Exhibit 10.1
Execution Copy
CONTRIBUTION, CONVEYANCE AND ASSUMPTION AGREEMENT
AMONG
ENCORE ACQUISITION COMPANY,
ENCORE OPERATING, L.P.,
ENCORE PARTNERS GP HOLDINGS LLC,
ENCORE PARTNERS LP HOLDINGS LLC,
ENCORE ENERGY PARTNERS GP LLC,
ENCORE ENERGY PARTNERS LP
AND
ENCORE ENERGY PARTNERS OPERATING LLC
TABLE OF CONTENTS
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| ARTICLE I DEFINITIONS |
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3 |
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Section 1.1
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Terms |
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3 |
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| ARTICLE II CONTRIBUTIONS,
ACKNOWLEDGMENTS AND DISTRIBUTIONS |
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7 |
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Section 2.1
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Public Cash Contribution |
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Section 2.2
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Payment of Transaction Expenses by
the Partnership; Cash Contribution by the Partnership to ENP
Operating; Repayment of Indebtedness |
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7 |
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Section 2.3
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Contribution of Permian Basin Assets
by Encore Operating to the Partnership |
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8 |
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Section 2.4
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Contribution of Permian Basin Assets
by the Partnership to ENP Operating |
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8 |
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Section 2.5
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Over-Allotment Option |
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8 |
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| ARTICLE III ASSUMPTIONS OF CERTAIN
LIABILITIES; INDEMNIFICATION |
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9 |
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Section 3.1
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Environmental Indemnification |
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Section 3.2
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Limitations Regarding Environmental
Indemnification |
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10 |
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Section 3.3
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Additional Indemnification |
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10 |
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Section 3.4
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Indemnification Procedures |
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11 |
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| ARTICLE IV TITLE MATTERS |
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12 |
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Section 4.1
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Encumbrances |
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12 |
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Section 4.2
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Disclaimer of Warranties;
Subrogation; Waiver of Bulk Sales Laws |
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12 |
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| ARTICLE V FURTHER ASSURANCES |
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14 |
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Section 5.1
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Further Assurances |
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14 |
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Section 5.2
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Other Assurances |
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14 |
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| ARTICLE VI EFFECTIVE TIME |
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| ARTICLE VII MISCELLANEOUS |
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15 |
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Section 7.1
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Order of Completion of
Transactions |
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Section 7.2
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Costs |
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15 |
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Section 7.3
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Headings; References;
Interpretation |
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15 |
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Section 7.4
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Successors and Assigns |
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16 |
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Section 7.5
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No Third Party Rights |
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Section 7.6
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Counterparts |
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16 |
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Section 7.7
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Governing Law |
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16 |
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Section 7.8
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Severability |
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16 |
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Section 7.9
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Amendment or Modification |
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16 |
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Section 7.10
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Integration |
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16 |
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Section 7.11
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Deed; Bill of Sale; Assignment |
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SCHEDULES
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Schedule A
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Assignment and Bill of Sale |
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Schedule B
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Leases |
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Schedule B-1
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Wells |
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Schedule B-2
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Surface Agreements |
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Schedule B-3
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Contracts |
CONTRIBUTION, CONVEYANCE AND ASSUMPTION AGREEMENT
This
Contribution, Conveyance and Assumption Agreement, dated effective
as of September 17, 2007, is entered into by and among Encore
Acquisition Company, a Delaware corporation (“EAC”),
Encore Operating, L.P., a Texas limited partnership (“Encore
Operating”), Encore Partners GP Holdings LLC, a Delaware
limited liability company (“GP Holdings”), Encore
Partners LP Holdings LLC, a Delaware limited liability company
(“LP Holdings”), Encore Energy Partners GP LLC, a
Delaware limited liability company (the “General
Partner”), Encore Energy Partners LP, a Delaware limited
partnership (the “Partnership”), and Encore Energy
Partners Operating LLC, a Delaware limited liability company
(“ENP Operating”). The above-named entities are
sometimes referred to in this Agreement each as a
“Party” and collectively as the “Parties.”
