EXHIBIT 2.2
SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER
THIS SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER (the "Second
Amendment") is made and entered into effective as the 2nd day of February, 2000,
by and among 3TEC Energy Corporation, a Delaware corporation ("3TEC" or the
"Company"), 3TM Acquisition L.L.C., a Delaware limited liability company
("Sub"), Magellan Exploration, LLC, a Delaware limited liability company
("Magellan"), ECIC Corporation ("ECIC"), EnCap Energy Capital Fund III, L.P.
("Fund III"), EnCap Energy Acquisition III-B, Inc. ("Acquisition III-B"), BOCP
Energy Partners, L.P. ("BOCP") and Pel-Tex Partners, L.L.C. ("Pel-Tex").
WHEREAS, the parties hereto entered into a certain Agreement and Plan of
Merger dated December 21, 1999 ("Original Agreement");
WHEREAS, such Agreement and Plan of Merger was amended by a certain letter
amendment dated January 14, 2000;
WHEREAS, in the course of conducting its due diligence, 3TEC has identified
several issues which it desires to be resolved;
WHEREAS, on January 14, 2000, 3TEC filed a certificate of amendment to its
certificate of incorporation whereby a one-for-three reverse stock split of the
Company's issued and outstanding shares of common stock, $.02 par value was
effected; and
WHEREAS, the parties hereto wish to further amend the Original Agreement.
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. TERMS DEFINED IN ORIGINAL AGREEMENT. Except as otherwise defined in
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this Second Amendment, terms defined in the Original Agreement and used herein
shall have the meaning assigned to them in the Original Agreement.
2. SECTION 1.1. The definition of each of the following terms defined
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in Section 1.1 shall be deleted and replaced with the following:
"Common Stock Shares" means the 1,085,934 shares of Common Stock to be
issued to the Prepayout Members pursuant to this Agreement.
"Current Warrant Exercise Price" has the meaning given said term in Section
4.1(b).
"Preferred Stock" means 3TEC Series D Convertible preferred stock, par
value $0.02 per share, with a stated value of $24.00 per share having the rights
and preferences set forth in the Series D Stock Designation.
"Warrant Exercise Price" means $30.00 per share (subject to adjustment as
provided in Section 4.2).
3. SECTION 2.7. Section 2.7 will be deleted and replaced with the
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following:
"SECTION 2.7. Conversion of Securities. Subject to the terms and
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conditions of this Agreement, at the Effective Time, by virtue of the Merger and
without any action on the part of 3TEC, Sub, Magellan or any holder of the
following securities:
(a) the Prepayout Interests issued and outstanding immediately prior to
the Effective Time shall be converted into the right to receive (i) 1,085,934
shares of Common Stock, (ii) 617,008 shares of Preferred Stock and (iii) the
Back-In Working Interest;
(b) the Postpayout Interests issued and outstanding immediately prior
to the Effective Time shall be converted into the right to receive warrants to
purchase 333,333 shares of Common Stock, which warrants shall be issued under
the terms hereof; and
(c) each issued and outstanding membership interest of Sub shall be
converted into and become one fully paid and nonassessable membership interest
of the Surviving Company."
4. SECTION 4.1. Section 4.1(b) will be deleted and replaced with the
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following:
"(b) The Warrants shall be exercised by presentation of the Warrant
Certificate evidencing the Warrants to be exercised, with the form of election
to purchase on the reverse thereof duly completed and signed, to the Company at
the offices of the Company as set forth on the signature page of this Agreement,
together with payment of the aggregate Warrant Exercise Price for the number of
Warrant Shares in respect of which such Warrants are being exercised in lawful
money of the United States of America. The Warrants may also be exercised in a
"cashless" or "net-issue" exercise by delivery to the offices of the Company of
(A) a written notice of election to exercise Warrants, duly executed by the
Warrant Holder in the form set forth on the reverse of, or attached to, such
Warrant Certificate, which notice shall specify the number of Warrant Shares to
be delivered to the Warrant Holder and the number of Warrant Shares with respect
to which such Warrants are being surrendered in payment of the aggregate Warrant
Exercise Price for the Warrant Shares to be delivered to the Warrant Holder, and
(B) the Warrant Certificate evidencing such Warrants. For purposes of this
subparagraph (b), each Warrant Share as to which such Warrants are surrendered
in payment of the aggregate Warrant Exercise Price will be attributed a value
equal to (x) the Current Warrant Exercise Market Price per share of Common Stock
minus (y) the then-current Warrant Exercise Price. As used herein, the term
"Current Warrant Exercise Market Price" shall mean the average of the last
reported sales prices for the Common Stock for the ten (10) consecutive Trading
Days ending on the second Trading Day prior to presentation of the Warrants to
the Company.
