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EXHIBIT 2.9
MEMBERSHIP INTEREST PURCHASE AGREEMENT
DATED AS OF MAY 24, 2007
AMONG
FOREST ALASKA HOLDING LLC,
AS SELLER;
FOREST ALASKA OPERATING LLC,
AS THE COMPANY;
FOREST OIL CORPORATION
(FOR PURPOSES OF SECTIONS 7.6, 7.14, 10.1 AND ARTICLE XII ONLY)
AND
PACIFIC ENERGY RESOURCES LTD.
AS BUYER
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS.....................................................1
ARTICLE II EFFECTIVE DATE;
CLOSING.........................................7
2.1
Effective Date;
Closing.............................................7
2.2
Proceedings at
Closing..............................................8
ARTICLE III SALE AND PURCHASE OF
MEMBERSHIP INTERESTS; CONSIDERATION........8
3.1
Sale and
Purchase of Membership Interests...........................8
3.2
Amount and Form
of Consideration....................................8
3.3
Payment of
Consideration............................................8
3.4
Price
Adjustments...................................................8
ARTICLE IV REPRESENTATIONS
AND WARRANTIES OF THE SELLER AND THE COMPANY....9
4.1
Organization and
Power..............................................9
4.2
Authorizations;
Execution and Validity.............................10
4.3
Capitalization.
...................................................10
4.4
Financial
Statements; Other Financial Data.........................10
4.5
Consents...........................................................11
4.6
No Defaults or
Conflicts...........................................11
4.7
Agreements,
Contracts and Commitments..............................11
4.8
Litigation.........................................................12
4.9
Taxes..............................................................12
4.10
Fees...............................................................13
4.11 Absence of Certain Changes or
Events...............................13
4.12
Compliance with
Laws...............................................14
4.13
Transactions with
Related Parties..................................14
4.14
Books and
Records..................................................14
4.15
Information
Furnished..............................................14
4.16
Directors and
Officers.............................................14
4.17
Bank
Accounts......................................................14
4.18
Owned Real
Property................................................15
4.19
Leased Real
Property...............................................15
4.20
Intentionally left
blank...........................................15
4.21
Title to Oil and Gas
Properties....................................15
4.22
Environmental
Matters..............................................16
4.23
Bonding
Matters....................................................17
4.24
Insurance..........................................................17
4.25
ERISA..............................................................17
4.26
Condition of
Assets................................................17
4.27
Lease Operating
Expenses...........................................17
4.28
Hedging
Transactions...............................................17
4.29
Prepayment Premium;
Total Company Debt.............................18
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
SELLER.......................18
5.1
Organization and
Good Standing.....................................18
5.2
Authorization of
Agreement.........................................18
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5.3
Conflicts,
Consents of Third Parties ..............................18
5.4
Brokers
...........................................................19
5.5
Litigation.........................................................19
5.6
Ownership of
Membership Interests..................................19
5.7
Tax
Status.........................................................19
5.8
Marketable
Title...................................................19
ARTICLE VI REPRESENTATIONS
AND WARRANTIES OF BUYER........................19
6.1
Organization and
Good Standing.....................................19
6.2
Authorization of
Agreement.........................................20
6.3
Conflicts,
Consents of Third Parties...............................20
6.4
No
Default.........................................................20
6.5
Litigation.........................................................20
6.6
Investment
Intent..................................................20
6.7
Disclosure of
Information..........................................20
6.8
Funding
Commitments................................................21
6.9
Brokers
...........................................................21
ARTICLE VII ADDITIONAL
AGREEMENTS..........................................21
7.1
Further
Actions....................................................21
7.2
Conduct of
Business Pending Closing................................21
7.3
Title
Defects......................................................22
7.4
Environmental
Defects..............................................24
7.5
Gas
Imbalances.....................................................25
7.6
Access to
Information..............................................26
7.7
Regulatory
Approvals...............................................26
7.8
Agreement to
Defend................................................26
7.9
Other
Actions......................................................26
7.10
LIMITATION AND
DISCLAIMER OF IMPLIED REPRESENTATIONS AND
WARRANTIES OF THE COMPANY AND
SELLER...............................26
7.11
Change of Company
Name.............................................27
7.12
Account
Signatories................................................27
7.13
Cooperation with
Financing.........................................27
7.14
Hedge
Assumption...................................................28
ARTICLE VIII
CONDITIONS TO
CLOSING..........................................28
8.1
Buyer's
Conditions.................................................28
8.2
Seller's
Conditions................................................29
ARTICLE IX DELIVERIES AT
CLOSING..........................................29
9.1
Deliveries by
Seller to Buyer......................................29
9.2
Deliveries by
Buyer to Seller and the Company......................30
ARTICLE X TRANSITION
OPERATIONS..........................................31
10.1
Transition
Operations..............................................31
ARTICLE XI
TERMINATION....................................................31
11.1
Termination........................................................31
11.2
Effect of Termination
.............................................32
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ARTICLE XII
INDEMNIFICATION................................................32
12.1
Seller and FOC
Indemnification....................................32
12.2
Buyer
Indemnification.............................................32
12.3
Indemnification
Procedures........................................32
12.4
Limits on
Indemnification.........................................33
ARTICLE XIII
TAXES..........................................................34
13.1
Sales and Use
Taxes; Property Taxes...............................34
13.2
Tax
Proceedings...................................................35
13.3
Real and
Personal Property Taxes..................................35
13.4
Property Tax
Reporting............................................35
13.5
Production
Taxes..................................................35
13.6
Income
Taxes......................................................36
13.7
Purchase Price
Allocation.........................................36
ARTICLE XIV
GENERAL........................................................36
14.1
Governing Law;
Choice of Forum....................................36
14.2
Amendments........................................................36
14.3
Waivers
..........................................................36
14.4
Notices...........................................................36
14.5
Successors and
Assigns, Parties in Interest.......................37
14.6
Severability......................................................37
14.7
Entire Agreement
.................................................37
14.8
Schedules
........................................................38
14.9
Remedies
.........................................................38
14.10
Expenses..........................................................38
14.11 Release of
Information; Confidentiality...........................38
14.12 Certain
Construction Rules........................................38
14.13
Counterparts......................................................39
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
This
Membership Interest Purchase Agreement dated as of May 24, 2007
(the
"Agreement") is entered into by and among Pacific Energy Resources
Ltd., a
Delaware corporation ("Buyer"), Forest Alaska Operating LLC, a
Delaware limited
liability company (the "Company"), Forest Alaska Holding LLC, a
Delaware limited
liability company ("Seller"), and, for purposes of Sections 7.6,
7.14, 10.1 and
Article XII only, Forest Oil Corporation, a New York corporation
("FOC")
pertaining to the purchase and sale of 100% of the membership
interests of the
Company.