Capitalized terms used herein shall have the meanings assigned to
such terms in Section 1.1.
RECITALS
WHEREAS , the General Partner and LP Holdings have formed
the Partnership pursuant to the Delaware Revised Uniform Limited
Partnership Act (the “Delaware LP Act”) for the purpose
of engaging in any business activity that is approved by the
General Partner and that lawfully may be conducted by a limited
partnership organized pursuant to the Delaware LP Act;
WHEREAS , in order to accomplish the objectives and purposes
in the preceding recital, each of the following actions has been
taken prior to the date hereof:
1. EAC
formed GP Holdings under the terms of the Delaware Limited
Liability Company Act (the “Delaware LLC Act”) and
contributed $1,000 to GP Holdings in exchange for all of the
membership interests in GP Holdings;
2. EAC
formed LP Holdings under the terms of the Delaware LLC Act and
contributed $1,000 to LP Holdings in exchange for all of the
membership interests in LP Holdings;
3. GP
Holdings formed the General Partner under the terms of the Delaware
LLC Act and contributed $512 to the General Partner in exchange for
all of the membership interests in the General Partner;
4. the
General Partner and LP Holdings formed the Partnership under the
terms of the Delaware LP Act and the General Partner contributed
$12 to the Partnership in exchange for a 2% general partner
interest in the Partnership and LP Holdings contributed $588 to the
Partnership in exchange for a 98% limited partner interest in the
Partnership;
5. the
Partnership formed ENP Operating under the terms of the Delaware
LLC Act and contributed $100 to ENP Operating in exchange for all
of the membership interests in ENP Operating;
6. ENP
Operating formed a Delaware limited liability company named Encore
Clear Fork Pipeline LLC (“Clear Fork”) under the terms
of the Delaware LLC Act and contributed $50 to Clear Fork in
exchange for all of the membership interests in Clear Fork;
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7. EAC
(through one or more subsidiaries) assigned to ENP Operating all of
its rights and duties under the Purchase Agreement (as defined
herein) relating to the Elk Basin Assets (as defined herein);
8. EAC
made a capital contribution to ENP Operating of $93,658,685 (98%
through LP Holdings and the Partnership and 2% through GP Holdings,
the General Partner and the Partnership);
9. EAC
made a capital contribution of $120 million to EAP Operating,
Inc., a Delaware corporation (“EAP Operating”), which
loaned all of such funds to ENP Operating (the “EAP Operating
Loan”);
10. ENP
Operating entered into the Credit Agreement (as defined
herein);
11. ENP
Operating acquired the Elk Basin Assets under the Purchase
Agreement in exchange for $328,358,685;
12. EAC
assigned put contracts with a value of $9,402,558 to ENP Operating
(98% through LP Holdings and the Partnership and 2% through GP
Holdings, the General Partner and the Partnership);
13. the
Partnership issued 550,000 management incentive units to certain
executives of the General Partner; and
14. LP
Holdings’ limited partner interest in the Partnership was
converted to 10,279,639 Common Units (as defined herein) and the
General Partner’s general partner interest was converted to
221,013 General Partner Units (as defined herein);
WHEREAS , concurrently with the consummation of the
transactions contemplated hereby, each of the following shall
occur:
1. in
connection with the Partnership’s initial public offering
(the “Offering”), the public, through the Underwriters
(as defined herein), will contribute $175,770,450 in cash to the
Partnership, less the Underwriters’ discount of 6.625% and a
structuring fee of 0.375%, in exchange for 9,000,000 Common Units
representing a 37.4% limited partner interest in the Partnership
(such Common Units being hereinafter referred to as the “Firm
Units”);
2. the
Partnership will use the proceeds from the Offering of the Firm
Units to (a) pay transaction expenses, which are estimated to
be $3.8 million (exclusive of the Underwriters’ discount
and the structuring fee), and (b) contribute the remaining
approximately $172.0 million to ENP Operating, which will use
it to repay (i) a portion of the indebtedness outstanding
under the Credit Agreement, and (ii) all of the indebtedness
under the EAP Operating Loan, together with accrued interest;
3.