"Upon such presentation, the Company shall issue and cause to be delivered
to or upon the written order of the registered Holder of such Warrants and in
such name or names as such registered Holder may designate, a certificate or
certificates for the aggregate number of Warrant Shares issued upon such
exercise of such Warrants. Any Person so designated to be named therein shall
be deemed to have become holder of record of such Warrant Shares as of the date
of exercise of such Warrants; provided, that, no Warrant Holder will be
permitted to designate that such Warrant Shares be issued to any Person other
than such Warrant Holder unless each condition to transfer contained in Article
V hereof which would be applicable to a transfer of Warrants or Warrant Shares
has been satisfied."
5. SECTION 4.2.
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(a) SECTION 4.2(a). Section 4.2 (a) will be deleted and replaced with
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the following:
"SECTION 4.2. Adjustment of Number of Warrant Shares Purchasable. The
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number of Warrant Shares purchasable upon the exercise of each Warrant is
subject to adjustment from time to time upon the occurrence of any of the events
enumerated in this Section 4.2.
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(a) In the event that the Company shall at any time after the date of
this Agreement declare a dividend on the Common Stock in shares of its capital
stock (whether shares of such Common Stock or of capital stock of any other
class of the Company), split or subdivide the outstanding Common Stock, or
combine the outstanding Common Stock into a smaller number of shares, the number
of Warrant Shares purchasable upon an exercise of each Warrant after the time of
the record date for such dividend or of the effective date of such split,
subdivision or combination shall be adjusted to equal the number of shares of
Common Stock and other securities which a Holder having the same number of
shares of Common Stock, and other securities, as the number of Warrant Shares
into which each Warrant is exercisable immediately prior to such record date or
effective date, as the case may be, would own or be entitled to receive after
such record date or effective date."
(b) SECTION 4.2(e). The following shall be added as Section 4.2(e):
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"(e) Whenever the number of Warrant Shares into which a Warrant is
exercisable is adjusted as provided in this Section 4.2, the Warrant Price
payable upon exercise of the Warrant shall simultaneously be adjusted by
multiplying such Warrant Price immediately prior to such adjustment by a
fraction, the numerator of which shall be the number of Warrant Shares into
which such Warrant was exercisable immediately prior to such adjustment, and the
denominator of which shall be the number of Warrant Shares into which such
Warrant was exercisable immediately thereafter."
6. SECTION 6.1(a). The following shall be added as subparagraphs (x)
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and (xi) of Section 6.1(a):
"(x) an investor representation letter in form reasonably acceptable
to 3TEC from each party receiving securities of 3TEC pursuant to the Merger;
notwithstanding the foregoing, although all parties hereto will take all
reasonable efforts to obtain such letters, the receipt of such letter from those
parties receiving only Warrants will not be a condition to Closing;
(xi) consents to transfer from the entities identified on Exhibit H
attached hereto."
7. SECTION 8.9. The following shall be added as a new Section 8.9:
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"After Closing but before March 1, 2000, 3TEC shall pay or shall cause the
Surviving Company to pay (i) $175,000 to Wynne M. Snoots, Jr. pursuant to his
employment agreement with Magellan, and (ii) discretionary bonuses totaling
$125,000 to the persons and in the respective amounts identified on Exhibit I
attached hereto."