WHEREAS, the Seller owns all the outstanding membership interests
(the
"Membership Interests") of the Company; and
WHEREAS, Buyer desires to purchase from Seller and Seller desires
to sell
to Buyer all of the Membership Interests on the terms and subject
to the
conditions set forth in this Agreement.
NOW,
THEREFORE, in consideration of the mutual agreements,
representations,
warranties and subject to the conditions contained herein, the
parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
As
used in this Agreement:
"Affiliate" means, as to any Person, a Person that, directly or
indirectly,
controls, is controlled by, or is under common control with such
Person.
"Aggregate Title Defect Value" has the meaning specified in Section
7.3(d).
"Aggregate Environmental Defect Value" has the meaning specified in
Section
7.4(c).
"Agreement" has the meaning specified in the preamble hereof.
"Allocated Values" means the allocation of values of the Oil and
Gas
Properties included in the Ownership Interests set forth on Exhibit
"A-2"
attached hereto. The Allocated Values for each Oil and Gas Property
has been
agreed to by Buyer and Seller and represents a good faith
allocation of value of
the Oil and Gas Properties.
"Base Purchase Price" has the meaning specified in Section 3.2.
"Basket Amount" has the meaning specified in Section 11.4(a).
"Buyer" has the meaning specified in the preamble hereof.
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"CERCLA" has the meaning specified in the definition of
"Environmental
Laws."
"CERCLIS" means the Comprehensive Environmental Response,
Compensation and
Liability Information System List.
"Closing" has the meaning specified in Section 2.1.
"Closing Date" has the meaning specified in Section 2.1.
"Closing Date Amounts" means the aggregate of the amounts set forth
in
Subsections 3.3(a)(i), (ii) and (iii).
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning specified in the preamble hereof.
"Company Debt" means (a) all indebtedness of the Company for the
repayment
of borrowed money, whether or not represented by bonds, debentures,
notes or
similar instruments, all accrued and unpaid interest thereon, and,
solely with
respect to the Credit Agreement, all unpaid premiums, prepayment
penalties, fees
and other amounts; (b) all other indebtedness of the Company
evidenced by bonds,
debentures, notes or similar instruments, including all accrued and
unpaid
interest thereon, including intercompany debt; and (c) all
obligations of the
Company as lessee under capital leases as determined in accordance
with GAAP.
"Company's Senior Lender" means Credit Suisse.
"Confidentiality Agreement" means that certain Confidentiality
Agreement by
and between Forest Oil Corporation and Buyer dated March 8,
2007.
"Contract" means any contract, agreement, indenture, note, bond,
loan,
instrument, lease, conditional sale contract, mortgage, license,
franchise,
insurance policy or commitment, whether written or oral.
"Credit Agreement" means the First Lien Credit Agreement and the
Second
Lien Credit Agreement, each dated as of December 8, 2006 (together
with all
ancillary agreements) by and among the Company, as Borrower, the
Company's
Senior Lender, and certain other financial institutions, as Lenders
(as amended
and supplemented as of the date hereof).
"Defensible Title" means such right, title and interest that is (a)
with
respect to Ownership Interests of record, evidenced by an
instrument or
instruments filed of record in accordance with the conveyance and
recording laws
of the applicable jurisdiction to the extent necessary to give the
Company and
Buyer, through its ownership of the Membership Interests, the right
to enjoy the
benefits of possession of the Ownership Interests reflected on
Exhibit "A", and,
with respect to Ownership Interests not yet earned under a farmout
agreement, if
any, is described in and subject to a farmout agreement containing
terms and
provisions reasonably consistent with terms and provisions used in
the domestic
oil and gas business and under which there exists no default by the
Company and
(b) subject to Permitted Liens, free and clear of all Liens,
claims,
infringements, and other burdens.