Encore Operating will contribute its interests in the Permian Basin
Assets (as defined herein) to the Partnership in exchange for
4,043,478 Common Units (together with the Firm Units, the
“Initial Closing Units”);
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4. the
Partnership will contribute its interests in the Permian Basin
Assets to ENP Operating in exchange for the continuation of its
membership interest in ENP Operating;
5. LP
Holdings will distribute a number of Common Units to EAC that is
equal to the excess of (a) 2% of the total number of Units
outstanding immediately following the issuance of the Initial
Closing Units over (b) the number of General Partner Units
outstanding immediately prior to the issuance of the Initial
Closing Units (after rounding as provided herein, the
“Initial Distributed Units”) and, thereafter, EAC will
contribute the Initial Distributed Units to GP Holdings, who will
further contribute such units to the General Partner;
6. upon
receipt of the Initial Distributed Units, the General Partner will
exchange such units with the Partnership for an equal number of
General Partner Units in order to enable the General Partner to
maintain its 2% general partner interest in connection with the
issuance of the Initial Closing Units;
7. to
the extent that the Underwriters exercise their over-allotment
option (the “Over-Allotment Option”) to purchase up to
1,350,000 Common Units (the “Over-Allotment Units”),
the Partnership will contribute the net proceeds therefrom to ENP
Operating, which will use such proceeds to repay a portion of the
indebtedness outstanding under the Credit Agreement;
8. to
the extent the Partnership issues Over-Allotment Units, LP Holdings
will distribute a number of Common Units to EAC that is equal to
the excess of (a) 2% of the total number of Units outstanding
immediately following the issuance of the Over-Allotment Units over
(b) the number of General Partner Units outstanding
immediately prior to the issuance of the Over-Allotment Units
(after rounding as provided herein, the “Subsequent
Distributed Units”) and, thereafter, EAC will contribute the
Subsequent Distributed Units to GP Holdings, who will further
contribute such units to the General Partner;
9. upon
receipt of Subsequent Distributed Units, the General Partner will
exchange such units with the Partnership for an equal number of
General Partner Units in order to enable the General Partner to
maintain its 2% general partner interest in connection with the
issuance of the Subsequent Distributed Units; and
10. the
organizational documents of the Parties will be amended and
restated as necessary to reflect the applicable matters set forth
above and as contained in this Agreement;
NOW, THEREFORE , in consideration of their mutual
undertakings and agreements hereunder, the Parties undertake and
agree as follows:
ARTICLE I
DEFINITIONS
The
following defined terms shall have the meanings given below:
“
Agreement ” means this Contribution, Conveyance and
Assumption Agreement.
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Affiliate ” means, with respect to any Person, any
other Person that directly or indirectly through one or more
intermediaries controls, is controlled by or is under common
control with, the Person in question. As used herein, the term
“control” means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting
securities, by contract or otherwise.
“
Assignment ” means one or more Deed, Assignment and
Bill of Sale substantially in the form attached as
Schedule A .
“
Clear Fork ” has the meaning as set forth in the
Recitals of this Agreement.
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Closing Date ” means the date of the closing of the
Partnership’s initial public offering of Common Units.
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Common Units ” has the meaning as set forth in the
Partnership Agreement.
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Conflicts Committee ” means the Conflicts Committee of
the General Partner.
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Covered Environmental Losses ” is defined in
Section 3.1.
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Credit Agreement ” means that certain Credit Agreement
dated as of March 7, 2007 by and among ENP Operating, the
Partnership, Bank of America, N.A., as administrative agent and L/C
Issuer, Banc of America Securities LLC, as sole lead arranger and
sole book manager, and the other lenders party thereto.
