binds and obligates itself, its successors and assigns to warrant and
forever defend title to the Interests unto Purchaser, its successors and
assigns, against every person or entity whomsoever lawfully claiming or to claim
the same or any part thereof by, through or under such Seller, but not
otherwise, and with full substitution and subrogation of Purchaser in and to all
warranties of predecessors in interest to Seller). Seller shall also deliver to
Purchaser the Notes with the appropriate notation that such Notes have been
cancelled and Seller shall release, fully acquit and forever discharge HHOC, its
subsidiaries, stockholders, officers, directors, successors and assigns from any
and all debt, late fees, penalties, interest and causes of action with respect
to the Note Indebtedness.
(b) Purchaser shall deliver to each Seller its allocable share of the
Purchase Price as adjusted on the basis of the Preliminary Closing Statement, as
provided in Section 2.3.
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(c) Seller shall execute or cause HHOC to execute transfer orders or
letters-in-lieu on forms prepared by Purchaser, and reasonably satisfactory to
Seller, directing purchasers of Substances produced under the terms of the
Leases on or after the Effective Time and attributable to the interest of Seller
in the Leases, as set forth in Schedule 1-A, to make payment to Purchaser for
such Substances as contemplated by this Agreement.
(d) Seller shall furnish Purchaser an affidavit stating the United States
taxpayer identification number of Seller and that Seller is not a foreign
person, pursuant to Section 1445(b)(2) of the Code.
(e) Seller shall deliver to Purchaser a certificate of the trustees of
Seller, dated the Closing Date, certifying (i) that a true and correct copy of
the Trust Agreement of Seller is attached thereto and is in full force and
effect and (ii) as to the incumbency and authorization of the trustees of Seller
executing, on behalf of Seller, this Agreement and the other documents to be
executed and delivered by Seller at the Closing.
(f) Purchaser shall deliver to Seller a certificate of the Secretary of
Purchaser, dated the Closing Date, certifying (i) that a true and correct copy
of the resolutions of the board of directors of Purchaser authorizing this
Agreement and the transactions contemplated hereby are attached thereto and have
been duly adopted and are in full force and effect and (ii) as to the incumbency
and authorization of the officers of Purchaser executing, on behalf of
Purchaser, this Agreement and the other documents to be executed and delivered
by Purchaser at the Closing.
(g) In accordance with the provisions of Section 4.1(d), Seller shall
deliver releases of all liens, mortgages and other encumbrances filed of record
against the Interests, if any, other than any Permitted Encumbrance.
(h) Seller and Purchaser shall each execute and deliver such other
instruments and take such other actions as may be necessary to carry out or to
evidence their obligations under this Agreement.
7.3 Transfer of Risk of Loss. Upon the Closing, all risk of loss of or
damage to any portion of the Interests attributable to ownership, use or
operation by Purchaser, including any Casualty Loss, shall pass to Purchaser as
of the Closing Date and all losses, costs, claims, suits, judgments, awards or
damages on account of bodily injury, illness, death or property damage or loss
suffered by any persons or entities other than Purchaser arising out of or
related to the performance of such operations on or after the Closing Date shall
pass to and be assumed by Purchaser as of the Closing Date.
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement and the transactions contemplated by
this Agreement may be terminated in the following situations:
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(a) by Seller or Purchaser, if the Merger Agreement shall have terminated
in accordance with its terms; and
(b) by Seller and Purchaser pursuant to written agreement.
8.2 Liabilities Upon Termination.
(a) Notwithstanding anything provided to the contrary in this Agreement,
upon the failure by Purchaser to fulfill any undertaking or commitment provided
for herein on the part of Purchaser that is required to be fulfilled on or prior
to the Closing Date, Seller, at its sole option, shall be entitled to any remedy
available at law or in equity.
(b) Notwithstanding anything provided to the contrary in this Agreement,
upon failure of Seller to fulfill any undertaking or commitment provided for
herein on the part of Seller that is required to be fulfilled on or prior to the
Closing Date, Purchaser, at its sole option, shall be entitled to any remedy
available at law or in equity.
(C) NOTWITHSTANDING ANYTHING CONTAINED TO THE CONTRARY IN ANY OTHER
PROVISION OF THIS AGREEMENT, SELLER AND PURCHASER AGREE THAT THE RECOVERY BY
EITHER PARTY HERETO OF ANY DAMAGES SUFFERED OR INCURRED BY IT AS A RESULT OF ANY
BREACH BY THE OTHER PARTY OF ANY OF ITS REPRESENTATIONS, WARRANTIES OR
OBLIGATIONS UNDER THIS AGREEMENT SHALL BE LIMITED TO THE ACTUAL DAMAGES SUFFERED
OR INCURRED BY THE NON-BREACHING PARTY AS A RESULT OF THE BREACH BY THE
BREACHING PARTY OF ITS REPRESENTATIONS, WARRANTIES OR OBLIGATIONS HEREUNDER, AND
IN NO EVENT SHALL THE BREACHING PARTY BE LIABLE TO THE NON-BREACHING PARTY FOR
ANY INDIRECT, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES SUFFERED OR INCURRED
BY THE NON-BREACHING PARTY AS A RESULT OF THE BREACH BY THE BREACHING PARTY OF
ANY OF ITS REPRESENTATIONS, WARRANTIES OR OBLIGATIONS HEREUNDER.
ARTICLE IX
OBLIGATIONS AFTER CLOSING
9.1 Post-Closing Adjustments. Seller and Purchaser acknowledge that the
amount of all adjustments to the Purchase Price under Section 2.2 may not be
available prior to the Closing. As soon as practicable after the Closing, but in
any event within ninety (90) days after the Closing, Purchaser shall cause HHOC
to prepare and submit to Seller a statement containing adjustments to the
Purchase Price contemplated by the provisions of Section 2.2 that were not
finally determined as of the Closing (the "Final Settlement Statement") and such
supporting documentation as is reasonably necessary to support the adjustments
shown therein. Purchaser shall cause HHOC to give representatives of Seller
reasonable access to the premises of HHOC and to the books and records of HHOC
for purposes of reviewing the calculation of any such adjustments and will cause
appropriate personnel of HHOC to assist Seller and representatives of Seller, at
no cost to Seller, in verification of such calculations. The Final Settlement
Statement shall become final and binding on Seller and Purchaser as to the
calculation of the Adjusted Purchase Price forty five (45) days following the
date
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the Final Settlement Statement is received by Seller, except to the extent that,
prior to the expiration of such forty five (45) day period, Seller shall deliver
to Purchaser notice, as hereinafter required, of its disagreement with the
contents of the Final Settlement Statement. Such notice shall be in writing and
set forth all disagreements of Seller with respect to any portion of the Final
Settlement Statement, together with any changes thereto proposed by Seller, and
shall include an explanation in reasonable detail of, and such supporting
documentation as is reasonably necessary to support, such changes. If Seller has
timely delivered such a notice of disagreement to Purchaser, then, upon written
agreement between Purchaser and Seller resolving all disagreements of Purchaser
set forth in such notice, the Final Settlement Statement shall become final and
binding upon Purchaser and Sellers as to the calculation of the Adjusted
Purchase Price. If the Final Settlement Statement has not become final and
binding by the seventy fifth (75th) day following its receipt by Seller, then
Purchaser or Seller may submit to a nationally-recognized firm of certified
public accountants which neither serves as the auditors for nor provides
consulting services to HHOC or any Seller or Purchaser or such other independent
public accounting firm mutually satisfactory to Seller and Purchaser for
resolution any unresolved disagreements of Seller set forth in the notice from
Seller to Purchaser. The fees and expenses of such accounting firm in making
such determination shall be shared equally by Purchaser and Seller. Upon
resolution of such unresolved disagreements of Seller, the Final Settlement
Statement (including any revisions thereto as are so resolved or agreed) shall
be conclusive, final and binding upon Purchaser and Seller as to the calculation
of the Adjusted Purchase Price. Payment of any net amount due to Seller or
Purchaser, as the case may be, on the basis thereof shall be made within five
(5) days after the Final Settlement Statement (as so resolved or agreed) becomes
final and binding on the parties hereto (the "Final Settlement Date").
9.2 Subsequent Adjustments. Seller and Purchaser recognize that either
Seller or Purchaser may receive funds or pay expenses after the Final Settlement
Date which are properly the property or obligation of the other. Upon receipt of
net proceeds or payment of net expenses due to or payable by the other party
hereto, whichever occurs first, Seller or Purchaser, as the case may be, shall
submit a statement to the other party hereto showing the relevant items of
income and expense. Payment of any net amount due by Seller or Purchaser, as the
case may be, on the basis thereof shall be made within ten (10) days of receipt
of the statement.
9.3 Reservation of Claims. Except as provided in this Agreement, Seller is
entitled to all claims related to the Interests prior to the Effective Time
regardless of when payment is made. Except as provided in this Agreement,
Purchaser is entitled to all claims related to the Interests which arise after
the Effective Time.
9.4 Files and Records. Upon the Closing, subject to the provisions of
Section 1.2(d), Seller shall permit Purchaser, at the expense of Purchaser, to
take possession of originals, or with respect to accounting records relating to
periods prior to the Closing Date, copies, of all Records in the possession or
control of Seller or HHOC and relating to the Interests. Seller shall have the
right to copy (at the expense of Seller) and retain a copy of all such files,
records and data. Insofar as Seller reasonably believes such Records may be
needed or useful in connection with federal, state or local regulatory or tax
matters or resolution of existing disputes or contract compliance issues with
third parties or for any other appropriate purposes, Seller shall have the right
to make, at the expense
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of Seller, and retain copies of Records subsequent to the delivery of such
Records to Purchaser; provided, however, any such copies of Records retained by
Seller shall be confidential and proprietary to Purchaser to the extent the
relevant Records were theretofore maintained as such by Seller, and to such
extent and except as provided herein to the contrary, Seller may not divulge any
matters contained therein or any other information provided by Purchaser to
Seller pursuant to the terms of this Agreement, without the prior express
written consent of Purchaser, except (a) as required by applicable law, (b) as
required by order of any court, (c) to the extent otherwise previously made
public (other than by disclosure in breach of this Agreement) or (d) as is
necessary to enforce, or seek redress for breach of, this Agreement. Except as
may be otherwise required by any of the Contracts or applicable law, Purchaser
shall be obligated to maintain the Records for a period of seven years following
the Closing Date; provided, however, Purchaser shall not be obligated to
maintain any Records that relate in all material respects to any of the
Interests that cease to be owned by Purchaser if Purchaser has obligated its
successors and assigns of such Records to maintain and allow access to such
Records for the remainder of such seven-year period; and provided further,
however, Purchaser shall not be required to retain any Records that it has
offered to deliver to Seller.
9.5 Further Assurances. After the Closing, Seller and Purchaser agree to
execute and deliver such instruments and take such other actions as may be
necessary or advisable to carry out their obligations under this Agreement or
any other document delivered pursuant hereto. In particular, Seller and
Purchaser agree to execute and deliver such instruments and take such other
actions as may be necessary and advisable to make all filings, registrations,
and recordings which must be made with respect to the ORIs in the records of the
MMS and all appropriate counties, parishes, and state agencies and offices in
order that the records maintained by the MMS and the appropriate state agencies
and the appropriate records of the relevant parishes and counties shall
accurately reflect the transfer of the Interests to Purchaser.
9.6 Assumption and Indemnity.
(a) Upon the Closing, Purchaser hereby assumes responsibility for and
agrees to pay, perform and discharge all duties and obligations of Seller
arising out of or in connection with the ownership of the Interests on or after
the Closing Date (collectively, the "Assumed Obligations").
(b) Seller, severally and not jointly, shall retain responsibility for and
agrees to pay, perform and discharge all costs, expenses, liabilities, claims
and obligations arising out of or in connection with the ownership of the
Interests prior to the Closing Date (the "Retained Obligations").
(c) To the extent Purchaser wishes to make adjustments to any audits with
respect to any of the Interests relating to any period prior to the Effective
Time, Purchaser shall do so only with the prior written consent of Seller.
