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EXHIBIT 10.26
EQUITY CONTRIBUTION AGREEMENT
THIS EQUITY CONTRIBUTION AGREEMENT (this "AGREEMENT") is entered
into
on June 29, 2006, among PACIFIC ENERGY RESOURCES LTD., a Delaware
corporation
("COMPANY"), WARBURG, PINCUS EQUITY PARTNERS, L.P., a Delaware
limited
partnership ("WARBURG"), and WP EEX LLC, a Delaware limited
liability company
("WP EEX").
R E C I T A L S
A. The Company's wholly-owned subsidiary, Cameras Acquisition
Corp., a
Delaware corporation ("ACQUISITION"), Carneros Energy, Inc., a
Delaware
corporation ("CARNEROS"), Warburg, WP EEX and certain other
shareholders of
Carneros are parties to a Stock Purchase Agreement dated the date
hereof whereby
Acquisition is purchasing all of the issued and outstanding shares
of capital
stock of Carneros (the "SHARES").
B. A significant portion of the purchase price for the Shares is
being
funded with proceeds of a loan from Laurus Master Fund, Ltd.
("LAURUS") that is
being secured by all of the assets of Carneros and its wholly-owned
subsidiary,
Gotland Oil, Inc. ("GOTLAND").
C. The parties desire to provide for a means to ensure that each
of
Carneros, Acquisition and Gotland will at all times remain solvent
and
adequately capitalized and able to pay its debts as they become
due.
D. The Company believes that Carneros, Acquisition, and Gotland
are
each well capitalized and not engaged or about to engage in a
business for which
its remaining assets are unreasonably small or beyond the ability
or each of
them to pay, but nonetheless has agreed to contribute additional
capital to
Carneros, Acquisition or Gotland, as the case may be, on the terms
and subject
to the conditions set forth below.
E.
Warburg and WP EEX would not have been willing to enter into
the
Stock Purchase Agreement but for the Company entering into this
Agreement.
A G R E E M E N T
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In
consideration of the foregoing and of the mutual promises
contained
in this Agreement, the parties agree that:
1. TERM. This Agreement shall be effective until the earlier of
(the
"TERMINATION DATE") (i) thirty (30) days after the fourth
anniversary of the
date hereof or (ii) the Early Termination Date. For purposes
hereof, "EARLY
TERMINATION DATE" means the first date after the date hereof that
all of the
following conditions are then satisfied: (i) Carneros and Gotland
have
collectively produced in excess of 1,000 barrels of oil, net to
Carneros and
Gotland, each day for more than 180 consecutive days preceding such
date, (ii)
the average of the forward prices for West Texas Intermediate oil
(as quoted on
the New York Mercantile Exchange) relating to the five years
following such date
exceeds $54.59 per barrel, (iii) the then aggregate consolidated
indebtedness of
Acquisition, Carneros and Gotland is less than $21,200,000, (iv)
none of the
conditions set forth in SECTION 2 shall have occurred on and after
the date
hereof and prior to such date, and (v)
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a Qualified Refinancing has occurred prior to such date. For
purposes hereof, a
"QUALIFIED REFINANCING" means that all the indebtedness associated
with the
Securities Purchase Agreement referenced below of approximately
$21,200,000
shall have been refinanced with one or more commercial lenders
unaffiliated with
the Company under arrangements pursuant to which there arc no
principal payments
required prior to the fourth anniversary of the Closing and all
other terms
thereof are no less favorable to Acquisition, Carneros and Gotland
as the other
terms of the Securities Purchase Agreement and related
agreements.
2. CONDITIONS FOR EQUITY CONTRIBUTION. The Company shall be
obligated to
contribute cash (either directly or through Acquisition) as
additional equity
capital to Carneros, Acquisition or Gotland, as the case may be, if
any of the
following occurs at any time prior to the Termination Date (which
if any such
event occurs such capital contribution shall he made within two
business days of
such event):
(a) There is an event of default under the Securities Purchase
Agreement dated May 31, 2006, as amended by a Joinder and
Amendment
Agreement the date hereof, among Carneros, Gotland, Acquisition
and
Laurus or any other loan document referenced therein and, if a
cure
period is provided, it continues without cure within such cure
period,
or an event of default occurs, and, if a cure period is provided,
such
event of default continues without cure within such cure period,
under
any loan agreement or other indebted