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"DGCL" means the Delaware General Corporation Law.
"Effective Date" has the meaning specified in Section 2.1.
"Environmental Defect" has the meaning specified in Section
7.4(b).
"Environmental Law" means any Law of any Governmental Authority
whose
purpose is to conserve or protect human health, the environment,
wildlife or
natural resources, including, without limitation, the Clean Air
Act, as amended,
the Federal Water Pollution Control Act, as amended, the Rivers and
Harbors Act
of 1899, as amended, the Safe Drinking Water Act, as amended, the
Comprehensive
Environmental Response, Compensation and Liability Act, as amended
("CERCLA"),
the Superfund Amendments and Reauthorization Act of 1986, as
amended, the
Resource Conservation and Recovery Act of 1976, as amended, the
Hazardous and
Solid Waste Amendments Act of 1984, as amended, the Toxic
Substances Control
Act, as amended, the Hazardous Materials Transportation Act, as
amended, and
Title 18 of the Alaska Administrative Code.
"Financial Statements" has the meaning specified in Section
4.4.
"FOC" has the meaning specified in the preamble hereof.
"GAAP" means accounting principles generally accepted in the United
States
of America, as in effect from time to time and applied on a
consistent basis.
"Governmental Authority" means any federal, state, provincial,
local or
foreign government or governmental regulatory body and any of their
respective
subdivisions, agencies, instrumentalities, authorities, courts or
tribunals
"Hazardous Material" means (a) any "hazardous substance," as
defined by
CERCLA; (b) any "hazardous waste" as defined by the Resource
Conservation and
Recovery Act, as amended; or (c) petroleum, petroleum hydrocarbons,
or any
fraction or byproducts thereof.
"Hedging Transaction" means any futures, hedge, swap, collar, put,
call,
floor, cap, option or other contract that is intended to benefit
from, relate to
or reduce or eliminate the risk of fluctuations in the price of
commodities,
including Hydrocarbons, interest rates, currencies or
securities.
"Hydrocarbons" means oil, condensate, gas, casinghead gas and other
liquid
or gaseous hydrocarbons.
"Income Taxes" means all taxes, assessments, levies or other
charges,
including any interest, penalties and additions thereto which are
imposed upon a
Party (whether disputed or not), and
i.
which are based or assessed upon a Party's capital, income or
receipts,
including, without limitation, federal, state, local or foreign
income,
franchise and gross receipts Taxes assessed by a Governmental
Authority
(but
only to the extent the same are assessed upon income or receipts),
and
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ii.
any payroll taxes, capital taxes or withholding taxes, or any
other
taxes, assessments, levies or other charges which are imposed by
a
Governmental Authority other than Property Taxes.
"Indemnified Party" has the meaning specified in Section
12.3(a).
"Indemnifying Party" has the meaning specified in Section
12.3(a).
"Injunction" means a temporary restraining order, preliminary or
permanent
injunction or other order issued by a court of competent
jurisdiction, an order
of a Governmental Entity having jurisdiction over any Party hereto,
or any legal
restraint or prohibition.
"Knowledge", with respect to any entity, means knowledge of such
entity's
executive officers, after reasonable investigation.
"Lands" has the meaning specified in the definition of "Oil and
Gas
Properties."
"Law" means any federal, state, provincial, municipal, local or
foreign
law, statute, rule, rule, writ, order, decree, ordinance, code or
regulation.
"Leases" has the meaning specified the definition of "Oil and
Gas
Properties."
"Legal Proceeding" means any judicial, administrative or arbitral
action,
suit, proceeding (public or private), litigation, investigation,
complaint,
claim or governmental proceeding.
"Lien" means any lien, pledge, mortgage, deed of trust, security
interest,
attachment, right of first refusal, option, easement, covenant,
encroachment, or
any other adverse claim whatsoever.
"Litigation" means the Legal Proceedings, Orders and Official
Actions
listed on Schedule 4.8.
"Losses" has the meaning
specified in Section 12.1.
"Material Adverse Effect" means:
(i)
As to Buyer, any breach of Buyer's representations and
warranties,
which individually or in the aggregate with other breaches would
materially
impair Buyer's ability to consummate the transactions contemplated
by this
Agreement or prevent the consummation of any of the
transactions
contemplated hereby.
(ii)
As to Seller, any breach of Seller's representations and
warranties,
which individually or in the aggregate with other breaches would
materially
impair Seller's ability to consummate the transactions contemplated
by this
Agreement or prevent the consummation of any of the
transactions
contemplated hereby.
(iii) As to the
Company, (A) any breach of the Company's representations
and
warranties which individually or in the aggregate with other
breaches,
would result in a
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decrease in the Company's value by an amount greater or equal to
five
percent (5%) of the Purchase Price, or (B) any change in its
financial
condition or results of operations which has or would, with the
passage of
time, result in a decrease in the Company's value by an amount
greater or
equal to five percent (5%) of the Purchase Price; provided,
however, that
any
effect, direct or indirect, occasioned by a decline in the price
of
crude oil or natural gas, whether in global, national or local
markets
shall be excluded from any Material Adverse Effect calculation
hereunder.
"Material Contracts" has the meaning specified in Section 4.7.
"Membership Interests" has the meaning specified in the preamble
hereof.
"Notification Deadline" has the meaning specified in Section
7.3(a).