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Delaware LLC Act ” has the meaning as set forth in the
Recitals of this Agreement.
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Delaware LP Act ” has the meaning as set forth in the
Recitals of this Agreement.
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EAC ” has the meaning as set forth in the opening
paragraph of this Agreement.
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EAP Operating ” has the meaning as set forth in the
Recitals of this Agreement.
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EAP Operating Loan ” has the meaning as set forth in
the Recitals of this Agreement.
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Effective Time ” means 12:01 a.m. Eastern
Daylight Time on September 17, 2007.
“
Elk Basin Assets ” means the oil and natural gas
properties and related assets (including, but not limited to, the
Elk Basin Gas Plant and the Clear Fork pipeline) in or near the Elk
Basin field in Park County, Wyoming and Carbon County, Montana,
that were acquired by ENP Operating under the terms of the Purchase
Agreement.
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Encore Operating ” has the meaning as set forth in the
opening paragraph of this Agreement.
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ENP Operating ” has the meaning as set forth in the
opening paragraph of this Agreement.
“
Environmental Laws ” means all federal, state and
local laws, statutes, rules, regulations, orders and ordinances,
legally enforceable requirements and rules of common law, now or
hereafter in effect, relating to the protection of the environment
(including, but not limited to, any natural resource damages, any
generation, use, storage, treatment, Release or threatened Release
of Hazardous Substances, into the indoor or outdoor environment,
and any exposure of any Person or property to Hazardous Substances)
including, without limitation, the federal Comprehensive
Environmental Response, Compensation, and Liability Act, the
Superfund Amendments Reauthorization Act, the Resource Conservation
and Recovery Act, the Clean Air Act, the Federal Water Pollution
Control Act, the Toxic Substances Control Act, the Oil Pollution
Act, the Safe Drinking Water Act, the Hazardous Materials
Transportation Act and all other environmental conservation and
protection laws, each as amended from time to time.
“
Firm Units ” has the meaning as set forth in the
Recitals of this Agreement.
“
General Partner ” has the meaning as set forth in the
opening paragraph of this Agreement.
“
General Partner Units ” has the meaning as set forth
in the Partnership Agreement.
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GP Holdings ” has the meaning as set forth in the
opening paragraph of this Agreement.
“
Hazardous Substance ” means (a) any substance
that is designated, defined or classified as a solid waste,
hazardous waste, hazardous material, pollutant, contaminant or
toxic or hazardous substance or words of similar meaning or impact,
or that is otherwise regulated or as to which liability may arise
under any Environmental Law, including, without limitation, any
hazardous substance as such term is defined under the Comprehensive
Environmental Response, Compensation, and Liability Act, as
amended, (b) petroleum, petroleum products, crude oil, oil,
gasoline, natural gas, fuel oil, motor oil, waste oil, diesel fuel,
jet fuel, and other petroleum hydrocarbons, whether refined or
unrefined and (c) asbestos, whether in a friable or
non-friable condition, polychlorinated biphenyls or radon.
“
Indemnified Assets ” means the Permian Basin Assets
and the Elk Basin Assets.
“
Indemnified Party ” means each member of the
Partnership Group and each EAC Entity in their capacities as
parties entitled to indemnification in accordance with
Article III.
“
Indemnifying Party ” means each of EAC and the
Partnership, as the case may be, in their capacity as the parties
from whom indemnification may be required in accordance with
Article III.
“
Initial Closing Units ” has the meaning as set forth
in the Recitals of this Agreement.
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“
Initial Distributed Units ” has the meaning as set
forth in the Recitals of this Agreement.
“
LP Holdings ” has the meaning as set forth in the
opening paragraph of this Agreement.
“
Offering ” has the meaning as set forth in the
Recitals of this Agreement.
“
Other Losses ” is defined in
Section 3.3(a).
“
Over-Allotment Option ” has the meaning as set forth
in the Recitals of this Agreement.
“
Over-Allotment Units ” has the meaning as set forth in
the Recitals of this Agreement.
