BUSINESS OPPORTUNITIES
AGREEMENT
This BUSINESS
OPPORTUNITIES AGREEMENT (this “ Agreement ”),
dated as of February 27, 2006, is entered into by and among
Concho Resources Inc., a Delaware corporation (the “
Company ”), and the parties to this Agreement listed
on Exhibit A hereto (each a “ Designated
Party ” and collectively the “ Designated
Parties ”).
A. This
Agreement is being executed and delivered pursuant to that certain
Combination Agreement, dated February 24, 2006 (the “
Combination Agreement ”) by and among the Company,
certain of the Designated Parties and the other parties thereto,
pursuant to which Concho Equity Holdings Corp., a Delaware
corporation, will become a subsidiary of the Company, and the
Company will acquire certain oil and gas exploration and production
assets located in Southeast New Mexico (the “
Combination ”).
B. The
Company believes that it and its stockholders (the “
Stockholders ”) will benefit from the Combination and
that the Combination is in its best interest and in the best
interest of the Stockholders. The Designated Parties to be a party
thereto, however, are unwilling to enter into the Combination
Agreement unless the Company enters into this Agreement because
each of the Designated Parties engages, directly or indirectly, in
the E&P Business. The businesses in which the Designated
Parties engage are similar to those in which the Company will
engage following the Combination.
C. In
recognition that certain Designated Parties may engage, directly or
indirectly, in the same or similar activities or lines of business
and have an interest in the same or similar areas of business, and
in recognition of the benefits to be derived by the Company through
its continued contractual, corporate and business relations with
each Designated Party (including services of employees, officers
and directors of each Designated Party as directors and officers of
the Company), this Agreement is set forth to regulate and define
the conduct of certain affairs of the Company as they may involve
each Designated Party, and as applicable, its employees, officers
and directors, and the powers, rights, duties, liabilities,
interests and expectancies of the Company in connection
therewith.
D. The law
relating to duties that certain Designated Parties may owe to the
Company is not clear. The application of such law to particular
circumstances is often difficult to predict, and, if a court were
to hold that any Designated Party breached any such duty, such
Designated Party could be held liable for damages in a legal action
brought on behalf of the Company.
E. In order
to induce the Designated Parties to enter into the Combination
Agreement or serve as directors of the Company, as applicable, the
Company is willing to enter into this Agreement, pursuant to
Section 122 of the General Corporation Law of the State of
Delaware, in order to renounce, effective upon the consummation of
the Combination, any interest or expectancy it may have in the
classes or categories of business opportunities specified herein
that are presented to or identified by any Designated Party, as
more fully described herein. As a result of this Agreement, each
Designated Party, as applicable, may continue to conduct his or its
business and to pursue certain business opportunities without an
obligation to offer such opportunities to the Company or any of its
Subsidiaries, and any Designated Party, as applicable,
may continue to
discharge his responsibilities as a director or employee of such
Designated Party or any company in which such Designated Party has
an interest.
NOW, THEREFORE, in
consideration of the foregoing, the mutual covenants, rights, and
obligations set forth in this Agreement, and the benefits to be
derived herefrom, and other good and valuable consideration, the
receipt and the sufficiency of which each of the undersigned
acknowledges and confesses, the undersigned agree as
follows:
1.
Renouncement of Business Opportunities . The Company
hereby renounces any interest or expectancy in any business
opportunity, transaction or other matter in which any Designated
Party participates or desires or seeks to participate in and that
involves any aspect of the E&P Business (each, a “
Business Opportunity ”) other than a Business
Opportunity that (i) is first presented to a Designated Party
solely in such person’s capacity as a director or officer of
the Company or its Subsidiaries and with respect to which, at the
time of such presentment, no other Designated Party (other than a
Nominee) has independently received notice of or otherwise
identified such Business Opportunity or (ii) is identified by
a Designated Party solely through the disclosure of information by
or on behalf of the Company (each Business Opportunity other than
those referred to in clauses (i) or (ii) are referred to
as a “ Renounced Business Opportunity ”). No
Designated Party, including any Nominee, shall have any obligation
to communicate or offer any Renounced Business Opportunity to the
Company, and any Designated Party may pursue a Renounced Business
Opportunity, provided that such Renounced Business Opportunity is
conducted by such Designated Party in accordance with the standard
set forth in Section 2. The Company shall not be prohibited
from pursuing any Business Opportunity with respect to which it has
renounced any interest or expectancy as a result of this
Section 1. Nothing in this Section 1 shall be construed
to allow any director to usurp a Business Opportunity of the
Company or its Subsidiaries solely for his or her personal
benefit.
2.
Standards for Separate Conduct of Renounced Business
Opportunities . In the event that a Designated Party
acquires knowledge of a Renounced Business Opportunity, such
Designated Party may pursue such Renounced Business
Oppor
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