"Official Action" shall mean any domestic or foreign decision,
order, writ,
injunction, decree, judgment, award or any determination, both as
presently
existing and effective or presently existing and as may become
effective in the
future, by any court, administrative body, or other tribunal.
"Oil
and Gas Properties" means all right, title, interest and estate,
real
or personal, recorded or unrecorded, movable or immovable, tangible
or
intangible, in and to: (i) oil and gas leases, oil, gas and mineral
leases,
subleases and other leaseholds, royalties, overriding royalties,
net profit
interests, mineral fee interests, carried interests and other
properties and
interests (the "Leases") and the lands covered thereby ("Land(s)")
and any and
all oil, gas, water or injection wells thereon or applicable
thereto (the
"Wells"); (ii) any pools or units which include all or a part of
any Land or
include any Well (the "Units") and including without limitation all
right, title
and interest in production from any such Unit, whether such Unit
production
comes from wells located on or off of the Lands, and all
tenements,
hereditaments and appurtenances belonging to, used or useful in
connection with
the Leases, Lands and Units; (iii) interests under or derived from
all
contracts, agreements and instruments applicable to or by which
such properties
are bound or created, to the extent applicable to such properties,
including,
but not limited to, operating agreements, gathering agreements,
marketing
agreements (including commodity swap, collar and/or similar
derivative
agreements), transportation agreements, processing agreements,
unitization,
pooling and communitization agreements, declarations and orders,
joint venture
agreements, and farmin and farmout agreements; (iv) easements,
permits,
licenses, servitudes, rights-of-way, surface leases and other
surface rights
appurtenant to, and used or held for use to the extent applicable
to such
properties; and (v) equipment, machinery, fixtures and other
tangible personal
property and improvements located on or used or obtained in
connection with such
properties. Attached hereto as Exhibit "A" is a description of the
Oil and Gas
Properties. The respective "net revenue interest" and "working
interest" of the
Company in the Oil and Gas Properties described on Exhibit "A" (the
"Ownership
Interests") shall be a part of the definition of "Oil and Gas
Properties."
"Order" means any order, judgment, Injunction, ruling, writ, award,
decree,
statute, law, ordinance, rule or regulation.
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"Ownership Interests" has the meaning specified in the definition
of "Oil
and Gas Properties."
"Party" mean Seller, the Company, FOC, the Buyer or any permitted
successor
or assignee thereof.
"Permit" means any permit, license, certificate (including a
certificate of
occupancy) registration, authorization, application, filing,
notice,
qualification, waiver of any of the foregoing or approval of a
Governmental
Authority.
"Permitted Liens" means: (a) Liens for Taxes that are not yet due
and
payable or that are being contested in good faith by appropriate
proceedings and
as to which adequate reserves have been established in accordance
with GAAP, (b)
operators' liens and statutory liens for labor and materials, where
payment is
not due (or that, if delinquent, are being contested in good
faith); (c)
operating agreements, unit agreements, unitization and pooling
designations and
declarations, gathering and transportation agreements, processing
agreements,
gas, oil and liquids purchase, sale and exchange agreements and
other contracts,
agreements and installments; (d) statutory or regulatory authority
of
governmental agencies; (e) easements, surface leases and rights,
plat
restrictions, pipelines, grazing, logging, canals, ditches,
reservoirs,
telephone lines, power lines, railways and similar encumbrances
that have not
materially affected or interrupted, and are not reasonably expected
to
materially affect or interrupt, the claimed ownership of the party,
the
operation of the Oil and Gas Properties or the receipt of
production revenues
from the Oil and Gas Properties affected thereby; (f) liens,
charges,
encumbrances and irregularities in the chain of title which,
because of
remoteness in or passage of time, statutory cure periods,
marketable title acts
or other similar reasons, have not materially affected or
interrupted, and are
not reasonably expected to materially affect or interrupt, the
claimed ownership
of the party, the operation of the Oil and Gas Properties or the
receipt of
production revenues from the Oil and Gas Properties affected
thereby; and (g)
other liens set forth in Schedule 4.21.
"Person" means any natural person, corporation, partnership,
limited
liability company, trust, unincorporated organization, Governmental
Authority,
or other entity.
"Property Taxes" means all federal, state or local taxes,
assessments,
levies or other charges, which are imposed upon the Oil and Gas
Properties or
other real and personal property owned by the Company, including,
without
limitation, ad valorem, property, documentary or stamp, as well as
any interest,
penalties and fines assessed or due in respect of any such taxes,
whether
disputed or not.
"Production Taxes" means all federal, state or local taxes,
assessments,
levies or other charges, which are imposed upon production from the
Oil and Gas
Properties, including, without limitation, excise taxes on
production, severance
or gross production, as well as any interest, penalties and fines
assessed or
due in respect of any such taxes, whether disputed or not.
"Purchase Price" has the meaning specified in Section 3.2.
"Real Property Leases" has the meaning specified in Section
4.19.
"Related Party" means (i) any Affiliate of the Company or
Seller.
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"Schedule" means a disclosure schedule provided by Seller to Buyer
pursuant
to this Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" has the meaning specified in the preamble hereof.