8. SECTION 12.4. Section 12.4 will be deleted in its entirety and
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replaced with the following:
SECTION 12.4. Indemnification.
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(a) Subject to the terms of this Section 12.4, Prepayout Members
severally (and expressly not jointly and severally) agree to indemnify and hold
harmless, 3TEC, its shareholders and its directors, officers, employees, agents,
successors and assigns (collectively, the "3TEC Indemnified Parties") from and
against any and all liabilities, losses, damages, costs and expenses of any kind
(including, without limitation, reasonable attorneys' fees and disbursements
("Damages") which may be incurred by any 3TEC Indemnified Party relating to or
arising out any breach by Prepayout Members of any of their representations,
warranties, covenants or agreements contained in this Agreement or the other
Transaction Documents ("3TEC Claims").
(b)Subject to the terms of this Section 12.4, the Prepayout Members
severally (and expressly not joint and severally) agree to reimburse 3TEC for
all of its Transaction Costs (as defined below) if (i) any Member of Magellan
(x) exercises the Magellan Preferential Right set forth in Section 9.7(a) of the
Magellan Operating Agreement (i.e., the right to "adjust the Prepayout
Interests" as described in Section 9.6(c) of the Magellan Operating Agreement)
or (y) commences an action or proceeding of the type described in Section
6.1(k), and as a result any party hereto terminates this Agreement pursuant to
Section 11.1 due to the failure of a condition precedent described in Section
6.1(k), Section 6.2(k), or Section 6.2(l), or (ii) Eugene Offshore Holdings, LLC
exercises a preferential right to purchase under Article XV.J of the Joint
Operating Agreement dated March 23, 1994 relating to leases at Breton Sound and
then 3TEC terminates this Agreement pursuant to Section 11.1 as a result.
Subject to the terms of this Section 12.4, the Prepayout Members severally (and
expressly not joint and severally) agree to reimburse 3TEC for one-half of its
Transaction Costs if the Prepayout Members terminate this Agreement pursuant to
Section 11.1 due to the failure of the condition described in Section 6.2(h).
For purposes of this Section, "Transaction Costs" mean all documented and
reasonable out-of-pocket expenses and disbursements incurred by 3TEC in
connection with the Merger Agreement and the investigation and negotiation
hereof, including, without limitation, all fees and expenses of counsel to 3TEC,
engineering costs, accounting and land due diligence costs (including the out-of
- -pocket costs of 3TEC employees performing such work) and costs associated with
the fairness opinion referred to in Section 6.1.
(c) Subject to the terms of this Section 12.4, Prepayout Members
severally (and expressly not jointly and severally) agree to indemnify and hold
harmless the 3TEC Indemnified Parties and, after the Closing, Magellan, from and
against any and all Damages which may be incurred by any 3TEC Indemnified Party
or Magellan relating to or arising out of any actions or proceedings brought by
members of Magellan (other than Prepayout Members) against 3TEC or Magellan
arising out of or in connection with the Merger or the Magellan Preferential
Rights. Notwithstanding any other provisions of this Agreement, the
indemnification obligations under this Section 12.4(c) (i) shall survive the
Closing until the expiration of the applicable statutes of limitations, and (ii)
shall not be subject to Section 12.4(f)(iii).
(d) Subject to the terms of this Section 12.4, Prepayout Members
severally (and expressly not jointly and severally) agree to indemnify and hold
harmless the 3TEC Indemnified Parties and, after the Closing, Magellan, from and
against any and all Damages which may be incurred by any 3TEC Indemnified Party
or Magellan relating to or arising out of the cancellation or the diminution of
value of the Lafourche Basin Levee District's and the West Jefferson Levee
District's leases in the Bay de Chene Field as a result of the judgment or
settlement of Lafourche Basin Levee District and West Jefferson Levee District
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v. Texaco, Inc., et al. Docket No. 76337, Seventeenth Judicial District Court,
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Parish of Lafourche, State of Louisiana. For purposes of this Section 12.4(d),
Damages shall include the value assigned such lease's underlying wells or
prospects as identified on Exhibit J attached hereto and any amounts which 3TEC
or Magellan may hereafter invest in such prospects or any future value created
by 3TEC's or Magellan's drilling and other operating activities associated with
such leases. Notwithstanding any other provisions of this Agreement, the
indemnification obligations under this Section 12.4(d) shall survive until the
above-referenced lawsuit has been dismissed with prejudice or a final
non-appealable judgment has been entered which does not include cancellation or
diminution of value of such leases.