“
Party ” or “ Parties ” has the
meaning as set forth in the opening paragraph of this
Agreement.
“
Partnership ” has the meaning as set forth in the
opening paragraph of this Agreement.
“
Partnership Agreement ” means the Second Amended and
Restated Agreement of Limited Partnership of Encore Energy Partners
LP, dated as of September 17, 2007, to which reference is
hereby made for all purposes of this Agreement. No amendment or
modification to the Partnership Agreement subsequent to
September 17, 2007 shall be given effect for the purposes of
this Agreement unless consented to by each of the Parties to this
Agreement.
“
Partnership Group ” means the General Partner, the
Partnership and all of their respective Subsidiaries.
“
Permian Basin Assets ” means the assets listed on
Schedules B , B-1 , B-2 and B-3 hereto
and as described in the Assignment with respect thereto.
“
Person ” means an individual or a corporation, limited
liability company, partnership, joint venture, trust,
unincorporated organization, association, government agency or
political subdivision thereof or other entity.
“
Purchase Agreement ” means that certain purchase and
sale agreement dated January 16, 2007 among EAC and certain
subsidiaries of Anadarko Petroleum Corporation.
“
Registration Statement ” means the registration
statement on Form S-1 filed by the Partnership relating to the
Offering.
“
Release ” means any depositing, spilling, leaking,
pumping, pouring, placing, emitting, discarding, abandoning,
emptying, discharging, migrating, injecting, escaping, leaching,
dumping or disposing.
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“
Retained Assets ” means the assets and investments
owned by EAC and any of its Affiliates that were not conveyed,
contributed or otherwise Transferred to the Partnership Group
pursuant to this Agreement and other documents relating to the
transactions referred to in this Agreement, including, without
limitation, the replacements and natural extensions thereof.
“
Risk-Based Cleanup Criteria ” are a risk-based cleanup
criteria authorized under applicable Environmental Law for
remediation of a particular property, taking into consideration the
Partnership Group’s use of the property being remediated and,
if such property is not owned by the Partnership Group, any
contractual or other requirements imposed by the property
owner.
“
Subsequent Distributed Units ” has the meaning as set
forth in the Recitals of this Agreement.
“
Transfer ” including the correlative terms “
Transferring ” or “ Transferred ”
means any direct or indirect transfer, assignment, sale, gift,
pledge, hypothecation or other encumbrance, or any other
disposition (whether voluntary, involuntary or by operation of law)
of any assets, property or rights.
“
Units ” refers to Common Units, General Partner Units
and management incentive units.
“
Underwriters ” means UBS Securities LLC, Lehman
Brothers, Inc., A.G. Edwards & Sons, Inc., Credit Suisse
Securities (USA) LLC, Raymond James & Associates, Inc. and
RBC Capital Markets Corporation.
“
Voluntary Cleanup Program ” means a program of the
United States or a state of the United States enacted pursuant to
Environmental Laws which provides for a mechanism for the written
approval of, or authorization to conduct, voluntary remedial action
for the clean-up, removal or remediation of contamination that
exceeds actionable levels established pursuant to Environmental
Laws.
ARTICLE II
CONTRIBUTIONS, ACKNOWLEDGMENTS AND DISTRIBUTIONS
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| Section 2.1 |
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Public Cash Contribution . |
The
Parties acknowledge a cash contribution by the public through the
Underwriters to the Partnership of $189,000,000 ($175,770,450 after
the Underwriters’ discount of 6.625% and a structuring fee of
0.375%) in exchange for 9,000,000 Common Units representing a 37.4%
limited partner interest in the Partnership.
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| Section 2.2 |
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Payment of Transaction Expenses by the Partnership; Cash
Contribution by the Partnership to ENP Operating; Repayment of
Indebtedness . |
The
Parties acknowledge (a) the payment by the Partnership, in
connection with the transactions contemplated hereby, of
transaction expenses in the amount of approximately $3.8 million
(ex
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