"Subsidiaries" means, with respect to any Person, each entity as to
which
such Person (either alone or through or together with any other
Subsidiary) (i)
owns beneficially or of record or has the power to vote or control,
50% or more
of the voting securities of such entity or of any class of equity
interests of
such entity the holders of which are ordinarily entitled to vote
for the
election of the members of the Board of Directors or other persons
performing
similar functions, (ii) in the case of partnerships, serves as a
general
partner, (iii) in the case of a limited liability company, serves
as a managing
member or owns a majority of the equity interests or (iv) otherwise
has the
ability to elect a majority of the directors, trustees or managing
members
thereof.
"Taxes" means, collectively, Income Taxes, Property Taxes and
Production
Taxes.
"Tax
Return" means any return, report, information statement, or
similar
statement required to be filed with respect to any Taxes (including
any attached
schedules), including, without limitation, any information return,
claim for
refund, amended return and declaration of estimated Tax.
"Title Defect" has the meaning specified in Section 7.3(a).
"Title Defect Value" means, with respect to each Title Defect,
the
reduction of the Allocated Value of the affected Ownership Interest
as a result
of such Title Defect as determined in Section 7.3.
"Units" has the meaning specified in the definition of "Oil and
Gas
Properties".
"Wells" has the meaning specified in the definition of "Oil and
Gas
Properties."
ARTICLE II
EFFECTIVE DATE; CLOSING
2.1
Effective Date; Closing. The effective date (for accounting
purposes
only) of the transactions contemplated hereby shall be at 7:00
a.m., Alaska
Standard Time, on January 1, 2007 (the "Effective Date"). The
Closing of the
transactions contemplated hereby (the "Closing") shall take place
at the offices
of Seller, 707 Seventeenth St., Suite 3600, Denver, CO 80202 at
10:00 a.m.,
Mountain Standard Time, on the later of (i) two business days after
satisfaction
of all conditions to Closing (including agreement of the Parties on
all Purchase
Price adjustments pursuant to Section 3.4), or June 30, 2007 (the
"Closing
Date"). Notwithstanding any provision herein to the contrary, in no
event shall
the Closing occur later than July 31, 2007.
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2.2
Proceedings at Closing. All proceedings to be taken and all
documents
to be executed and delivered by all parties at the Closing shall be
deemed to
have been taken and executed simultaneously, and no proceedings
shall be deemed
taken nor any documents executed or delivered until all have been
taken,
executed and delivered.
ARTICLE III
SALE AND PURCHASE OF MEMBERSHIP INTERESTS; CONSIDERATION
3.1
Sale and Purchase of Membership Interests. On the Closing Date,
subject
to the terms and conditions set forth herein, the Seller will sell,
transfer,
convey, assign and deliver to Buyer, and Buyer will purchase from
the Seller,
the Membership Interests.
3.2
Amount and Form of Consideration. The total purchase price to be
paid
by Buyer to Seller in consideration of the Membership Interests is
FOUR HUNDRED
TWENTY MILLION DOLLARS AND NO/CENTS (US$420,000,000.00) (the "Base
Purchase
Price"), subject to adjustment as provided in Section 3.4 (the Base
Purchase
Price, as so adjusted, is the "Purchase Price").
3.3
Payment of Consideration.
(a) In consideration of the sale, transfer, conveyance, assignment
and
delivery of the Membership Interests, Buyer will, subject to
adjustment
pursuant to Section 3.4 hereof:
(i) Pay the Seller a performance deposit (the "Deposit") in the
amount of FOUR MILLION TWO HUNDRED THOUSAND DOLLARS AND
NO/CENTS
(US$4,200,000.00) by wire transfer of immediately available funds
upon
the execution of this Agreement;
(ii) pay the Seller an amount equal to the balance of the
Purchase Price by wire transfer of immediately available funds on
the
Closing Date; and
(b) The Purchase Price shall be paid by wire transfer of
immediately
available funds to Seller in accordance with the instructions of
Seller
delivered to Buyer not later than 48 hours prior to the
Closing).
3.4
Price Adjustments. The Base Purchase Price will be adjusted:
(a) Upward by the amount of US$18,433,160 being consideration for
the
Company's working capital as at December 31, 2006;
(b) downward as may be required in Section 7.3 or 7.4;
(c) downward by the amount of the Deposit;
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(d) downward by the amount of $380,000,000, being $375,000,000 in
debt
as reflected on the December 31, 2006 balance sheet plus the
$5,000,000 put premium which arises upon the early termination of
the
Credit Agreement;
(e) upward by the amount of any cash equity contribution to the
Company by Seller or FOC between the date hereof and Closing,
but
solely to the extent such contribution (i) reduces the principal
or
the put premium under the Credit Agreement or (ii) is made pursuant
to
Section 7.02 of the First Lien Credit Agreement; and
(f) upward or downward as may be required in Section 13.3.
No
later than ten days before Closing, Seller will deliver to Buyer
a
statement setting forth the Purchase Price as adjusted pursuant to
this Section
3.4. Buyer shall have five days to review the statement and, if
Buyer agrees
with Seller's calculations, the Parties shall proceed to Closing as
scheduled.