(d) IN THE EVENT THAT THE CLOSING OCCURS, EXCEPT AS TO MATTERS WAIVED IN
WRITING BY THE PARTY HERETO AGAINST WHICH THE WAIVER IS SOUGHT TO BE ENFORCED,
(I)
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PURCHASER SHALL PROTECT, DEFEND, RELEASE, INDEMNIFY AND HOLD HARMLESS SELLER AND
THE TRUSTEES, BENEFICIARIES, EMPLOYEES, AND AGENTS OF SELLER AND THE HEIRS,
PERSONAL REPRESENTATIVES, SUCCESSORS, AND ASSIGNS OF ANY OF THE FOREGOING (EACH
A "SELLER INDEMNIFIED PARTY") FROM AND AGAINST ANY AND ALL DAMAGES, CLAIMS,
LOSSES, DEMANDS, FINES, PENALTIES, JUDGMENTS (INCLUDING INTEREST), COSTS,
EXPENSES, ENVIRONMENTAL LIABILITIES, AND OTHER LIABILITIES, DIRECT, CONTINGENT,
OR OTHERWISE, INCLUDING CONSULTANT AND ATTORNEYS' FEES AND COSTS OF COURT
("DAMAGES") WHICH MAY BE ALLEGED AGAINST ANY SELLER INDEMNIFIED PARTY, ARISING
OR ACCRUING WITH RESPECT TO (A) ANY REPRESENTATION OR WARRANTY MADE BY PURCHASER
IN OR PURSUANT TO THIS AGREEMENT BEING UNTRUE OR INCORRECT IN ANY MATERIAL
RESPECT, (B) ANY FAILURE BY PURCHASER TO PERFORM ANY COVENANT OR AGREEMENT SET
FORTH IN THIS AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT EXECUTED BY IT IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY OR (C) THE ASSUMED
OBLIGATIONS AND (II) SELLER SHALL PROTECT, DEFEND, RELEASE, INDEMNIFY AND HOLD
HARMLESS PURCHASER AND THE SHAREHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES, AND
AGENTS OF PURCHASER AND THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS, AND
ASSIGNS OF ANY OF THE FOREGOING (EACH A "PURCHASER INDEMNIFIED PARTY") FROM ANY
DAMAGES WHICH MAY BE ALLEGED AGAINST ANY PURCHASER INDEMNIFIED PARTY, ARISING OR
ACCRUING WITH RESPECT TO (A) ANY REPRESENTATION OR WARRANTY MADE BY SELLER IN OR
PURSUANT TO THIS AGREEMENT BEING UNTRUE OR INCORRECT IN ANY MATERIAL RESPECT,
(B) ANY FAILURE BY SELLER TO PERFORM ANY COVENANT OR AGREEMENT SET FORTH IN THIS
AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT EXECUTED BY IT IN CONNECTION WITH
THE TRANSACTIONS CONTEMPLATED HEREBY OR (C) THE RETAINED OBLIGATIONS. THE TERM
"DAMAGES," AS USED IN THIS SECTION 9.6, SHALL NOT INCLUDE (X) ANY AMOUNT WHICH
WAS TAKEN INTO ACCOUNT AS AN ADJUSTMENT TO THE PURCHASE PRICE PURSUANT TO ANY
APPLICABLE PROVISION OF THIS AGREEMENT OR (Y) COSTS AND EXPENSES OF EITHER PARTY
HERETO AS DESCRIBED IN SECTION 10.2.
(e) Neither any Seller Indemnified Party nor any Purchaser Indemnified
Party shall be entitled to indemnification under this Section 9.6 unless the
aggregate of all amounts for which indemnity would otherwise be due to the
Seller Indemnified Parties or the Purchaser Indemnified Parties, as the case may
be, exceeds $50,000 in the aggregate, in which case the Seller Indemnified
Parties or the Purchaser Indemnified Parties, as the case may be, shall be
entitled to recover in full with respect to all such amounts. This threshold
does not apply to (and shall not be satisfied by) defaults related to the
payment of money or other liquidated amounts. NOTWITHSTANDING ANYTHING IN THIS
AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL PURCHASER OR SELLER BE LIABLE
HEREUNDER FOR ANY EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL,
INCIDENTAL, STATUTORY, REMOTE OR SPECULATIVE DAMAGES FURTHER NOTWITHSTANDING
ANYTHING IN THIS AGREEMENT TO THE CONTRARY, NEITHER SELLERS NOR PURCHASER SHALL
BE OBLIGATED TO PROVIDE INDEMNIFICATION UNDER THIS SECTION 9.6 EXCEEDING IN THE
AGGREGATE AS TO ALL CLAIMS FOR SUCH INDEMNIFICATION, $1,000,000.
9.7 Express Negligence. THE DEFENSE, INDEMNIFICATION AND HOLD HARMLESS
PROVISIONS PROVIDED FOR IN THIS AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE
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DAMAGES IN QUESTION AROSE SOLELY OR IN PART FROM THE ACTIVE, PASSIVE OR
CONCURRENT NEGLIGENCE, OR OTHER FAULT (INCLUDING STRICT LIABILITY), OF ANY
SELLER INDEMNIFIED PARTY OR PURCHASER INDEMNIFIED PARTY. PURCHASER AND SELLER
ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS
CONSPICUOUS.
9.8 Indemnification Procedure. All claims for indemnification under the
provisions of Section 9.6 shall be asserted and resolved pursuant to the
provisions of this Section 9.8. Any person or entity claiming indemnification
hereunder is hereinafter referred to as the "Indemnified Party" and any person
or entity against whom such claims are asserted hereunder is hereinafter
referred to as the "Indemnifying Party." In the event that any Damages are
asserted against or sought to be collected from an Indemnified Party by a third
party, such Indemnified Party shall, with reasonable promptness, provide to the
Indemnifying Party a written notice of claim specifying, in reasonable detail,
the specific nature of and specific basis of the Damages and the estimated
amount of such Damages and including a copy of all papers served with respect to
such claim (if any) and the basis of such claim for indemnification under the
provisions of Section 9.6 (each a "Claim Notice"). Notwithstanding the preceding
sentence, failure of an Indemnified Party to give notice hereunder shall not
release the Indemnifying Party from its obligations under the provisions of
Section 9.6, except to the extent the Indemnifying Party is actually prejudiced
by such failure to give notice; provided that, the Indemnifying Party shall not
be obligated to defend, indemnify or otherwise hold harmless an Indemnified
Party with respect to a third party claim until a Claim Notice meeting the
foregoing requirements is furnished to the Indemnifying Party by the party
seeking indemnity hereunder. The Indemnifying Party shall have thirty (30) days
from the personal delivery or receipt of any Claim Notice (the "Notice Period")
in which to notify the Indemnified Party whether or not it disputes the
liability of the Indemnifying Party to the Indemnified Party hereunder with
respect to such Damages. If the Indemnifying Party fails to so notify the
Indemnified Party during the Notice Period, the Indemnifying Party shall be
deemed to have elected to dispute such liability. The Indemnified Party shall
have the duty to defend such third party claim by all appropriate proceedings,
and with counsel of its own choosing, which proceedings shall be promptly
settled or prosecuted to a final conclusion. If the Indemnifying Party desires
to participate in, but not control, any such defense or settlement, it may do so
at its sole cost and expense. If requested by the Indemnified Party, the
Indemnifying Party agrees to cooperate with the Indemnified Party and its
counsel in contesting any Damages that the Indemnified Party elects to contest.
No claim may be settled or otherwise compromised without the prior written
consent of the Indemnifying Party. If the Indemnifying Party disputes whether a
third party claim is an indemnified claim under the provisions of Section 9.6,
the determination of whether the Indemnified Party is entitled to
indemnification under the provisions of Section 9.6 shall be resolved pursuant
to arbitration as provided in Section 10.16.
9.9 Allocation of Proceeds. Seller shall receive all proceeds from the sale
of Substances physically produced or allocable to the Interests prior to the
Effective Time. Purchaser shall receive all proceeds from the sale of Substances
physically produced or allocable to the Interests on or after the Effective
Time.
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9.10 Termination of Confidentiality Agreements. Effective upon the Closing,
the obligations of Purchaser under the Confidentiality Agreements, insofar and
only insofar as they relate to the Interests, are terminated.
ARTICLE X
MISCELLANEOUS
10.1 Notices. All notices required or permitted under this Agreement shall
be effective upon receipt if personally delivered, if mailed by registered or
certified mail, postage prepaid, or if delivered by telegram, telecopy or
facsimile if directed to the relevant party hereto as follows:
To any Seller: Hall-Houston Oil Company Employee Royalty Trust
c/o Hall-Houston Oil Company
700 Louisiana, Suite 2100
Houston, Texas 77002
Telephone: (713) 228-0711
Fax: (713) 225-7600
Attn: John H. Peper
Senior Vice President
To Purchaser: Energy Partners, Ltd.
201 St. Charles Avenue
Suite 3400
New Orleans, Louisiana 70170
Fax: (504) 569-1874
Attn: President
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Fax: (212) 269-5420
Attn: John Schuster, Esq.
Any party hereto may give written notice to the others, in the aforesaid
manner, of a change in the address or individual to whom delivery to such party
shall be made.
10.2 Expenses. Except as otherwise provided in this Agreement, all fees,
costs and expenses incurred by any party hereto in negotiating this Agreement or
in consummating the transactions contemplated by this Agreement shall be paid by
the party hereto incurring them.
10.3 Amendment. This Agreement may not be altered or amended, nor may any
rights hereunder be waived, except by a written instrument executed by each of
the parties hereto. No
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waiver of any provision of this Agreement shall be construed as a continuing
waiver of the same provision or of any other provision of this Agreement.
10.4 Assignment. Except as provided in the following sentence of this
Section 10.4, neither party hereto may assign or delegate any of its rights or
duties hereunder without the prior written consent of the other party hereto.
Purchaser shall have the right, without obtaining the prior written consent of
Seller, to assign the rights of Purchaser hereunder to an Affiliate (as defined
below in this Section 10.4) of Purchaser; provided, however, no such assignment
shall relieve Purchaser of any of its obligations under this Agreement. The term
"Affiliate" as used herein shall mean, as to the person or entity specified, any
person or entity controlling, controlled by or under common control with such
specified person or entity. The concept of control, controlling or controlled by
as used in the aforesaid context means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
another, whether through the ownership of voting securities, by contract or
otherwise. No person or entity shall be deemed an Affiliate of any person or
entity by reason of the exercise or existence of rights, interests or remedies
under this Agreement.
10.5 Conditions. The inclusion in this Agreement of conditions to the
obligations of Seller or Purchaser at the Closing shall not, in and of itself,
be a covenant of any party hereto to satisfy the conditions to the obligations
of any other party hereto at the Closing.
10.6 References. References in this Agreement to Schedule, Exhibit,
Article, or Section numbers shall be to Schedules, Exhibits, Articles, or
Sections of this Agreement, unless expressly stated to the contrary. References
in this Agreement to "hereby," "herein," "hereinafter," "hereinabove,"
"hereinbelow," "hereof," "hereunder" and words of similar import shall be to
this Agreement in its entirety and not only to the particular Schedule, Exhibit,
Article, or Section in which such reference appears. Specific enumeration herein
shall not exclude the general and, in such regard, references in this Agreement
to "includes" or "including" shall mean "includes, without limitation," or
"including, without limitation," as the case may be. Except as otherwise
indicated, references in this Agreement to statutes, sections, or regulations
are to be construed as including all statutory or regulatory provisions
consolidating, amending, replacing, succeeding, or supplementing the statute,
section, or regulation referred to. References in this Agreement to "writing"
include printing, typing, lithography, facsimile reproduction, and other means
of reproducing words in a tangible visible form. References in this Agreement to
agreements and other contractual instruments shall be deemed to include all
exhibits and appendices attached thereto and all subsequent amendments and other
modifications to such instruments, but only to the extent such amendments and
other modifications are not prohibited by the terms of this Agreement.
References in this Agreement to persons or entities include their respective
successors and permitted assigns.
10.7 Articles and Sections. This Agreement, for convenience only, has been
divided into Articles and Sections; and it is understood that the rights and
other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
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10.8 Number and Gender. Whenever the context requires, reference herein
made to the single number shall be understood to include the plural; and
likewise, the plural shall be understood to include the singular. Definitions of
terms defined in the singular or plural shall be equally applicable to the
plural or singular, as the case may be, unless otherwise indicated. Words
denoting sex shall be construed to include the masculine, feminine and neuter,
when such construction is appropriate; and specific enumeration shall not
exclude the general but shall be construed as cumulative.
10.9 Incorporation of Schedules and Exhibits. The Schedules and Exhibits
attached to this Agreement are incorporated herein and shall be considered a
part of this Agreement for all purposes.
10.10 Counterparts. This Agreement may be executed in counterparts, each of
which shall be an original and which, taken together, shall constitute the same
instrument.
10.11 Governing Law. EXCEPT TO THE EXTENT THE LAWS OF ANOTHER JURISDICTION
MANDATORILY GOVERN ANY ASPECT OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT, THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
LOUISIANA, WITHOUT GIVING EFFECT TO ANY PRINCIPLES OF SUCH LAWS REGARDING
CONFLICT OF LAWS.
10.12 Integration. THIS AGREEMENT AND THE DOCUMENTATION TO BE EXECUTED AND
DELIVERED AT THE CLOSING CONSTITUTE THE ENTIRE UNDERSTANDING BETWEEN SELLER AND
PURCHASER CONCERNING THE SUBJECT MATTER OF THIS AGREEMENT AND SUPERSEDE ALL
NEGOTIATIONS, DISCUSSIONS, REPRESENTATIONS, PRIOR AGREEMENTS AND UNDERSTANDINGS,
WHETHER ORAL OR WRITTEN, EXCEPT THE CONFIDENTIALITY AGREEMENT.
10.13 Parties in Interest. Except as otherwise expressly provided herein,
this Agreement is binding upon and shall inure to the benefit of Seller and
Purchaser and their respective successors, representatives, and permitted
assigns. Except as otherwise expressly provided herein, no other person or
entity is intended to have any benefits, rights or remedies under this Agreement
nor shall any person or entity other than Purchaser and Seller be entitled to
any claim, cause of action, remedy, or right of any kind under this Agreement.