(e) The liability of Prepayout Members under this Section 12.4 shall be
several (and expressly not joint and several), except in the instance of a 3TEC
Claim relating to or out of any breach by a Prepayout Member of a representation
and warranty in Section 7.2, Section 7.3 or Section 7.19 that applies
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specifically to such Prepayout Member (in which event such Prepayout Member, and
no other Prepayout Member, shall have liability). With respect to any
indemnification obligation under this Section 12.4 for which Prepayout Members
have several liability, the several share of each Prepayout Member shall be as
set forth in Exhibit A and in no event shall such Prepayout Member's share of
any such indemnification obligation exceed such several share.
(f) Notwithstanding the foregoing or anything else herein to the
contrary, the indemnification obligation of the Prepayout Members pursuant to
subparagraphs (a) through (e) above of this Section 12.4 shall be subject to the
following:
(i) No indemnification shall be required to be made by Prepayout Members
pursuant to this Section 12.4 with respect to any 3TEC Claims arising out
or resulting from the breach of the representations and warranties set
forth in Article VII (exclusive of the representations set forth in Section
7.18)), except to the extent that the aggregate amount of the Damages
incurred by the 3TEC Indemnified Parties with respect to all such 3TEC
Claims exceeds $100,000.
(ii) No indemnification shall be required to be made by Prepayout Members
pursuant to this Section 12.4 with respect to any 3TEC Claims arising out
or resulting from the breach of the representations and warranties set
forth in Section 7.18, except to the extent that the aggregate amount of
the Damages incurred by the 3TEC Indemnified Parties with respect to all
such 3TEC Claims exceeds $100,000.
(iii) No Prepayout Member shall be obligated to pay the 3TEC Indemnified
Parties pursuant to this Section 12.4 (excluding for this purpose, Section
12.4(c)) an aggregate amount in excess of (x) the amount stipulated for
such Prepayout Member in Exhibit A minus (y) all amounts previously paid by
such Prepayout Member pursuant to Section 12.4(c). The deduction described
in the preceding sentence relating to amounts paid pursuant to Section
12.4(c) shall not be construed to require any 3TEC Indemnified Party to
return any amounts previously received by it pursuant to this Section 12.4
from the Prepayout Members or to put any cap on the liability of the
Prepayout Members under Section 12.4(c).
(iv) A Prepayout Member shall have the right to satisfy any indemnification
obligation under this Section 12.4 (other than obligations under Section
12.4(b)) by delivering, at its election, Common Stock Shares or Preferred
Stock Shares, as provided in this subsection (f)(iv). If a Prepayout Member
so exercises its right, the number of Common Stock Shares or Preferred
Stock Shares so delivered shall be equal to the amount (or portion thereof)
of the obligation so owed to be paid with Common Stock Shares or Preferred
Stock Shares (as applicable) divided by (A) in the instance of the Common
Stock Shares, the Current Market Price (as defined below) and (B) in the
instance of the Preferred Stock Shares, the greater of (x) $18.00 and (y)
the aggregate Current Market Price of the shares of Common Stock into which
such Preferred Stock Shares are then convertible divided by the number of
Preferred Stock Shares to be delivered. As used herein, the term "Current
Market Price" shall mean the average of the last reported sales prices for
the Common Stock for the 10 consecutive Trading Days ending on the second
Trading Day prior to delivery in satisfaction of the indemnification
obligation. The last reported sales price for each day shall be the last
reported sales price of the Common Stock on such date on the exchange where
it is primarily traded, or, if the Common Stock is not traded on an
exchange, the Common Stock shall be valued at the last reported sales price
on such date on the NASDAQ National Market System, or, if the Common Stock
is not traded on the NASDAQ National Market System or any similar system of
automated dissemination of quotations of securities prices, the Common
Stock shall be valued at the closing bid price (or average of bid prices)
last quoted on such date as reported on an established quotation service
for over-the-counter securities. As used in this subsection (f)(iv), the
term "Trading Days" shall mean (1) if the Common Stock is listed or
admitted for trading on any generally recognized U.S. securities exchange,
days on which such securities exchange is open for business and (2) if the
Common Stock is quoted on the NASDAQ National Market System or any similar
system of automated dissemination of quotations of securities prices, days
on which trades may be made on such system.