If Buyer disagrees with Seller's calculations, the Parties shall
negotiate in
good faith for five days to resolve their differences. If the
Parties still
cannot agree after such five day period, they shall proceed to
mediation with a
mutually agreeable mediator. If they cannot agree on a mediator
within five
days, or if they are unable to reach agreement within ten days
after selecting a
mediator, Closing shall proceed with the Purchase Price adjusted
per the
adjustment demand of the Buyer. The allocated value of the adjusted
assets
subject to dispute, as set forth in Exhibit A-2, shall be placed by
Buyer in an
interest-bearing escrow account pending resolution of the dispute,
and,
following Closing, the Parties shall immediately refer the
adjustment dispute to
binding arbitration.
Such
arbitration shall be conducted in Houston, Texas under the auspices
of
the US Chamber of Commerce (the "Chamber"). It shall be conducted
by a single
arbitrator chosen by mutual agreement of the Parties. Should the
Parties fail to
reach agreement on an arbitrator, an arbitrator shall be chosen by
the Chamber
in accordance with their Rule of Arbitration; provided that such
arbitrator
shall be an expert in the valuation of oil & gas properties
with at least 10
years of experience in the industry and may, but need not, be an
attorney. The
arbitration shall be conducted with the greatest possible haste.
The award of
the arbitrator shall be limited to an award to Seller of cash
money, bounded by
the initial claims of the Parties as to the proper value of the
adjustments.
Each Party shall bear its own costs, and the jointly incurred
arbitration fees
shall be split equally between the Parties.
The
foregoing arbitration clause shall apply only to disputes as to
potential Purchase Price adjustments made under this Section
3.4.
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF THE SELLER AND THE COMPANY
The
Seller and the Company hereby represent and warrant to Buyer as of
the
date hereof and as of the Closing Date as follows:
4.1
Organization and Power. The Company is a limited liability company
duly
organized, validly existing and in good standing under the laws of
the State of
Delaware and is
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qualified and in good standing to transact business in each
jurisdiction in
which such qualification is required by Law, except where the
failure to be so
qualified would not have a Material Adverse Effect. The Company has
all
requisite corporate power and authority to execute, deliver and
perform its
obligations under this Agreement and to consummate the transactions
contemplated
hereby. The Company has heretofore delivered to Buyer complete and
correct
copies of its constituent documents, each as amended to date.
4.2
Authorizations; Execution and Validity. The execution and delivery
of
this Agreement by the Company, the performance of this Agreement by
the Company
and the consummation by the Company of the transactions
contemplated hereby and
thereby to be consummated by it, have been duly authorized by all
necessary
corporate action and no other corporate action on the part of the
Company is
necessary with respect thereto. This Agreement has been duly
executed and
delivered by the Company and, when duly and validly executed and
delivered by
Buyer and Seller, will constitute a valid and binding obligation of
the Company,
enforceable against the Company in accordance with its terms,
except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization,
moratorium and similar laws of general applicability and by general
principles
of equity.
4.3
Capitalization.
(a) The authorized equity ownership of the Company consists solely
of
the
Membership Interests, which are owned 100% of record and
beneficially,
free
and clear of any Liens (other than Liens that shall be released at
or
prior to Closing) by Seller, and have been duly authorized and
validly
issued, and are fully paid and non-assessable. There are no
outstanding
options, subscriptions, warrants, calls, commitments, preemptive
rights or
other rights obligating the Company to issue or sell any
Membership
Interests or any securities convertible into or exercisable for
any
Membership Interests, or otherwise requiring Seller or the Company
to give
any
Person the right to receive any benefits or rights similar to
any
rights enjoyed by or accruing to the holders of Membership
Interests or any
rights to participate in the equity or net income of the Company.
All of
the
issued Membership Interests of the Company were issued, and to
the
extent purchased or transferred, have been so purchased or
transferred, in
compliance with all applicable Laws, including federal and state
securities
laws, and any preemptive rights and any other statutory or
contractual
rights of any Seller.
(b) The Company has no Subsidiaries. The Company does not own,
directly or indirectly, any capital of or other equity interest in
or has
any
other investment in or outstanding loans to any corporation,
partnership or other entity or organization. There are no
stockholders'
agreements, voting trusts or other agreements or understandings to
which
Seller or the Company is a party or by which either is bound with
respect
to
the transfer or voting of any Membership Interests.
4.4
Financial Statements; Other Financial Data. Attached hereto on
Schedule
4.4 are correct and complete copies of (i) the audited balance
sheet of the
Company as of December 31, 2006, together with the related audited
statements of
income and retained earnings and of cash flows for the period ended
December 31,
2006 and (ii) the unaudited balance sheet of the Company as of
March 31, 2007,
together with the related unaudited statements of income and
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retained earnings and of cash flows for the quarter ended March 31,
2007 (the
"Financial Statements"). The Financial Statements present fairly in
all material
respects the financial position of the Company as of the dates
indicated, and
the results of its operations for the respective periods indicated.
The
Financial Statements have been prepared in conformity with
GAAP.
4.5
Consents. Schedule 4.5 sets forth the consents, authorizations
and
approvals that must be obtained or waived prior to the consummation
or
performance by the Company and Seller of the transactions
contemplated by this
Agreement; excluding, therefrom any consents, authorizations and
approvals that
the Buyer may be required to obtain in order to lawfully conduct
business in
Alaska generally and to operate the Oil and Gas Properties,
specifically.