10.14 Severability. If any provision of this Agreement is found to be
illegal or unenforceable, the other terms of this Agreement shall remain in
effect and this Agreement shall be construed as if the illegal or unenforceable
provision had not been included.
10.15 Survival. The covenants, agreements, representations, warranties and
indemnities contained in this Agreement shall survive the Closing of the
transactions contemplated hereby; provided, however, except as to the
representations and warranties made by each Seller in Sections 3.1(a), (b), (c),
(d) and (e), the representations and warranties made by each Seller in this
Agreement and indemnities by each Seller associated therewith shall survive the
Closing for eighteen months only.
22
10.16 Arbitration. Except as provided in Section 9.1 and below in this
Section 10.16, any dispute, controversy or claim arising out of or in relation
to or in connection with this Agreement, including any dispute as to the
construction, validity, interpretation, enforceability or breach of this
Agreement, shall be exclusively and finally settled by arbitration in accordance
with this Section 10.16. Any party may submit such a dispute, controversy or
claim to arbitration by notice to the other involved party and the administrator
for the American Arbitration Association ("AAA"). The arbitration proceedings
shall be conducted in New Orleans, Louisiana, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association as in effect on the
date hereof. The arbitration shall be heard and determined by three arbitrators.
Each side shall appoint an arbitrator of its choice within twenty (20) days of
the submission of the notice of arbitration. The party-appointed arbitrators
shall in turn appoint a presiding arbitrator for the tribunal within twenty (20)
days following the appointment of the second party-appointed arbitrator. If the
party-appointed arbitrators cannot reach agreement on a presiding arbitrator for
the tribunal and/or one party fails to appoint its party-appointed arbitrator
within the applicable period, the AAA shall act as appointing authority to
appoint an independent arbitrator with at least ten (10) years experience in the
legal and/or commercial aspects of the petroleum exploration and production
industry. None of the arbitrators shall have been an employee or consultant to
either party to the arbitration or any of their respective Affiliates, or have
any financial interest in the dispute, controversy or claim. All decisions of
the arbitral tribunal shall be by majority vote. The arbitrators may not award
consequential, punitive or similar damages except those claimed by persons other
than Seller and Purchaser for which responsibility is being allocated between
the parties. Expenses in connection with the arbitration and the compensation
and expenses of the arbitrators shall be borne in such manner as may be
specified in the arbitral award. Privileges protecting attorney-client
communications and attorney work product from compelled disclosure or use in
evidence, as recognized by the Federal Rules of Civil Procedure, shall apply to
and be binding in any arbitration proceeding conducted under this Section 10.16.
This Section 10.16 does not apply to any dispute, controversy or claim in which
the claimant seeks injunctive, declaratory or other equitable relief, and each
party hereto reserves its right to bring such action in court, which the parties
hereto agree shall be exclusively the U.S. Federal Courts sitting in the Eastern
District of Louisiana and each party hereto irrevocably consents to personal
jurisdiction in any and all such tribunals.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
23
IN WITNESS WHEREOF, Seller and Purchaser have executed and delivered this
Agreement as of the date first set forth above.
SELLER:
WITNESSES: HALL-HOUSTON OIL COMPANY EMPLOYEE
ROYALTY TRUST
By:
------------------------------------
- ------------------------------------
Name: Gary L. Hall
-------------------------------
Trustee
By:
- ------------------------------------
Name: Wayne P. Hall
-------------------------------
Trustee
PURCHASER:
WITNESSES: ENERGY PARTNERS, LTD.
Name: By:
-------------------------------
Name:
Title:
Name:
S-i
SCHEDULE 1-A
Attached to and made a part of that certain Purchase and Sale Agreement dated
December 16, 2001, by and between Hall-Houston Oil Company Employee Royalty
Trust, as "Seller", and Energy Partners, Ltd., as "Purchaser".
1. PROPERTY: EAST CAMERON BLOCK 161
SERIAL NO.: OCS-G 15141
o Lease Description: Oil and Gas Lease
effective July 1, 1995, between the United
States of America, as Lessor, and Energy
Development Corporation and Hardy Oil & Gas
USA Inc., as Lessee, covering all of Block
161, East Cameron Area, OCS Leasing Map,
Louisiana, Map No. 2, INSOFAR AND ONLY
INSOFAR as said lease covers the NW/4 of
said Block 161 as to subsea depths from the
seafloor down to and including 100 feet
below the stratigraphic equivalent of 8201
feet TVD as seen in the Hall-Houston Oil
Company OCS-G 15141 No. 3 Well:
Hall-Houston Oil Company
Employee Royalty Trust:
Overriding Royalty Interest 0.50000% of 6/6ths
Wells: OCS-G 15141 A-1 (aka #3)
Production Status: Producing
OCS-G 15141 A-2 (aka #4)
Production Status: Producing
2. PROPERTY: EAST CAMERON BLOCK 196
SERIAL NO.: OCS-G 16244
o Lease Description: Oil and Gas Lease effective September 1,
1996, between the United States of America,
as Lessor, and Hardy Oil & Gas USA Inc.
(predecessor in interest to Mariner Energy,
Inc.) and Forcenergy Gas Exploration, Inc.,
as Lessee, covering all of Block 196, East
Cameron Area, OCS Leasing Map, Louisiana Map
No. 2, containing approximately 5,000 acres,
INSOFAR AND ONLY INSOFAR as said lease covers
the depths from the seafloor down to and
including 100 feet below the stratigraphic
equivalent of 3200 feet TVD as seen in the
Hall-Houston Oil Company OCS-G 16244 No. 2
Well:
Schedule 1-A Page 1 of 5
Hall-Houston Oil Company Employee
Royalty Trust
Overriding Royalty Interest: 0.50000% of 6/6ths
Wells: OCS-G 16244 #2 (aka #A-1 ST 1)
Production Status: Producing
3. PROPERTY: EAST CAMERON BLOCK 263
SERIAL NO.: OCS-G 15147
Lease Description: Oil and Gas Lease effective July 1, 1995,
between the United States of America, as
Lessor, and Hardy Oil & Gas USA Inc. and
Nippon Oil Exploration U.S.A. Limited, as
Lessee, covering all of Block 263, East
Cameron Area, South Addition, OCS Leasing
Map, Louisiana Map No. 2A, containing
approximately 5,000 acres:
Hall-Houston Oil Company Employee
Royalty Trust
Overriding Royalty Interest 0.50000% of 6/6ths
Wells: OCS-G 15147 #B-1 (aka #3)
Production Status: Producing
OCS-G 15147 #B-2
Production Status: Producing
4. PROPERTY: HIGH ISLAND 72
SERIAL NO.: OCS-G 22231
o Lease Description: Oil and Gas Lease effective November 1, 2000,
between the United States of America, as
Lessor, and Hall-Houston Oil Company and
Juniper Energy L.P., as Lessee, covering all
of Block 72, High Island Area, OCS Leasing
Map, Texas Map No. 7, containing
approximately 5,760 acres:
Schedule 1-A Page 2 of 5
Hall-Houston Oil Company Employee
Royalty Trust:
Overriding Royalty Interest: 1.00000% of 6/6ths
Wells: OCS-G 22231 #1
Production Status: Temporarily Abandoned
5. PROPERTY: HIGH ISLAND A-327
SERIAL NO.: OCS-G 02418
o Lease Description: Oil and Gas Lease effective August 1, 1973,
between the United States of America, as
Lessor, and Cities Service Oil Company,
Skelly Oil Company, Getty Oil Company,
Pennzoil Louisiana and Texas Offshore, Inc.,
and Pennzoil Offshore Gas Operators, Inc., as
Lessee, covering all of Block A-327, High
Island Area, East Addition, South Extension,
Official Leasing Map, Texas Map No. 7C,
containing approximately 5,760 acres:
Hall-Houston Oil Company Employee
Royalty Trust:
Overriding Royalty Interest 0.28125% of 6/6ths
Wells: OCS-G 02418 B-1 (aka #5)
Production Status: Producing
OCS-G 02418 B-2
Production Status: Producing
6. PROPERTY: SOUTH TIMBALIER 180
SERIAL NO.: OCS-G 18046
Lease Description: Oil and Gas Lease effective July 1, 1997,
between the United States of America, as
Lessor, Hall-Houston Oil Company and
Spinnaker Exploration Company, L.L.C., as
Lessee, covering all of Block 180, South
Timbalier Area, OCS Leasing Map, Louisiana
Map No. 6, containing approximately 5,000
acres.
Hall-Houston Oil Company
Employee Royalty Trust:
Overriding Royalty Interest 1.00000% of 6/6ths
Wells: None
Schedule 1-A Page 3 of 5
7. PROPERTY: WEST CAMERON 427
SERIAL NO.: OCS-G 2846
o Lease Description: Oil and Gas Lease effective December 1, 1974,
between the United States of America, as
Lessor, and Columbia Gas Development
Corporation, as Lessee, covering all of Block
427, West Cameron Area, West Addition,
Official Leasing Map, Louisiana Map No. 1A,
containing approximately 5,000 acres, INSOFAR
AND ONLY INSOFAR as said lease covers those
depths from the surface to the stratigraphic
equivalent of the base of "2250' Sand" [being
defined for purposes hereof as that interval
seen in the Huffco Petroleum Corporation
OCS-G 2846 #A-4 Well between 2356 feet TVD
(2239 feet subsea) and 2480 feet TVD (2363
feet subsea)]:
Hall-Houston Oil Company Employee
Royalty Trust
Overriding Royalty Interest 1.60000% of 6/6ths
Wells: OCS-G 2846 #B-1 (aka #2)
Production Status: Temporarily Abandoned
8. PROPERTY: WEST CAMERON 431
SERIAL NO.: OCS-G 10584
Lease Description: Oil and Gas Lease effective May
1, 1989 between The United States of
America, as Lessor, and Pelto Oil Company,
as Lessee, covering all of Block 431, West
Cameron Area, West Addition, OCS Leasing
Map, Louisiana Map No. 1A, INSOFAR AND ONLY
INSOFAR as said lease covers the following
described acreage and depths:
o Tract 1: N/2N/2 of said Block 431, as to depths from the surface of
the earth down to 6800 feet TVD:
Schedule 1-A Page 4 of 5
Hall-Houston Oil Company Employee
Royalty Trust
Overriding Royalty Interest 2.00000% of 6/6ths
Wells: OCS-G 10584 #A-2/A-2D (aka #3)
Production Status: Temporarily Abandoned
o Tract 2: S/2N/2 and the N/2S/2 of said Block 431, as to depths
between the surface of the earth and the stratigraphic
equivalent of the total depth drilled in the Earning Well (as
defined in the Farmout Agreement effective May 23, 2001,
between ATP Oil & Gas Corporation, as Farmor, and Juniper
Energy L.P., as Farmee, which provides for Farmor to be
entitled to a 2% of 6/6ths overriding royalty interest, as
amended by letters dated July 13, 2001 and October 22, 2001.),
save and except the N/2SE/4NE/4 as to those depths from 6,000
feet to 12,500 feet
o The Trust has a right to receive an assignment of overriding
royalty interest from Hall-Houston Oil Company establishing
the interest set forth hereinbelow upon the earning of an
assignment of operating rights by Hall-Houston Oil Company
pursuant to the Farmout Agreement dated effective May 23,
2001, between ATP Oil & Gas Corporation, as Farmor, and
Juniper Energy L.P., as Farmee, as amended.
Hall-Houston Oil Company Employee
Royalty Trust
Overriding Royalty Interest 2.00000% of 6/6ths
Wells: OCS-G 10584 #4
Production Status: Temporarily Abandoned
Schedule 1-A Page 5 of 5
SCHEDULE 1-B
Attached to and made a part of that certain Purchase and Sale Agreement
dated December 16, 2001, by and between Hall-Houston Oil Company Employee
Royalty Trust, as "Seller", and Energy Partners, Ltd., as "Purchaser".
Assignments of Overriding Royalty Interests
in favor of Seller:
Hall-Houston Oil Company Employee Royalty Trust:
1. Assignment of Overriding Royalty Interest effective August 21, 2000,
between Hall-Houston Oil Company, as Assignor, and Gary L. Hall and
Wayne P. Hall as Trustees, acting on behalf of Hall-Houston Oil
Company Employee Royalty Trust, as Assignee, recorded at Entry
#268131, Conveyance Book 921 of the records of Cameron Parish,
Louisiana, and filed on December 27, 2000 in the Non-Required Document
Filings at the Minerals Management Service, covering OCS-G 15141 Block
161, East Cameron Area (such Assignee subsequently having conveyed in
that certain Assignment of Overriding Royalty Interest effective
August 22, 2001, between Gary L. Hall and Wayne P. Hall as Trustees,
acting on behalf of Hall-Houston Oil Company Employee Royalty Trust,
as Assignor, and Falfurrias, L.P., as Assignee, recorded at Entry
#268142, Conveyance Book 921 of the records of Cameron Parish,
Louisiana, and filed on December 27, 2000 in the Non-Required Document
Filings at the Minerals Management Service).