(g) Subject to the terms of this Section 12.4, 3TEC agrees to indemnify
and hold harmless, each Prepayout Member and their respective partners,
shareholders, members, directors, officers, managers, employees, agents,
successors and assigns (collectively, the "Prepayout Member Indemnified
Parties") from and against any and all Damages which may be incurred by any
Prepayout Member Indemnified Party relating to or arising out any breach by 3TEC
of any of its representations, warranties, covenants or agreements contained in
this Agreement or the other Transaction Documents ("Prepayout Member Claims").
(h) Promptly after receipt by an indemnified party under Section
12.4(a), Section 12.4(c) or 12.4(d) of notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party under such Section, give written notice to the
indemnifying party of the commencement thereof, but the failure so to notify the
indemnifying party shall not relieve it of any liability that it may have to any
indemnified party except to the extent the indemnifying party demonstrates that
the defense of such action is prejudiced thereby. In case any such action shall
be brought against an indemnified party and it shall give written notice to the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it may wish, to assume
the defense thereof with counsel reasonably satisfactory to such indemnified
party. If the indemnifying party elects to assume the defense of such action,
the indemnified party shall have the right to employ separate counsel at its own
expense and to participate in the defense thereof. If the indemnifying party
elects not to assume (or fails to assume) the defense of such action, the
indemnified party shall be entitled to assume the defense of such action with
counsel of its own choice, at the expense of the indemnifying party. If the
action is asserted against both the indemnifying party and the indemnified party
and there is a conflict of interests which renders it inappropriate for the same
counsel to represent both the indemnifying party and the indemnified party, the
indemnifying party shall be responsible for paying for separate counsel for the
indemnified party; provided, however, that if there is more than one indemnified
party, the indemnifying party shall not be responsible for paying for more than
one separate firm of attorneys to represent the indemnified parties, regardless
of the number of indemnified parties. If the indemnifying party elects to
assume the defense of such action, (i) no compromise or settlement thereof may
be effected by the indemnifying party without the indemnified party's written
consent (which shall not be unreasonably withheld) unless the sole relief
provided is monetary damages that are paid in full by the indemnifying party and
(ii) the indemnifying party shall have no liability with respect to any
compromise or settlement thereof effected without its written consent (which
shall not be unreasonably withheld).
(i) THE PARTIES RECOGNIZE THAT AN INDEMNITEE MAY BE ENTITLED TO
INDEMNIFICATION HEREUNDER FROM ACTS OR OMISSIONS THAT ARISE OUT OF OR RESULT
FROM THE ORDINARY, STRICT, SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH INDEMNITEE.
(j) In relation to any breach, default or nonperformance of any
representation, warranty, covenant or agreement made by a party hereto in this
Agreement, the exclusive relief and remedy available to the other parties hereto
in respect of said breach, default or nonperformance shall be (i) termination,
but only if said termination is expressly permitted under the provisions of
Section 11.1, or (ii) indemnification as provided in this Section 12.4, but only
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to the extent properly claimable hereunder and as limited pursuant hereto."