4.6
No Defaults or Conflicts. Neither the execution and delivery by
the
Company of this Agreement nor the consummation or performance by
the Company of
the transactions contemplated by this Agreement to be consummated
or performed
by it (i) results or will result in any violation of its
constituent documents;
(ii) subject to obtaining any required consent under the Credit
Agreement,
violates or conflicts with, or constitutes a breach of any of the
terms or
provisions of or a default under, or results in the creation or
imposition of
any Lien upon any property or asset of the Company, the trigger of
any charge,
payment or requirement of consent, or the acceleration or increase
of the
maturity of any payment date under: (A) any Contract or (B) any
applicable Law
or Order to which the Company or any of its respective properties
is subject.
4.7
Agreements, Contracts and Commitments. Except for the Leases or
the
Units, all of which are listed on Exhibit "A," the Company has
listed in
Schedule 4.7 all leases, contracts, agreements and instruments to
which it is a
party as of the date hereof (i) which is an employment agreement
between the
Company, on the one hand, and its officers and employees, on the
other hand,
(ii) which, upon Closing, will (either alone or upon the occurrence
of any
additional acts or events, including the passage of time) result in
any material
payment or benefit (whether of severance pay or otherwise) becoming
due, or the
acceleration or vesting of any right to any material payment or
benefits, from
Buyer or the Company to any officer, director, consultant or
employee of the
Company, (iii) which involves payment by or to the Company of more
than
US$250,000 or extends for a term of six months or more, (iv) which
expressly
limits the ability of the Company to compete in or conduct any line
of business
or compete with any Person or in any geographic area or during any
period of
time, in each case, if such limitation is or is reasonably likely
to be material
to the Company, (v) which is a material joint venture agreement,
joint operating
agreement, partnership agreement or other similar contract or
agreement
involving a sharing of profits and expenses with one or more third
Persons, (vi)
the benefits of which will be increased, or the vesting of the
benefits of which
will be accelerated, by the occurrence of any of the transactions
contemplated
by this Agreement, or the value of any of the benefits of which
will be
calculated on the basis of any of the transactions contemplated by
this
Agreement (including any stock option plan, stock appreciation
rights plan,
restricted stock plan or stock purchase plan) or (vii) which is a
limited
liability operating agreement or equity holder rights agreement or
which
otherwise provides for the issuance of any securities in respect of
this
Agreement (the "Material Contracts"). The Company has not breached,
nor to the
Company's or Seller's Knowledge is there any claim or any legal
basis for a
claim that the Company or any third party has breached, any of the
terms or
conditions of any Material
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Contract, except where any such breach, whether considered
individually or in
the aggregate, could not be reasonably expected to result in a
Material Adverse
Effect.
4.8
Litigation. There are no Legal Proceedings pending or, to the
Company's
Knowledge, threatened against or affecting the Company or any of
its assets that
are reasonably likely to have a Material Adverse Effect on the
Company. The
Company is not subject to any Order or Official Action. There are
no Legal
Proceedings pending against or, to the Company's or Seller's
Knowledge,
threatened in writing against, the Company that questions the
validity or
legality of any of this Agreement or any action taken or to be
taken by the
Company in connection herewith or therewith.
4.9
Taxes.
(a) Except as disclosed on Schedule 4.9:
(i) There are no Liens for Taxes upon any of the properties or
assets of the Company (except for Permitted Liens).
(ii) No agreements relating to allocation or sharing of, or
liability or indemnification for, Taxes exist between the Company
and
any other Person. Any internal tax allocation agreement shall
terminate at the Closing.
(iii) The Company is not a party to any arrangement, nor does
it
hold any Oil and Gas Property in an entity treated as a tax
partnership for Tax purposes.
(iv) Within the times and in the manner prescribed by law, the
Company has filed all federal, state and local tax returns and all
tax
returns for foreign countries, provinces and other governing
bodies
having jurisdiction to levy taxes upon it.
(v) To the Company's and Seller's knowledge, all tax returns
filed by the Company for the taxable years ending in 2000 through
2006
constitute complete and accurate representations of their
respective
tax liabilities for such years and accurately set forth all items
(to
the extent required to be included or reflected in such
returns)
relevant to
their future tax liabilities, including the tax bases of
its properties and assets.
(v) The Company has not waived or extended any applicable
statute
of limitations relating to the assessment of federal, state, local
or
foreign taxes.
(vi) No examination of the federal, state, local or foreign tax
returns of the Company are currently in progress nor, to the
Company's
and Seller's knowledge, is any such examination threatened.
(b) The Company is a disregarded entity for federal income tax
purposes under Section 7701 of the Code.
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4.10
Fees. The Company has not paid or become obligated to pay any fee
or
commission to any broker, finder or intermediary in connection with
the
transactions contemplated hereby for which the Company or Buyer
shall have
liability following the Closing.