2. Assignment of Overriding Royalty Interest effective December 13, 2000,
between Hall-Houston Oil Company, as Assignor, and Gary L. Hall and
Wayne P. Hall, acting on behalf of Hall-Houston Oil Company Employee
Royalty Trust, as Assignee, recorded at Entry #_________, Conveyance
Book ____ of the records of Cameron Parish, Louisiana, and filed on
November 28, 2001 in the Non-Required Document Filings at the Minerals
Management Service, covering OCS-G 16244 Block 196, East Cameron Area
(such Assignee to convey a 1.5% overriding royalty interest in favor
of Falfurrias, L.P.).
3. Assignment of Overriding Royalty Interest effective May 1, 2000,
between Hall-Houston Oil Company, as Assignor, and Gary L. Hall and
Wayne P. Hall as Trustees, acting on behalf of Hall-Houston Oil
Company Employee Royalty Trust, as Assignee, recorded at Entry
#269340, Conveyance Book 926 of the records of Cameron Parish,
Louisiana, and filed on March 21, 2001 in the Non-Required Document
Filings at the Minerals Management Service, covering OCS-G 15147 Block
263, East
Schedule 1-B Page 1 of 3
Cameron Area (such Assignee subsequently having conveyed in that
certain Assignment of Overriding Royalty Interest effective May 2,
2000, between Gary L. Hall and Wayne P. Hall as Trustees, acting on
behalf of Hall-Houston Oil Company Employee Royalty Trust, as
Assignor, and Falfurrias, L.P., as Assignee, recorded at Entry
#269349, Conveyance Book 926 of the records of Cameron Parish,
Louisiana, and filed on March 21, 2001 in the Non-Required Document
Filings at the Minerals Management Service).
4. Assignment of Overriding Royalty Interest effective November 1, 2000,
between Hall-Houston Oil Company, as Assignor, and Gary L. Hall and
Wayne P. Hall as Trustees, acting on behalf of Hall-Houston Oil
Company Employee Royalty Trust, as Assignee, recorded at Film Code
#2001003246 in the records of Jefferson County, Texas, and filed on
January 29, 2001 in the Non-Required Document Filings at the Minerals
Management Service, covering OCS-G 22231 Block 72, High Island Area.
5. Assignment of Overriding Royalty Interest effective September 29,
1999, between Hall-Houston Oil Company, as Assignor, and Gary L. Hall
and Wayne P. Hall as Trustees, acting on behalf of Hall-Houston Oil
Company Employee Royalty Trust, as Assignee, recorded at Film Code
#2000013331, of the Official Public Records of Jefferson County,
Texas, and filed on April 7, 2000 in the Non-Required Document Filings
at the Minerals Management Service, covering OCS-G 02418 Block A-327,
High Island Area (such Assignee subsequently having conveyed in that
certain Assignment of Overriding Royalty Interest effective Sesptember
29, 1999, between Gary L. Hall and Wayne P. Hall as Trustees, acting
on behalf of Hall-Houston Oil Company Employee Royalty Trust, as
Assignor, and Falfurrias, L.P., as Assignee, recorded at Film Code
#2000013333, of the Official Public Records of Jefferson County,
Texas, and filed on April 7, 2000 in the Non-Required Document Filings
at the Minerals Management Service).
6. Assignment of Overriding Royalty Interest effective July 1, 1997,
between Hall-Houston Oil Company, as Assignor, and Gary L. Hall and
Wayne P. Hall as Trustees, acting on behalf of Hall-Houston Oil
Company Employee Royalty Trust, as Assignee, recorded at Entry
#899087, Conveyance Book 1470, Folio 391 of the records of La Fourche
Parish, Louisiana, and filed on August 13, 2001 in the Non-Required
Document Filings at the Minerals Management Service, covering OCS-G
18046 Block 180, South Timbalier Area.
7. Assignment of Overriding Royalty Interest effective October 3, 2001,
between Hall-Houston Oil Company, as Assignor, and Gary L. Hall and
Wayne P. Hall as Trustees, acting on behalf of Hall-Houston Oil
Company
Schedule 1-B Page 2 of 3
Employee Royalty Trust, as Assignee, recorded at Entry #272661,
Conveyance Book 939 of the records of Cameron Parish, Louisiana, and
filed on October 16, 2001 in the Non-Required Document Filings at the
Minerals Management Service, covering OCS-G 02846 Block 427, West
Cameron Area.
8. Assignment of Overriding Royalty Interest to be done effective
February 16, 2001, between Hall-Houston Oil Company, as Assignor, and
Gary L. Hall and Wayne P. Hall as Trustees, acting on behalf of
Hall-Houston Oil Company Employee Royalty Trust, as Assignee, recorded
at Entry #__________, Conveyance Book ___ [sent 12/15/01] of the
records of Cameron Parish, Louisiana, and filed on __________, 2000
[sent 12/15/01] in the Non-Required Document Filings at the Minerals
Management Service, covering OCS-G 10584 Block 431, West Cameron Area.
Schedule 1-B Page 3 of 3
SCHEDULE 1-C
1. Promissory Note in the amount of $2,500,000 dated July 31, 2000 from
Hall-Houston Oil Company to the Hall-Houston Oil Company Employee Royalty Trust.
2. Promissory Note in the amount of $1,500,000 dated November 1, 2000 from
Hall-Houston Oil Company to the Hall-Houston Oil Company Employee Royalty Trust.
3. Promissory Note in the amount of $1,800,000 dated November 16, 2000 from
Hall-Houston Oil Company to the Hall-Houston Oil Company Employee Royalty Trust.
C-1
SCHEDULE 3.1(a)
ASSIGNMENTS NOT APPROVED BY MMS
Pending Approval
Trust Affected: Hall-Houston Oil Company Employee Royalty Trust
1. Assignment of Operating Rights effective February 16, 2001, between
EOG Resources, Inc., as Assignor, and Hall-Houston Oil Company, as
Assignee, covering the N/2N/2 of Block 431, West Addition, West
Cameron Area, OCS-G 10584.
Assignments Not in Approvable Form
None
EXHIBIT A
PRELIMINARY CLOSING STATEMENT
Seller: Hall-Houston Employee Royalty Trust
------------------------------------------
Buyer: Energy Partners, Ltd.
Effective Date: November 1, 2001 7:00 am
Closing Date:
------------------------------------------
Property Description: Seller's right, title and interest in and
to the properties as described in
Section 1.2 of the Purchase and Sale
Agreement, and as further described as
"Interests".
================================================================================
Cash Purchase Price:
Overriding Royalty Interest None
ADJUSTMENTS:
Increases to Purchase Price:
Seller's Net Overriding Royalty Interest Share of
Merchantable Oil produced from Leases and in
Storage at the Effective Time (Section 2.2(a) $0
-------
Total Increases: $0
=======
Decreases to Purchase Price:
Seller's Net Overriding Royalty Interest Share of
Post-effective related Proceeds
received by the Seller: (Sec 2.2(b)(i)) $0
Post-effective related Proceeds related
to the sale in any portion on Interest (Sec 2.2(b)(ii)) $0
-------
Total Decreases: $0
=======
-------
Total Adjustments to Purchase Price: $0
Adjusted Purchase Price: $0
-------
Amount Due From/(To) Buyer: $0
=======
Purchase Price Allocated to be Paid in Cash: $0
-------
Purchase Price Allocated to be Paid in Shares of Purchaser Stock: $0
-------
Buyer's Initials:
-------------------------
Seller's Initials:
-------------------------
EXHIBIT B
ASSIGNMENT OF OVERRIDING ROYALTY INTERESTS
THE UNITED STATES OF AMERICA ss. [_______ Block ___]
ss. [_______ Block ___]
OUTER CONTINENTAL SHELF ss. [_______ Block ___]
ss.
OFFSHORE [LOUISIANA] [TEXAS] ss.
This Assignment of Overriding Royalty Interests (the "Assignment"), dated
effective as of 7:00 a.m., Central ____ Time, on ___________, 2001 (the
"Effective Time"), is from Gary L. Hall and Wayne P. Hall, as Trustees of the
Hall-Houston __________________ Royalty Trust, the address for which is 700
Louisiana, Suite 2100, Houston, Texas 77002, and the taxpayer identification
number for which is _____________ ("Assignor"), to [SAINTS], a Delaware
corporation, the address for which is ___________________________ and the
taxpayer identification number for which is __________ ("Assignee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, by way of the Assignments of Overriding Royalty Interests
described in Schedule 1-B attached hereto and made a part hereof (the "Prior
Assignments"), Assignor acquired overriding royalty interests in and to the oil
and gas leases described therein; and
WHEREAS, Assignor desires to convey to Assignee all or a portion of the
overriding royalty interests acquired by Assignor by way of the Prior
Assignments;
NOW THEREFORE, for ONE THOUSAND AND NO/100 DOLLARS ($1,000.00) and other
good and valuable consideration, the receipt and sufficiency of which Assignor
hereby acknowledges, Assignor has granted, transferred, bargained, sold,
conveyed, and assigned, and does hereby grant, transfer, bargain, sell, convey,
and assign, to Assignee, effective for all purposes as of the Effective Time, an
overriding royalty interest in and to all oil, gas, casinghead gas and other
hydrocarbons produced, saved and marketed pursuant to the terms and conditions
of each oil and gas lease more particularly described in Schedule 1-A made a
part hereof (each a "Lease") equal to the overriding royalty interest as to each
such Lease acquired by Assignor by way of the relevant Prior Assignment and
remaining vested in Assignor after giving effect to any subsequent assignment by
Assignor referred to in Schedule 1-B (collectively, the "Overriding Royalty
Interests"), which overriding royalty interest as to each such Lease Assignor
warrants to be not less than the interest set forth in Schedule 1-A for the
relevant Lease .
TO HAVE AND TO HOLD the Overriding Royalty Interests unto Assignee, its
successors and assigns, forever, subject to the following terms, exceptions, and
other provisions:
1. Special Warranty. Assignor binds and obligates itself, its successors
and assigns to warrant and forever defend title to the Overriding Royalty
Interests unto Assignee, its successors and assigns, against every person
whomsoever lawfully claiming or to claim the same or any part thereof
B-i
by, through or under Assignor, but not otherwise, but with full right of
substitution and subrogation, to the extent assignable, in and to all covenants
and warranties of Assignor's predecessors in title and with full subrogation of
all rights accruing under the applicable statutes of limitation or prescription
under the laws of the state in or offshore from which the interests conveyed
hereby are located and all rights of actions of warranty against all former
owners of the interests conveyed hereby.
2. Prior Assignments. This Assignment, as to each Overriding Royalty
Interest, is made expressly subject to the terms of the relevant Prior
Assignment.
3. Successors and Assigns. This Assignment shall bind Assignor and its
successors and assigns and inure to the benefit of Assignee and its successors
and assigns.
4. No Third Party Beneficiaries. Except as expressly provided herein, this
Assignment is not intended to create, nor shall it be construed to create, any
rights in any third party under doctrines concerning third-party beneficiaries.
5. Governing Law. THIS ASSIGNMENT SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF __________, WITHOUT REGARD TO ANY
CONFLICT OF LAW RULES THAT WOULD DIRECT APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
6. Schedules. The Schedules attached hereto are hereby made a part hereof
and incorporated herein by this reference. Unless provided otherwise, all
recording references in such Schedules are to the appropriate records of the
United States Department of Interior, Minerals Management Service or the
counties or parishes adjacent to the location of the lands covered by the
relevant Lease.
7. Captions. The captions in this Assignment are for convenience only and
shall not be considered a part of or affect the construction or interpretation
of any provision of this Assignment.
8. Counterparts. This Assignment may be executed in one or more originals,
but all of which together shall constitute one and the same instrument.
9. Purchase and Sale Agreement. This Assignment is made and accepted
pursuant to all of the terms, conditions and provisions of that certain Purchase
and Sale Agreement between Assignor and others, as sellers, and Assignee, as
Purchaser, dated as of December 16, 2001.
B-ii
EXECUTED this ___ day of ___________ 200__, to be effective for all
purposes as of the Effective Time.
[WITNESSES TO BOTH SIGNATURES: ASSIGNOR:
Hall-Houston __________________
Royalty Trust
By:
- ------------------------------------- ----------------------------------
(Printed Name of Witness) Gary L. Hall, Trustee
By:
- ------------------------------------- ----------------------------------
Wayne P. Hall, Trustee
- -------------------------------------
(Printed Name of Witness)]
B-iii
STATE OF ___________ ss.
ss.
_________ OF ___________ ss.
[LOUISIANA]
On this ___ day of _________________, 200__, before me appeared Gary L.
Hall, to me personally known, who being by me fully sworn, did say that he is a
Trustee of Hall-Houston ______________________ Royalty Trust, and that the
foregoing instrument was signed on behalf of such Trust and in the presence of
the witnesses whose names appear above and Gary L. Hall acknowledged the
foregoing instrument to be the free act and deed of such Trust.