9. EXHIBIT A. Exhibit A shall be deleted in its entirety and replaced
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with Exhibit A attached hereto.
10. EXHIBIT D. Exhibit D shall be deleted in its entirety and
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replaced with Exhibit D attached hereto.
11. EXHIBIT E. Exhibit E shall be deleted in its entirety and replaced
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with Exhibit E attached hereto.
12. EXHIBIT F. Exhibit F shall be deleted in its entirety and replaced
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with Exhibit F attached hereto.
13. EXHIBIT G. Exhibit G shall be deleted in its entirety and replaced
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with Exhibit G attached hereto.
14. MAGELLAN DISCLOSURE SCHEDULE SUPPLEMENT. The Magellan Disclosure
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Schedule is supplemented by the Supplement to Magellan Disclosure Schedule dated
February 2, 2000.
15. FULL FORCE AND EFFECT. Except with respect to the changes made in
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this Second Amendment, the terms and provisions of the Original Agreement as
amended by the First Amendment are in full force and effect.
16. BINDING EFFECT. This Second Amendment shall be binding upon the
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parties hereto and their respective successors and assigns.
17. COUNTERPARTS. This Second Amendment may be executed in any number
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of counterparts, each of which shall constitute an original and all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
be duly executed by their respective Authorized Officers on the day and year
first above written.
COMPANY:
3TEC ENERGY CORPORATION
By: ________________________________
Name: Floyd C. Wilson
Title: President and Chief Executive Officer
Address for Notice:
3TEC Energy Corporation
Two Shell Plaza
777 Walker
Suite 2400
Houston, TX 77002
Fax: (713) 222-6418
SUB:
3TM ACQUISITION L.L.C.
By: ________________________________
Name: Floyd C. Wilson
Title: Manager
Address for Notice:
c/o 3TEC Energy Corporation
Two Shell Plaza
777 Walker
Suite 2400
Houston, TX 77002
Fax: (713) 222-6418
MAGELLAN EXPLORATION, LLC
By: _________________________________
Name: Wynne M. Snoots, Jr.
Title: President
Address For Notice:
Five Post Oak Park
Suite 1500
Houston, Texas 77027
Attention: Wynne M. Snoots, Jr.
Fax: (713) 622-5511
ECIC CORPORATION
By: ________________________________
Name: Robert L. Zorich
Title: President
Address for Notice:
c/o EnCap Investments L.L.C.
1100 Louisiana
Suite 3150
Houston, Texas
Attention: Garry A. Tanner
Fax: (713) 659-6130
ENCAP ENERGY CAPITAL FUND III, L.P.
By: ENCAP INVESTMENTS L.L.C., General Partner
By: ____________________________
Name: D. Martin Phillips
Title: Managing Director
Address For Notice:
c/o EnCap Investments L.L.C.
1100 Louisiana
Suite 3150
Houston, Texas
Attention: Garry A. Tanner
Fax: (713) 659-6130
ENCAP ENERGY ACQUISITION III-B, INC.
By: __________________________________
Name: D. Martin Phillips
Title: Vice President
Address For Notice:
c/o EnCap Investments L.L.C.
1100 Louisiana
Suite 3150
Houston, Texas
Attention: Garry A. Tanner
Fax: (713) 659-6130
BOCP ENERGY PARTNERS, L.P.
By: ENCAP INVESTMENTS L.L.C., Manager
By: __________________________
Name: D. Martin Phillips
Title: Managing Director
Address For Notice:
c/o EnCap Investments L.L.C.
1100 Louisiana
Suite 3150
Houston, Texas
Attention: Garry A. Tanner
Fax: (713) 659-6130
PEL-TEX PARTNERS, L.L.C.
By:________________________________
Name: Townes G. Pressler, Jr.
Title: Manager
By: DLJ LBO PLANS MANAGEMENT CORP., Manager
By:____________________
Name: Ivy Dodes
Title: Vice President
Address For Notice:
277 Park Avenue
New York, New York 10172
Attn: Ivy Dodes
Fax: (212) 892-7512