4.11
Absence of Certain Changes or Events. Except as set forth on
Schedule
4.11, as disclosed in the Financial Statements, since December 31,
2006, or
otherwise where the Buyer has consented in writing, (i) the Company
has
conducted its business only in the ordinary course consistent with
past practice
in all material respects, and (ii) there has not been any
transaction or
occurrence by which the Company has:
(a) suffered any Material Adverse Effect;
(b) declared, set aside or paid any dividend or other
distribution
(whether in cash, stock or property) with respect to any of its
outstanding
Membership Interest, or made any redemption, purchase or other
acquisition
of
any of its equity securities;
(c) other than the principal payment of US$625,000 made under
the
Credit Agreement on March 30, 2007 and payments that are within the
scope
of
Section 3.4(e) above, cancelled or paid any Company Debt (in any
amount)
or
waived any receivables, claims or rights in excess of
US$100,000
individually or in the aggregate;
(d) suffered any uninsured casualty loss or damage in excess of
US$100,000 individually or in the aggregate;
(e) amended any material term of any equity security or
Material
Contract of the Company;
(f) hired any employees;
(g) made any payments to any Affiliates except in the ordinary
course
of
business pursuant to the Intercompany Services Agreement referred
to in
Section 10.1;
(h) incurred any obligation to make capital expenditures in excess
of
US$250,000 individually or in the aggregate;
(i) sold, leased, encumbered or otherwise disposed of, or agreed
to
sell, lease (whether such lease is an operating or capital lease),
encumber
or
otherwise disposed of any portion of its assets, other than in
the
ordinary course of business consistent with past practice;
(j) amended any of its organizational documents, including its
limited
liability company operating agreement;
(k) adopted any plan or agreement of merger or liquidation; or
(1) made any change in its accounting methods, principles or
practices.
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4.12
Compliance with Laws. Schedule 4.12 lists all material Permits.
The
Company holds all material Permits necessary for the lawful conduct
of its
business and is in compliance in all material respects, with all
Laws and Orders
applicable to its business and has filed with the proper
authorities all
statements and reports required by the Laws and Orders to which the
Company or
any of its properties or operations are subject. No claim has been
made by any
Governmental Authority (and, to the Company's and Seller's
Knowledge, no such
claim is anticipated) to the effect that the business conducted by
the Company
fails to comply, in any respect, with any Law.
4.13
Transactions with Related Parties. Except as set forth in
Schedule
4.13:
(a) No Related Party of the Company other than Seller has
entered
into, or has had any direct or indirect financial interest in, any
Material
Contract, transaction or business dealings involving the
Company;
(b) No Related Party of the Company owns or has any interest
in,
directly or indirectly, in whole or in part, any tangible or
intangible
property used in the conduct of the business of the Company;
and
(c) The Company has not, directly or indirectly, guaranteed or
assumed
any
indebtedness for borrowed money or otherwise for the benefit of
any
Related Party of the Company.
4.14
Books and Records. The minute books and records of the Company
are
current as of the date hereof (and shall be current as of the
Closing) with
respect to all undertakings and authorizations, and contain a true,
complete and
correct record of all actions taken at all meetings and by all
written consents
in lieu of meetings of the Company's board of directors, or any
committees
thereof, and members of the Company. The capital ledger and related
Membership
Interest transfer records of the Company contain a true, complete
and correct
record of the original issuance, transfer and other capitalization
matters of
the Membership Interests. The accounting, financial reporting, and
business
books and records of the Company accurately and fairly reflect in
all material
respects the business and condition of the Company and the
transactions and the
assets and liabilities of the Company with respect thereto. Without
limiting the
generality of the foregoing, the Company has not engaged in any
transaction with
respect to its business or operations, maintained any bank account
therefor or
used any funds of the Company in the conduct thereof except for
transactions,
bank accounts and funds that have been and are reflected in the
normally
maintained books and records of the business.
4.15
Information Furnished. The Company has made available to Buyer and
its
directors, officers, employees, counsel, representatives, financing
sources,
customers, creditors, accountants and auditors, true and correct
copies of all
agreements, documents, and other items listed on the Schedules to
this Agreement
and all books and records of the Company.
4.16
Directors and Officers. Schedule 4.16 lists all of the directors
and
officers of the Company as of the Closing Date. The Company has no
employees.
4.17
Bank Accounts. Attached hereto as Schedule 4.17 is a list of all
banks
or other financial institutions with which the Company has an
account, showing
the type and account
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number of each such account, and the names of the persons
authorized as
signatories thereon or to act or deal in connection therewith.
4.18
Owned Real Property. Other than the Oil and Gas Properties and
those
properties listed on Schedule 4.18, the Company does not own any
real property.
4.19
Leased Real Property. Schedule 4.19 contains a complete and
correct
list of all real property leases and any and all amendments thereto
relating to
the leased real property to which the Company is a party or is
bound (the "Real
Property Leases"). The Company has provided to Buyer correct and
complete copies
of the Real Property Leases. Except as disclosed in Schedule 4.19,
(i) each of
the Real Property Leases is in full force and effect, and, to the
Company's and
Seller's Knowledge, is enforceable against the landlord which is
party thereto
in accordance with its terms (except as such enforceability may be
limited by
bankruptcy, insolvency, reorganization and similar laws affecting
creditors
generally and by the availability of equitable remedies), (ii)
there are no
subleases under the Real Property Leases and none of the Real
Property Leases
has been assigned (other than collateral assignments to Company's
Senior Lender
which will be released in their entirety at or prior to the
Closing), (iii) no
notices of default or notices of termination have been received by
the Company
with respect to the Real Property Leases which have not been
withdrawn or
canceled and (iv) the Company is not, and to the Company's and
Seller's
Knowledge, no other party is, in default under any Real Property
Lease. To the
Company's and Seller's Knowledge there has been no receipt of any
written notice
of a proceeding in