[TEXAS]
This instrument was acknowledged before me on this _____ day of
______________, 200__ by Gary L. Hall, Trustee of the Hall-Houston ___________
Royalty Trust on behalf of such Trust.
Notary Public in and for
the State of _________
STATE OF ___________ ss.
ss.
_________ OF ___________ ss.
[LOUISIANA]
On this ___ day of _________________, 200__, before me appeared Wayne P.
Hall, to me personally known, who being by me fully sworn, did say that he is a
Trustee of Hall-Houston ______________________ Royalty Trust, and that the
foregoing instrument was signed on behalf of such Trust and in the presence of
the witnesses whose names appear above and Wayne P. Hall acknowledged the
foregoing instrument to be the free act and deed of such Trust.
[TEXAS]
This instrument was acknowledged before me on ____ day of _____________,
200__ by Wayne P. Hall, Trustee of the Hall-Houston ___________ Royalty Trust on
behalf of such Trust.
Notary Public in and for
the State of _________
B-iv
Exhibit H
to Merger Agreement
[COMPANY PRINCIPAL SHAREHOLDER AGREEMENT]
PRINCIPAL SHAREHOLDER AGREEMENT
This PRINCIPAL SHAREHOLDER AGREEMENT (this "Agreement"), dated as of
December 16, 2001, is entered into by and among Energy Partners, Ltd., a
Delaware corporation ("Buyer"), each member of the Gary Hall Group, each member
of the Wayne Hall Group, Bruce R. Sidner, John H. Peper, W.P. Dillard, Otto
Candies, LLC, Candies Family Investments, LLC, Ollabelle D. Hall, Hall Equities,
Inc., Hall Family Trust, Hall Partners L.P., Patrick R. Hall, Preston R. Hall
and Valerie A. Hall each, either directly or through one or more entities
controlled by such party, a holder of debt and/or equity securities of
Hall-Houston Oil Company, a Texas corporation (the "Company"), as set forth on
Exhibit A, as well as of certain interests in real property and related personal
property in which the Company has an interest (the "Principal Shareholders").
RECITALS
A. Concurrently with the execution of this Agreement, the Company and Buyer
have entered into an Agreement and Plan of Merger dated the date hereof (as such
agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which (i) a wholly-owned subsidiary of Buyer will be merged with and
into the Company, which will be the surviving corporation in the Merger, and
will, as a result of the Merger, become a wholly-owned subsidiary of Buyer and
(ii) in the Merger, holders of equity securities of the Company will receive the
consideration set forth in the Merger Agreement, and, in connection therewith
and as contemplated by the Merger Agreement, holders of debt securities of the
Company and certain interests in real property and related personal property in
which the Company also has an interest shall exchange such securities and
property for consideration set forth in related documents.
B. As an inducement and a condition to entering into the Merger Agreement,
Buyer has required that the Principal Shareholders agree, and the Principal
Shareholders have agreed, to enter into this Agreement.
AGREEMENT
In consideration of the Recitals and the mutual promises contained herein,
and other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged, the parties hereto, intending to be legally bound hereby,
agree as follows:
1. Certain Definitions. Capitalized terms used and not defined herein have
the respective meanings ascribed to them in the Merger Agreement. For purposes
of this Agreement:
"Debt" means the Refinanced Debt, together with any associated Nominal
Overriding Royalty Interest, owned by the Principal Shareholders on the date
hereof and any debt instrument of
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the Company and its subsidiaries acquired after the date hereof and prior to the
termination of this Agreement (except for the Bridge Loans, as defined in the
Merger Agreement).
"Gary Hall Group" means Gary L. Hall and Houston Explorer Group, L.P.
"Indemnifying Shareholders" means the Gary Hall Group, jointly and
severally among themselves, the Wayne Hall Group, jointly and severally among
themselves, and Bruce R. Sidner.
"Permitted Transfer" means a sale, transfer, assignment or other
disposition to a Permitted Transferee.
"Permitted Transferee" means any person who is (A) the spouse or former
spouse of, or any lineal descendent of, or any spouse of such lineal descendant
of, or the grandparent, parent, brother or sister of, or spouse of such brother
or sister of, a Principal Shareholder or Permitted Transferee; (B) upon the
death of any Principal Shareholder or any Permitted Transferee of such person,
the executors of the estate of such Principal Shareholder or such Permitted
Transferee, and any of such Principal Shareholder's or such Permitted
Transferee's heirs, testamentary trustees, devisees, or legatees; (C) any trust
principally for the benefit of one or more of the foregoing Principal
Shareholders or Permitted Transferees; (D) upon the disability of any Principal
Shareholder or Permitted Transferee, any guardian or conservator of such
Principal Shareholder or such Permitted Transferee; or (E) any corporation,
partnership or other entity if all of the beneficial ownership is held by a
Principal Shareholder or other Permitted Transferees; provided that in each case
such transferee assumes and agrees to perform and becomes a party to this
Agreement, agrees not to make or in any way assist in the making of any
Acquisition Proposal, and agrees not to dissent in the Merger, all on terms
reasonably acceptable to Buyer. For purposes of this Agreement, when a Permitted
Transferee has acquired Shares in accordance herewith, such person shall be
deemed a "Principal Shareholder" hereunder.
"Person" shall mean an individual, corporation, limited liability company,
partnership, joint venture, association, trust, unincorporated organization or
other entity.
"Shares" shall mean the Company Common Stock ("Common Shares") and any
Company preferred stock ("Preferred Shares") owned by the Principal Shareholders
on the date hereof and any additional Common Shares or Preferred Shares acquired
by any Principal Shareholder in any capacity after the earlier of the Closing
Date or termination of this Agreement prior to the Closing Date. "Shares" shall
include Common Shares and Preferred Shares acquired upon the exercise of
options, warrants or rights, the conversion or exchange of convertible or
exchangeable securities, or by means of purchase, dividend, distribution, gift,
bequest, inheritance or as a successor in interest in any capacity or otherwise.
In the event of a stock dividend or distribution, or any change in the Common
Shares or the Preferred Shares by reasons of any stock dividend, split-up,
recapitalization, reclassification, combination, exchange of shares or the like,
the term "Shares" shall be deemed to refer to and include the original Common
Shares or Preferred Shares as well as all such stock dividends and distributions
and any Common Shares or the Preferred Shares into which or for which any or all
of the Shares may be changed, reclassified or exchanged and appropriate
adjustments shall be
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made to the terms and provisions of this Agreement. "Shares" shall also include
voting trust certificates issued in respect of any Common Shares or Preferred
Shares.
"Subject Instruments" means, collectively, the Shares, the Debt and the
Affiliate Interests to be acquired by Buyer.
"Wayne Hall Group" means Wayne P. Hall and Hall SouthWest Business Ventures
L.P.
2. Voting of Shares; No Inconsistent Agreements
(a) Each Principal Shareholder hereby severally and not jointly and solely
with respect to the Shares held of record by such Principal Shareholder, agrees
that during the period commencing on the date hereof and continuing until the
earlier of the Closing Date or termination of this Agreement prior to the
Closing Date at any meeting (whether annual or special and whether or not an
adjourned or postponed meeting) of the holders of Company Common Stock or
Company Preferred Stock, however called, or in connection with any written
consent of the holders of Common Stock or Company Preferred Stock, such
Principal Shareholder shall vote (or cause to be voted) all of the Common Stock
or Preferred Shares, as the case may be, held of record by such Principal
Shareholder (i) in favor of the Merger, the execution, delivery and performance
of the Merger Agreement and the other Transaction Documents (as defined in the
Merger Agreement) and the approval and adoption of the terms thereof and each of
the other actions contemplated by the Transaction Documents and this Agreement
and any actions required in furtherance thereof and hereof (the "Subject
Transactions"); (ii) against any Acquisition Proposal (other than the Merger and
the other Subject Transactions) and against any action or agreement that would
result in a breach in any respect of any covenant, representation or warranty or
any other obligation or agreement under the Transaction Documents; and (iii)
except as otherwise agreed to in writing in advance by Buyer, and regardless of
the status of the Merger and the other Subject Transactions, against the
following actions (other than pursuant to the terms of the Transaction
Documents): (A) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or any of its
subsidiaries; (B) any sale, lease or transfer by the Company of a material
amount of assets (including stock) of the Company or any of its subsidiaries, or
a merger, restructuring, recapitalization, special dividend, dissolution or
liquidation of the Company or any of its subsidiaries; or (C)(1) any change in a
majority of the persons who constitute the board of directors of the Company or
any of its subsidiaries; (2) any change in the present capitalization of the
Company or any of its subsidiaries, including any proposal to sell a substantial
equity interest in the Company or any of its subsidiaries; (3) any amendment of
the Company's or any of its subsidiaries' charters or by-laws; (4) any other
change in the Company's or any of its subsidiaries' corporate structure or
business; or (5) any other action which, in the case of each of the matters
referred to in clauses (C)(1), (2), (3) or (4), is intended, or could reasonably
be expected, to impede, interfere with, delay, postpone, or materially adversely
affect the Transaction Documents or the Subject Transactions. In addition, such
Principal Shareholder agrees that it will, upon request by Buyer, furnish
written confirmation, in form and substance reasonably acceptable to Buyer, of
such Principal Shareholder's vote in the manner required by clauses (i)-(iii) of
this Section 2(a). Each Principal Shareholder acknowledges receipt and review of
a copy of the Merger Agreement.
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(b) Each Principal Shareholder severally and not jointly agrees that it
shall not enter into any agreement or understanding with any Person the effect
of which would be inconsistent with or violative of the provisions and
agreements contained herein, including in this Section 2, and shall take all
such actions necessary to approve, if so requested by Buyer, or any actions
incident to the Subject Transactions or the other matters referred to in this
Section 2 by Principal Shareholder written consent.
3. Debt and Affiliate Interests.
(a) Each Principal Shareholder hereby severally and not jointly and solely
with respect to Debt and Affiliate Interests held or controlled by such
Principal Shareholder, agrees that during the period commencing on the date
hereof and continuing until the earlier of the Closing Date or termination of
this Agreement prior to the Closing Date such Principal Shareholder will, to the
extent such Principal Shareholder or an entity controlled by such Principal
Shareholder is a party thereto, (i) execute and deliver counterpart signatures
pages to the Working Interest Purchase Agreement and/or the Overriding Royalty
Interest Purchase Agreement, as applicable, with respect to the Affiliate
Interests to be acquired by Buyer, (ii) execute and deliver counterpart
signature pages to the Employee Royalty Trust Debt and Overriding Royalty
Interest Purchase Agreement with respect to the Debt and Affiliate Interests to
be acquired by Buyer held by the Employee Royalty Trust, (iii) execute and
delivery counterpart signature pages to the Debt Exchange Agreement and (iv) not
agree to any amendment, consent or waiver of the documentation relating to the
Debt and the Affiliate Interests to be held by Buyer in order to permit any
transaction contemplated by an Acquisition Proposal or any other transaction
against which such Principal Shareholder would be required to vote its Shares
pursuant to Section 2. Each Principal Shareholder hereby severally and not
jointly with respect to Debt and Affiliate Interests to be acquired by Buyer
held or controlled by such Principal Shareholder, agrees to (i) not accept any
offer of cash consideration for such Debt and Affiliate Interests that may be
offered in the alternative to the consideration offered in the documents
referenced in (i)-(iii) in the preceding sentence, and (ii) not accept any offer
to purchase, redeem or exchange such Debt or Affiliate Interests in any
transaction that is a component part of an Acquisition Proposal.
(b) Each Principal Shareholder severally and not jointly agrees that it
shall not enter into any agreement or understanding with any Person the effect
of which would be inconsistent with or violative of the provisions and
agreements contained herein, including in this Section 3, and shall take all
such actions necessary to approve, if so requested by Buyer or any actions
incident to the Subject Transactions or the other matters referred to in this
Section 3 by Principal Shareholder written consent.
-5-
4. Other Principal Shareholder Covenants.
(a) Restriction on Transfer; Proxies and Non-interference. Except for
Permitted Transfers or as expressly permitted herein, each Principal Shareholder
severally and not jointly agrees that it shall not directly or indirectly:
(i) offer for sale, sell, transfer, tender, pledge, encumber, assign
or otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to, or consent to the offer for
sale, sale, transfer, tender, pledge, encumbrance, assignment or other
disposition of (collectively, "transfer"), any or all of the Subject
Instruments or any interest therein;
(ii) grant any proxies or powers of attorney, deposit the Shares or
Debt into a voting trust or enter into a voting agreement with respect to
the Shares or Debt; or
(iii) take any action that would make any representation or warranty
of such Principal Shareholder contained herein untrue or incorrect or would
result in a breach by such Principal Shareholder of its obligations under
this Agreement or a breach by the Company of its obligations under the
Transaction Documents.
(b) No Solicitation.
(i) From the date hereof through the Closing Date or the earlier
termination of this Agreement prior to the Closing Date, each Principal
Shareholder severally and not jointly agrees that it shall not, and shall
not permit any of its subsidiaries, or any of its or their officers,
directors, employees, representatives, agents or Affiliates (including,
without limitation, any investment banker, attorney or accountant retained
by any Principal Shareholder) to, directly or indirectly, enter into,
solicit, initiate or continue any discussions or negotiations with, or
encourage or respond to any inquiries or proposals by, or participate in
any negotiations with, or provide any information to, or otherwise
cooperate in any other way with or facilitate or encourage, any Person or
group, other than Buyer and its Affiliates, concerning any Acquisition
Proposal. Each Principal Shareholder severally and not jointly agrees that
it will immediately notify Buyer if any discussions or negotiations are
sought to be initiated or continued, any inquiry or proposal is made, or
any information or document is requested with respect to any Acquisition
Proposal, and notify Buyer of the terms of any proposal which it may
receive in respect of any such Acquisition Proposal, including the identity
of the prospective purchaser or soliciting party if known; and
(ii) Each Principal Shareholder severally and not jointly further
agrees to use its best efforts as a Principal Shareholder to cause the
Company not to, directly or indirectly, solicit, initiate, seek, or
encourage (including by way of furnishing information or assistance), or
take other action to facilitate, any inquiries or the making of any
proposal which constitutes or may reasonably be expected to lead to, an
Acquisition Proposal.
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(c) Reliance. Each Principal Shareholder understands and acknowledges that
Buyer is entering into the Transaction Documents in reliance upon each Principal
Shareholder's execution and delivery of this Agreement.
(d) Further Assurances. From time to time, at Buyer's reasonable request
and without further consideration, each Principal Shareholder severally and not
jointly agrees that it shall execute and deliver such additional documents and
take all such further lawful action as may be necessary or desirable to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement. Without limitation, each Principal
Shareholder who is a party to any agreement that may conflict with this
Agreement has caused such other agreement to be amended to the extent required
(if any) to permit him or her to enter into and perform this Agreement.
5. Indemnification by Indemnifying Shareholders.
(a) General. From and after the date hereof, but subject to the conditions
and limitations set forth in this Section 5, each Indemnifying Shareholder,
severally and not jointly (except as provided in the definition of "Gary Hall
Group" and "Wayne Hall Group"), shall defend, indemnify and save Buyer, Newco
and their respective shareholders, subsidiaries (including the Company and its
subsidiaries after the Closing) Representatives and other Affiliates
(collectively, the "Buyer Group") harmless from and against any and all claims,
actions, suits, demands, assessments, judgments, damages, losses, liabilities,
costs or expenses (including, without limitation, fines, penalties, punitive
damages and reasonable attorneys' fees) (collectively, "Damages") incurred or
suffered by the Buyer Group resulting from or arising out of (i) any inaccuracy
in any representation or warranty of the Company that is contained in any
Transaction Document (other than Section 3.12(b)(ii) of the Merger Agreement),
(ii) any breach of or failure to perform any covenant or other agreement of the
Company that is contained in any Transaction Document and to be performed prior
to the Closing, (iii) the failure of the Existing Shareholders and holders of
Debt and Affiliate Interests to be acquired by Buyer to perform their
obligations under any Transaction Document to be entered into by them, (iv) the
Employee Royalty Trust, or (v) any 401(k) plan of the Company and its
subsidiaries. The Buyer Group shall be entitled to indemnity for reasonable
litigation expenses included in Damages with respect to litigation against third
parties (including, without limitation, the costs of defense, preparation and
investigation relating to any such litigation), as such expenses are incurred by
the Buyer Group. Notwithstanding the foregoing, no Indemnifying Shareholder
shall have any liability under this Section 5(a) unless the Damages otherwise
compensable under this Section 5(a) exceed $1,000,000. Notwithstanding the
foregoing, except as provided in the succeeding sentence, in no event shall any
Indemnifying Shareholder's aggregate liability under this Section 5 exceed the
value of the Merger Consideration exclusive of any Earnout received by such
Indemnifying Shareholder; provided, that solely for purposes of this Section 5,
each Warrant received by an Indemnifying Shareholder shall be valued at $.75. In
addition to the cash indemnity provided in the previous sentence, Buyer may also
set off any claim under this Section 5 against the Earnout of such Indemnifying
Shareholder when it would be otherwise payable pursuant to the terms of the
Earnout Agreement. The limitation on aggregate liability contained in the two
preceding sentences shall not apply to Damages resulting from or arising out of
clauses (iv) and (v) above. Notwithstanding the foregoing, Bruce R. Sidner shall
have no liability with respect to clauses (iv) and (v) above. Any additional
consideration that certain In-
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demnifying Shareholders may receive in respect of New Company Preferred Stock as
contemplated by Section 5.10 of the Merger Agreement shall be excluded from the
calculations of aggregate liability under this Section 5.
(b) Survival. Each of the representations and warranties contained in
Article III of the Merger Agreement will survive the Closing and remain in full
force and effect until (a) in the case of all representations and warranties
contained in Sections 3.1, 3.2, 3.3, 3.5, 3.8, 3.15 and 3.20 of the Merger
Agreement and Sections 6(a)-(c) of this Agreement, three years following the
Effective Date, and (b) in the case of all other representations and warranties,
eighteen months following the Effective Date, at which respective times such
representations and warranties shall expire. The covenants and agreements
contained herein shall survive the Closing and remain in effect in accordance
with their terms.
(c) Defense of Claims. (i) Promptly, but in any event not later than twenty
calendar days after receipt by any member of the Buyer Group (in any such case,
the "Beneficiary"), of notice of any claim or potential claim or the
commencement of any Action by any Person that is not a party to this Agreement
or a member of the Buyer Group (a "Third Party Claim"), which could give rise to
a right to indemnification pursuant to Section 5(a), the Beneficiary shall give
the party who may become obligated to provide indemnification hereunder (the
"Indemnitor") written notice describing the Third Party Claim in reasonable
detail.
(ii) Any claim by a Beneficiary on account of Damages that does not result
from a Third Party Claim (a "Direct Claim") shall be asserted by giving the
Indemnitor reasonably prompt written notice thereof, but in any event not later
than 45 calendar days after the Beneficiary becomes aware of such Direct Claim.
The remedies available to the Beneficiary for any Direct Claim shall remain
subject to the applicable terms and provisions of this Section 5 (including,
without limitation, Section 5(b) hereof).
(iii) A failure to give timely notice or to include any specified
information in any notice as provided in Section 5(c)(i) or (ii) hereof will not
affect the rights or obligations of any party hereunder except and only to the
extent that, as a result of such failure, any party which was entitled to
receive such notice was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise damaged as a result of such
failure.
(d) Subrogation. Upon making any payment pursuant to Section 5(a), the
Indemnitor shall, to the extent of such payment, be subrogated to all rights of
the Beneficiary against any third party that is not an Affiliate of the
Beneficiary in respect of the Damages to which the payment relates; provided,
however, that (i) the Indemnitor shall then be in material compliance with its
obligations under this Agreement in respect of such Damages and (ii) until the
Beneficiary recovers full payment of its Damages, any and all claims of the
Indemnitor against any such third party on account of such payment will be
subordinated in right of payment to the Beneficiary's rights against such third
party, and the Indemnitor shall postpone any of its remedies against any such
third party with respect to such payment. Without limiting the generality or
effect of any other provision hereof, each such
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Beneficiary and Indemnitor shall duly execute upon request all instruments
reasonably necessary to evidence and perfect the above-described subrogation and
subordination rights.
6. Representations and Warranties of Principal Shareholders. Each Principal
Shareholder hereby severally and not jointly (and solely with respect to itself
and the Subject Instruments by such Principal Shareholder) represents and
warrants to Buyer as follows:
(a) Ownership of Subject Instruments. Such Principal Shareholder is
the owner of record of the Subject Instruments set forth on Exhibit A
hereto (with respect to the Affiliate Interests to be acquired by Buyer, as
set forth in the Transaction Documents covering such Affiliate Interests).
On the date hereof, the Subject Instruments referred to in the preceding
sentence constitute all of the Subject Instruments owned by such Principal
Shareholder and its Affiliates. With respect to the number of Shares and
Debt set forth opposite such Principal Shareholder's name on Exhibit A
hereto, and with the exceptions noted thereon, such Principal Shareholder
has sole voting power and sole power to issue instructions with respect to
the matters set forth in Sections 2 and 4 hereof, sole power of
disposition, sole power of conversion, sole power to demand appraisal
rights and sole power to agree to all of the matters set forth in this
Agreement, in each case with respect to all of the Shares and Debt with no
limitations, qualifications or restrictions on such rights, subject to
applicable securities laws and the terms of this Agreement. With respect to
the Affiliate Interests to be acquired by Buyer owned by such Principal
Shareholder, except as provided in the Transaction Document covering the
relevant Affiliate Interests, such Principal Shareholder has sole power of
disposition, free and clear of any preferential rights or other
restrictions on alienation, with no limitations, qualifications or
restrictions on such rights, subject to the terms of this Agreement.
(b) Due Authorization; Binding Agreement. Such Principal Shareholder
is, as applicable, duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, and has all requisite
capacity, power and authority to execute and deliver this Agreement and
perform its obligations hereunder. The execution and delivery by such
Principal Shareholder of this Agreement and the performance by such
Principal Shareholder of its obligations hereunder have been duly and
validly authorized by such Principal Shareholder and no other proceedings
on the part of such Principal Shareholder are necessary to authorize the
execution, delivery or performance of this Agreement or the consummation of
the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by such Principal Shareholder and
constitutes a valid and binding agreement enforceable against such
Principal Shareholder in accordance with its terms except to the extent (i)
such enforcement may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors rights and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(c) No Conflicts. Except for filings, authorizations, consents and
approvals contemplated by the Transaction Documents and necessary for the
consummation of the transactions contemplated hereby and thereby, (i) no
filing with, and no permit, authorization,
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consent or approval of, any state or federal public body or authority is
necessary for the execution and delivery of this Agreement by such
Principal Shareholder, the consummation by such Principal Shareholder of
the transactions contemplated hereby and the compliance by such Principal
Shareholder with the provisions hereof and (ii) none of the execution and
delivery of this Agreement by such Principal Shareholder, the consummation
by such Principal Shareholder of the transactions contemplated hereby or
compliance by such Principal Shareholder with any of the provisions hereof
shall (A) conflict with or result in any breach of the organizational
documents of such Principal Shareholder, (B) result in a violation or
breach of, or constitute (with or without notice or lapse of time or both)
a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the
terms, conditions or provisions of any note, loan agreement, bond,
mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind,
including, without limitation, any voting agreement, proxy arrangement,
pledge agreement, shareholders agreement or voting trust, to which such
Principal Shareholder is a party or by which such Principal Shareholder or
any of its properties or assets may be bound, or (C) violate any order,
writ, injunction, decree, judgment, statute, rule or regulation applicable
to such Principal Shareholder or any of its properties or assets.
(d) No Encumbrances. (i) Except as set forth on Exhibit A, the Shares
and Debt and the certificates representing such Shares and Debt are now,
and at all times during the term hereof, will be, held and (ii) except as
set forth in the Transaction Documents, the Affiliate Interests to be
acquired by Buyer are now, and at all times during the term hereof, will
be, owned, in each case, by such Principal Shareholder or any Permitted
Transferee, or by a nominee, custodian or trust for the benefit of such
Principal Shareholder or any Permitted Transferee, free and clear of all
liens, claims, security interests, proxies, voting trusts or agreements,
understandings or arrangements or any other encumbrances whatsoever, except
for any such arising hereunder.
(e) No Finder's Fees. No broker, investment banker, financial advisor
or other person is entitled to any broker's, finder's, financial advisor's
or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Principal Shareholder.
7. Representations and Warranties of Buyer. Buyer makes to and for the
benefit of to the Principal Shareholders each of the representations and
warranties set forth in Article IV of the Merger Agreement.
8. Stop Transfer. Each Principal Shareholder severally and not jointly
agrees with, and covenants to, Buyer that such Principal Shareholder shall not
request that the Company register the transfer (by book-entry or otherwise) of
any certificate or uncertificated interest representing any of the Shares unless
such transfer is in compliance with this Agreement.
9. Termination. This Agreement shall terminate upon the earlier of (i) the
Effective Date, or (ii) the termination of the Merger Agreement in accordance
with its terms prior to the Closing
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Date; provided that the provisions of Sections 5 and 10 shall survive any
termination of this Agreement, and provided further that no such termination
shall relieve any party of liability for a breach hereof prior to termination.
10. Confidentiality and Public Announcements. The parties recognize that
successful consummation of the transactions contemplated by this Agreement may
be dependent upon confidentiality with respect to the matters referred to
herein. In this connection, pending public disclosure thereof, each of the
parties hereto severally and not jointly agrees not to disclose or discuss such
matters with anyone not a party to this Agreement (other than its counsel,
advisors, corporate parents and Affiliates) without the prior written consent of
the other parties hereto, except for filings required pursuant to the Exchange
Act and the rules and regulations thereunder or disclosures its counsel advises
are necessary in order to fulfill its obligations imposed by law or the
requirements of any securities exchange. At all times during the term of this
Agreement, the parties hereto will consult with each other before issuing or
making any reports, statements or releases to the public with respect to this
Agreement or the transactions contemplated hereby and will use good faith
efforts to agree on the text of public reports, statements or releases.
11. Voting Agreement. Buyer agrees that it shall vote (or cause to be
voted) all shares of Company Capital Stock with respect to which Buyer has
voting power, if any, in favor of the Merger, the execution and delivery of the
Transaction Documents and the approval and adoption of the terms thereof and
each of the other Transactions and any action required in furtherance thereof.
12. General Provisions.
(a) Nonsurvival of Representations, Warranties and Agreements. Except as
otherwise provided in Section 5, all of the representations, warranties,
covenants and agreements in this Agreement shall survive for eighteen months
following the Effective Date.
(b) Expenses. Whether or not the transactions contemplated hereby are
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses, except as otherwise specifically noted herein or in the Merger
Agreement.
(c) Notices. All notices, requests, demands and other communications which
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given when received if personally delivered; when
transmitted if transmitted by telecopy, electronic or digital transmission
method; the day after it is sent, if sent for next day delivery to a domestic
address by recognized overnight delivery service (e.g., Federal Express); and
upon receipt, if sent by certified or registered mail, return receipt requested.
In each case notice shall be sent to:
(i) if to Buyer, to:
Energy Partners, Ltd.
201ST. Charles Avenue, Suite 3400
New Orleans, LA. 70170
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Attention: General Counsel
Telecopy No.: (504) 569-1874
with copies to:
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Attention: John Schuster, Esq.
Telecopy No.: (212) 269-5420
(ii) if to the Principal Shareholders, to the respective addresses
provided to Buyer from time to time.
(d) Interpretation. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of this Agreement unless otherwise
indicated. Headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the word "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". This Agreement shall not be construed for or against either party
by reason of the authorship or alleged authorship of any provision hereof or by
reason of the status of the respective parties. All terms defined in this
Agreement in the singular shall have comparable meanings when used in the
plural, and vice versa, unless otherwise specified.
(e) Entire Agreement; No Third-Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and, except third-party benefits conferred upon the Buyer
Group under Section 5, is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
(f) Assignment. Except in connection with Permitted Transfers or as
permitted in Section 3(a), neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned (whether by operation of
law or otherwise) by any Principal Shareholder without the consent of Buyer, or
by Buyer without the consent of the Principal Shareholders holding 66% of the
Shares subject to this Agreement. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
(g) Governing Law. This Agreement shall be construed, interpreted and the
rights of the parties determined exclusively in accordance with the laws of the
State of Delaware (without reference to the choice of law provisions), except
with respect to matters of law concerning the internal corporate affairs of any
corporate entity which is a party to or the subject of this Agreement, and as to
those matters the law of the jurisdiction under which the respective entity
derives its powers shall govern.
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(h) Severability. Each party agrees that, should any court or other
competent authority hold any provision of this Agreement or part hereof to be
null, void or unenforceable, or order any party to take any action inconsistent
herewith or not to take an action consistent herewith or required hereby, the
validity, legality and enforceability of the remaining provisions and
obligations contained or set forth herein shall not in any way be affected or
impaired thereby. Upon any such holding that any provision of this Agreement is
null, void or unenforceable, the parties will negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
by this Agreement are consummated to the extent possible. Except as otherwise
contemplated by this Agreement, to the extent that a party hereto took an action
inconsistent herewith or failed to take action consistent herewith or required
hereby pursuant to an order or judgment of a court or other competent authority,
such party shall incur no liability or obligation unless such party did not in
good faith seek to resist or object to the imposition or entering of such order
or judgment.
(i) Injunctive Relief. The parties acknowledge that it will be impossible
to measure in money the damages that would be suffered if the parties fail to
comply with any of the obligations herein imposed on them and that in the event
of any such failure, an aggrieved person or entity will be irreparably damaged
and will not have an adequate remedy at law. Any such person or entity shall,
therefore, be entitled to injunctive relief, including specific performance, to
enforce such obligations, and if any action should be brought in equity to
enforce any of the provisions of this Agreement, none of the parties shall raise
the defense that there is an adequate remedy at law.
(j) Attorneys' Fees. If any party to this Agreement brings an action to
enforce its rights under this Agreement, the prevailing party shall be entitled
to recover its costs and expenses, including without limitation reasonable
attorneys' fees, incurred in connection with such action, including any appeal
of such action.
(k) Cumulative Remedies. All rights and remedies of either party hereto are
cumulative of each other and of every other right or remedy such party may
otherwise have at law or in equity, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
(l) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same instrument and
shall become effective when executed and delivered by each of the parties.
(m) Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the parties hereto.
(n) Binding Agreement. Each Principal Shareholder agrees that this
Agreement and the obligations hereunder shall attach to the Shares and shall be
binding upon any person or entity to which ownership of such shares shall pass,
whether by operation of law or otherwise, including, without limitation, such
Principal Shareholder's heirs, distributees, guardians, administrators,
executors,
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legal representatives, or successors or other transferees (for value or
otherwise) and any other successors in interest. Notwithstanding any transfer of
Shares, the transferor shall remain liable for the performance of all
obligations under this Agreement of the transferor.
(o) Obligations of the Principal Shareholders. The liabilities and
obligations of each Principal Shareholder under any provision of this Agreement
are several and not joint and apply solely to such Principal Shareholder and to
the Shares held of record by such Principal Shareholder. No Principal
Shareholder shall have any liability or obligation under this Agreement for any
act, omission or breach by any other Principal Shareholder.
(p) Service of Process. Each of the parties hereto irrevocably consents to
the service of any process, pleading, notices or other papers by the mailing of
copies thereof by registered, certified or first class mail, postage prepaid, to
such party at such party's address as provided in accordance with Section 12(c)
hereof, or by any other method provided or permitted under Louisiana law.
(q) Consent and Jurisdiction. Each party irrevocably and unconditionally
agrees and consents that any suit, action or other legal proceeding arising out
of or related to this Agreement shall be brought and heard exclusively in U.S.
Federal Courts sitting in the Eastern District of Louisiana and each party
irrevocably consents to personal jurisdiction in any and all such tribunals.
[Signature Pages Follow]
IN WITNESS WHEREOF, the parties have executed this Principal Shareholders
Agreement as of the date first written above.
ENERGY PARTNERS, LTD.
By:
---------------------------------------
Name:
Title:
PRINCIPAL SHAREHOLDER AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Principal Shareholders
Agreement as of the date first written above.
By: _____________________________
Name:
Title:
PRINCIPAL SHAREHOLDERS
---------------------------------
Name: John H. Peper
---------------------------------
Name: W.P. Dillard
Otto Candies, LLC,
By: _____________________________
Name:
Candies Family Investments, LLC
By: _____________________________
Name:
----------------------------
Name: Ollabelle D. Hall
Hall Equities, Inc.
By: ____________________________
Name:
Hall Family Trust
By: ____________________________
Name:
Hall Partners, L.P.
By: ____________________________
Name:
----------------------------
Name: Patrick R. Hall
----------------------------
Name: Preston R. Hall
----------------------------
Name: Valerie A. Hall
PRINCIPAL AND INDEMNIFYING SHAREHOLDERS
By: ____________________________
Name: Gary L. Hall
Houston Explorer Group L.P.
By: ___________________________
Name:
----------------------------
Name: Wayne P. Hall
Hall SouthWest Business Ventures, L.P
By: ____________________________
Name:
----------------------------
Name: Bruce R. Sidner
Exhibit A
to Principal Shareholders Agreement
NUMBER OF SHARES AGGREGATE
COMPANY COMMON COMPANY PREFERRED PRINCIPAL AMOUNT OF
STOCK STOCK REFINANCED DEBT
NAME AND ADDRESS FOR NOTICE
- -------------------------------------------------------------------------------------------------------------------------
Gary L. Hall and Ollabelle D. Hall 0 0 $416,535
Gary L. Hall 0 23,439 0
Houston Explorer Group, L.P. 2,222,842 0 268,382
Wayne P. Hall 196,936 11,409* 102,000
Hall SouthWest Business Ventures, L.P. 200,000 752 0
Ollabelle D. Hall 73,093
Hall Equities, Inc. 664,632
Hall Family Trust 701,178
Hall Partners L.P. 1,139,629
Patrick R. Hall 221,246
Preston R. Hall 221,246
Valerie A. Hall 102,000
John H. Peper 0 1,177** 204,000
W.P. Dillard 0 3,780 1,360,787
Bruce R. Sidner 396,936 5,568*** 296,305
Otto Candies, LLC 0 71,265 0
Candies Family Investments, LLC 0 0 24,603,715
- -------------------------------------------------------------------------------------------------------------------------
Total 3,016,714 117,390 $30,374,748
========= ======= ===========
* Does not include 1,003 shares held in 401K.
** Does not include 847 shares held in 401K.
*** Does not include 2,723 shares held in 401K
Exhibit I
to Merger Agreement
[BUYER REGISTRATION RIGHTS AGREEMENT]
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of December
16, 2001, is made and entered into by and among Energy Partners, Ltd., a
Delaware corporation (the "Company"), and Hall-Houston Oil Company ("HHOC"), for
the benefit of holders (collectively, together with their assigns, the
"Holders") of the Common Stock (as defined herein), the Preferred Stock (as
defined herein) and the Warrants (as defined herein) being issued by the Company
as contemplated by the agreement and plan of merger dated as of the date hereof
by and among the Company, HHOC and Saints Acquisition Subsidiary, Inc. (the
"Merger Agreement").
NOW, THEREFORE, in consideration of the mutual premises, agreements and
covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
Definitions
For purposes of this Agreement, the following terms shall have the
following respective meanings (each such meaning to be equally applicable to the
singular and plural forms thereof):
"Agreement" has the meaning assigned such term in the preamble hereto.
"Closing" has the meaning assigned such term in the Merger Agreement.
"Commission" means the Securities and Exchange Commission, and any other
similar or successor agency of the federal government at the time administering
the Securities Act or the Securities Exchange Act.
"Common Stock" means the Company's Common Stock, par value $0.01 per share,
and any stock into which such Common Stock may hereafter be changed or for which
such Common Stock may be exchanged after giving effect to the terms of such
change or exchange (by way of reorganization, recapitalization, merger,
consolidation or otherwise).
"Company" has the meaning assigned such term in the preamble hereto.
"HHOC" has the meaning assigned such term in the preamble hereto.
"Holders" has the meaning assigned such term in the preamble hereto.
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"Holder of Registrable Securities" means a person who owns Registrable
Securities or has the right to acquire Registrable Securities, whether or not
such acquisition has actually been effected and disregarding any legal
restrictions upon the exercise of such right.
"Merger Agreement" has the meaning assigned such term in the preamble
hereto.
"Nasdaq" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"Person" has the meaning set forth in Section 2.5.
"Preferred Stock" means the Series D Exchangeable Convertible Preferred
Stock issued by the Company to certain of the Holders on the date of the
Closing.
"Prospectus" means the prospectus included in the Shelf Registration
Statement, as amended or supplemented, registering for sale the Registrable
Securities and all other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference in such
Prospectus.
"Registrable Securities" means any Common Stock, including without
limitation Common Stock which has been or may be acquired upon the conversion of
the Preferred Stock or exercise of the Warrants in accordance with their
respective terms; provided that the securities held by any Holder shall cease to
be Registrable Securities upon the earlier of (i) the date such securities have
been sold or otherwise transferred and the securities received by the transferee
do not contain any legend restricting further transfers and (ii) the date the
Company determines that such Holder may transfer all securities covered by this
Agreement held by such Holder without regard to the volume restrictions of Rule
144.
"Rule 144" means Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Shelf Registration Statement" means the registration statement of the
Company which registers for sale the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to the Shelf Registration Statement, including post-effective
amendments, all exhibits and all material incorporated by reference in the Shelf
Registration Statement.
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"Warrants" means the 4,000,000 warrants expiring in 2007 being issued to
certain of the Holders.
ARTICLE II
Registration Rights
SECTION 2.1. (a) Shelf Registration. As soon as practicable following the
Closing, the Company will file the Shelf Registration Statement relating to the
Registrable Securities pursuant to Rule 415 under the Securities Act. The
Company agrees to use reasonable efforts to keep effective the Shelf
Registration Statement until all Registrable Securities cease to be such;
provided that in no event shall the Company's obligation extend more than two
years after the date of the Closing.
(b) Shelf Registration Statement Form. The registration under this Section
2.1 shall be on such appropriate registration form of the Commission as shall be
selected by the Company. The Company shall include in the Shelf Registration
Statement all information which, in the opinion of counsel to the Company, is
required to be included therein.
(c) Suspension. The Company may delay, suspend or withdraw the registration
of the Registrable Securities required pursuant to this Section 2.1 or the
preparation or furnishing of a supplemental or amended prospectus pursuant to
Section 2.2(g) for a period or periods not exceeding 120 days in the aggregate
in any twelve month period if the Company shall in good faith determine that
such registration would require the Company to include disclosure that would
reasonably be expected to have a detrimental effect on any proposal,
negotiations or plan by the Company or any of its subsidiaries to engage in any
acquisition or disposition of assets or any merger, consolidation, tender offer,
reorganization or similar transaction, or any other material corporate event
contemplated by the Company.
SECTION 2.2. Registration Procedures. In connection with the registration
of Registrable Securities, the Company shall effect the registration to permit
the sale of such Registrable Securities in accordance with the intended method
or methods of disposition thereof (provided that each such seller agrees hereby
that no such sale or other disposition shall be pursuant to an underwritten
offering), and pursuant thereto the Company shall as soon as practicable:
(a) prepare and file with the Commission the Shelf Registration
Statement with respect to such securities and use reasonable efforts to
cause the Shelf Registration Statement to become effective and remain
effective as provided herein;
(b) prepare and file with the Commission such amendments and
post-effective amendments to the Shelf Registration Statement as may be
necessary and use reasonable efforts to keep the Shelf Registration
Statement continuously effective; cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 (or any similar provisions then in force)
under the Securities Act; and comply with the provisions of the Securities
Act, the Securities Exchange Act and
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the rules and regulations of the Commission promulgated thereunder
applicable to it with respect to the disposition of all securities covered
by the Shelf Registration Statement as so amended or in such Prospectus as
so supplemented;
(c) notify the Holders of Registrable Securities promptly, and confirm
such notice in writing, (i) when a Prospectus or any Prospectus supplement
or amendment has been filed, and, with respect to the Shelf Registration
Statement or any amendment thereto, when the same has become effective,
(ii) of the issuance (or, to the Company's knowledge, the threat or
contemplation) by the Commission of any stop order suspending the
effectiveness of the Shelf Registration Statement or of any order
preventing or suspending the use of any prospectus or the initiation of any
proceedings for that purpose and (iii) of the receipt by the Company of any
notification with respect to the suspension of the qualification or
exemption from qualification of the Shelf Registration Statement or the
Registrable Securities for offer or sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose;
(d) use reasonable efforts to prevent the issuance of any order
suspending the effectiveness of the Shelf Registration Statement or of any
order preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of the Registrable
Securities for sale in any jurisdiction, and, if any such order is issued,
to obtain the withdrawal of any such order as soon as practicable;
(e) furnish to each seller and to each duly authorized broker of each
seller such number of authorized copies of a Prospectus in conformity with
the requirements of the Securities Act, and such other customary documents
as such seller or broker may reasonably request in order to facilitate the
public sale or other disposition of the Registrable Securities owned by
such seller;
(f) use reasonable efforts to register or qualify (and to keep each
such registration and qualification effective, including through new
filings, renewals or amendments, during the period the Shelf Registration
Statement is required to be kept effective) the securities covered by the
Shelf Registration Statement under such securities or blue sky laws of such
jurisdictions as each seller shall reasonably request, and do any and all
other reasonable acts and things which may be necessary under such
securities or blue sky laws to enable such seller to consummate the public
sale or other disposition in such jurisdictions of the Registrable
Securities to be sold by such seller, except that the Company shall not for
any such purpose be required to qualify to do business as a foreign
corporation, or to consent to the jurisdiction of any court or subject
itself to suit in any jurisdiction wherein it is not qualified;
(g) notify each seller of Registrable Securities covered by the Shelf
Registration Statement, at any time when a Prospectus relating thereto is
required to be delivered under the Securities Act, of the Company's
becoming aware that the Prospectus included in the Shelf Registration
Statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and, at the written request of
any such seller, promptly prepare and furnish to such seller a
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reasonable number of copies of a Prospectus supplemented or amended
(whereupon all previous versions of the Prospectus shall not be used by
such seller and shall be promptly returned to the Company or destroyed) so
that, as thereafter delivered to the purchasers of such Registrable
Securities, such Prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(h) use reasonable efforts to cause all such Registrable Securities
covered by the Shelf Registration Statement to be listed or quoted on the
principal securities exchange (including Nasdaq) on which similar
securities issued by the Company are then listed or quoted; and
(i) cooperate with the selling Holders of Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall not bear any
restrictive legends.
The Company may require as a condition precedent to the Company's
obligations under this Section 2.2 that each Holder of Registrable Securities as
to which registration is being effected furnish the Company information
regarding such Holder and the distribution of such securities as the Company may
from time to time reasonably request.
SECTION 2.3. Expenses. All expenses incurred in effecting the registration
provided for in this Article II, including without limitation all registration
and filing fees, printing expenses, fees and disbursements of counsel for the
Company and expenses of complying with the securities or blue sky laws of any
jurisdictions pursuant to Subsection 2.2(f), transfer taxes, fees of transfer
agents and registrars, costs of insurance, duplicating fees, delivery expenses
and expenses incurred with the listing of the securities on any securities
exchange, shall be paid by the Company; provided that, for avoidance of doubt,
the selling Holders shall be liable for broker's commissions and other expenses
incurred by the selling Holders.
SECTION 2.4. Rule 144. The Company shall use reasonable efforts to file the
reports required to be filed by it under the Securities Act and the Securities
Exchange Act and the rules and regulations promulgated thereunder (or, if the
Company is not required to file such reports, it will, upon the written request
of any Holder of Registrable Securities as soon as practicable, make publicly
available other information so long as such information is necessary to permit
sales under Rule 144), and will take such further actions as any Holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemption
provided by Rule 144. Upon the request of any Holder of Registrable Securities,
the Company shall deliver to such Holder a written statement as to whether it
has complied with such requirements.
SECTION 2.5. Indemnification. (a) In the event of registration of
Registrable Securities under the Securities Act pursuant to this Agreement, the
Company will, and hereby does, indemnify and hold harmless, to the fullest
extent permitted by law, the seller of such Registrable Securities covered by
the Shelf Registration Statement, its directors and officers or general and
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limited partners (and the directors and officers thereof) (each, a "Person"),
and each other Person, if any, who controls such seller within the meaning of
the Securities Act, against any and all losses, claims, damages or liabilities,
joint or several, and expenses (including fees of counsel and any amounts paid
in any settlement approved by the Company (which such approval shall not be
unreasonably withheld or delayed)) to which such seller may become subject under
the Securities Act, common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof), or expenses arise out of or are based upon (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Shelf Registration Statement under which such securities were registered
under the Securities Act or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (ii) any untrue statement or alleged untrue statement
of a material fact contained in any Prospectus (together with the documents
incorporated by reference or filed with the Commission) and any amendment
thereof or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that the Company shall not be liable to any
such seller in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding, whether commenced or threatened, in respect
thereof) or expense arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in the Shelf
Registration Statement or amendment thereof or supplement thereto or in any such
Prospectus in reliance upon and in conformity with information furnished to the
Company in writing by or on behalf of any such seller expressly for use in the
preparation thereof.
(b) The Company, as a condition to including Registrable Securities in the
Shelf Registration Statement filed in accordance with this Agreement, shall have
received an undertaking reasonably satisfactory to it from the prospective
seller of such Registrable Securities to indemnify and hold harmless (in the
same manner and to the same extent as set forth in paragraph (a) of this Section
2.5) the Company and its directors and officers and all other prospective
sellers and their directors, officers, general and limited partners and
respective controlling Persons (within the meaning of the Securities Act) with
respect to any statement or alleged statement in or omission or alleged omission
from the Shelf Registration Statement, any Prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or information has been furnished in writing to the Company or its
representative by or on behalf of such seller expressly for use in the
preparation of the Shelf Registration Statement or such Prospectus, amendment or
supplement; provided, however, that the aggregate amount which any such seller
or prospective seller shall be required to pay pursuant to such undertaking
shall be limited to the amount of the net proceeds received by such Person upon
the sale of the Registrable Securities pursuant to the Shelf Registration
Statement giving rise to such claim. Such indemnity shall remain in full force
and effect following the transfer of such securities by such seller.
(c) As soon as possible after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding with respect to
which a claim for indemnification may be made pursuant to this Section 2.5 such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; provided that the failure of any indemnified party to give notice
as pro-
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vided herein shall not relieve the indemnifying party of its obligations under
the preceding paragraphs of this Section 2.5, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to such indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this
Section 2.5 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof unless the indemnifying
party has failed to assume the defense of such claim or to employ counsel
reasonably satisfactory to such indemnified party. No indemnifying party will
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimants or
plaintiffs to such indemnified party of an unconditional release from all
liability in respect to such claim or litigation. No indemnifying party will be
liable for any settlement effected without its prior written consent, which
consent will not be unreasonably withheld or delayed.
(d) If the indemnification provided for in this Section 2.5 is unavailable
or insufficient to hold harmless an indemnified party under Section 2.5(a) or
(b), then each indemnifying party shall contribute to the amount paid or payable
by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in Section 2.5(a) or (b) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the indemnified party on the other hand in connection with statements
or omissions which resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the indemnifying party or the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue or alleged untrue
statements or omissions. The parties hereto agree that it would not be just and
equitable if contributions pursuant to this Section 2.5(d) were to be determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the first sentence of
this Section 2.5(d). The amount paid by an indemnified party as a result of the
losses, claims, damages or liabilities referred to in the first sentence of this
Section 2.5(c) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any action or claim (which shall be limited as provided in Section 2.5(d) if the
indemnifying party has assumed the defense of any such action in accordance with
the provisions thereof) which is the subject of this Section 2.5(d). No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. Promptly after receipt by an
indemnified party under this Section 2.5(d) of notice of the commencement of any
action against such party in respect of which a claim for contribution may be
made against an indemnifying party under this Section 2.5(d), such indemnified
party shall notify the indemnifying party in writing of the commencement thereof
if the notice specified in Section 2.5(c) has not been given with respect to
such action; provided that the omission so to notify the indemnifying party
shall not relieve the indemnifying party from any liability which it may have to
any indemnified party otherwise under this Section 2.5(d), except to the extent
that the indemnifying party is actually prejudiced by such failure to give
notice. Notwithstanding
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anything in this Section 2.5(d) to the contrary, no indemnifying party (other
than the Company) shall be required pursuant to this Section 2.5(d) to
contribute any amount in excess of the proceeds received by such indemnifying
party from the sale of Registrable Securities in the offering to which the
losses, claims, damages or liabilities of the indemnified parties relate.
ARTICLE III
Miscellaneous
SECTION 3.1. Notices. All notices, requests, consents or other
communications hereunder shall be in writing and shall be deemed to have been
duly given or delivered (a) when received if delivered by hand or telecopy, (b)
within one day after being sent by recognized overnight delivery service, or (c)
within three business days after being mailed by first-class mail, postage
prepaid, and in each case addressed as follows:
(i) if to any Holder, at the address provided by such Holder to the
Company:
(ii) if to the Company, to:
Energy Partners, Ltd.
201 St. Charles Avenue, Suite 3400
New Orleans, Louisiana 70170
Telecopy No.: (504) 569-1874
Attention: General Counsel
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Telecopy No.: (212) 269-5420
Attention: John Schuster, Esq.
SECTION 3.2. Amendment. This Agreement may be amended or modified only by
an instrument in writing duly executed by the parties to this Agreement;
provided that following the Closing (as defined in the Merger Agreement), this
Agreement may be amended or modified with the consent of the Company and the
Holders of a majority of the Registrable Securities then outstanding.
SECTION 3.3. Waivers. Any waiver by the Company, HHOC or of any Holder of
Registrable Securities of any breach of or failure to comply with any provision
of this Agreement by any other party hereto shall be in writing and shall not be
construed as, or constitute, a continuing waiver of such provision, or a waiver
of any other breach of, or failure to comply with, any other
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provision of this Agreement; provided that following the Closing (as defined in
the Merger Agreement), this Agreement may be waived with the consent of the
Company and the Holders of a majority of the Registrable Securities then
outstanding.
SECTION 3.4. Governing Law. This Agreement shall be construed and enforced
in accordance with and governed by the internal substantive laws of the State of
Delaware without giving effect to the principles of conflicts of laws thereof.
SECTION 3.5. Assignment. The obligations of the Company under this
Agreement shall inure to the benefit of, and be enforceable by, the initial
Holders and their successors and permitted assigns without any further action on
the part of any party hereto.
SECTION 3.6. Severability. In case any one or more of the provisions
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby. The
parties shall endeavor in good faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid, legal and enforceable provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 3.7. Construction. The headings of the Articles and Sections of
this Agreement are inserted for convenience of reference only and shall not be
used in interpreting this Agreement. Unless specifically stated otherwise,
references to Articles and Sections refer to the Articles and Sections of this
Agreement.
SECTION 3.8. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute a single instrument.
SECTION 3.9. Complete Agreement. This Agreement sets forth the entire
understanding of the parties to this Agreement with respect to the subject
matter hereof and supersedes all prior agreements, covenants, arrangements,
communications, representations or warranties, whether oral or written, by
either party or any representatives of either party.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as
of the date first set forth above.
ENERGY PARTNERS, LTD.
By:
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Name:
Title:
S-2
HALL-HOUSTON OIL COMPANY:
By:
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Name:
Title: