Form 8-K

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ji8FT9rB3x/j/a6PD6WnivNEEcUzFjc5KdAS/GemriFbYbk1gFUSxnih9E1tkGXi r+48IwCoOCSu/5wEJ2HVcQ== 0001193125-05-182034.txt : 20050908 0001193125-05-182034.hdr.sgml : 20050908 20050908112955 ACCESSION NUMBER: 0001193125-05-182034 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20050902 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050908 DATE AS OF CHANGE: 20050908 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONTANGO OIL & GAS CO CENTRAL INDEX KEY: 0001071993 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 954079863 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-16317 FILM NUMBER: 051074491 BUSINESS ADDRESS: STREET 1: 3700 BUFFALO SPEEDWAY SUITE 960 CITY: HOUSTON STATE: TX ZIP: 77098 BUSINESS PHONE: 7139601901 MAIL ADDRESS: STREET 1: 3700 BUFFALO SPEEDWAY SUITE 960 CITY: HOUSTON STATE: TX ZIP: 77098 FORMER COMPANY: FORMER CONFORMED NAME: MGPX VENTURES INC DATE OF NAME CHANGE: 19981013 8-K 1 d8k.htm FORM 8-K Form 8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) September 2, 2005

CONTANGO OIL & GAS COMPANY

(Exact Name of Registrant as Specified in Its Charter)

DELAWARE

001-16317

95-4079863

(State or other jurisdiction

of incorporation)

(Commission File Number)

(IRS Employer

Identification No.)

3700 BUFFALO SPEEDWAY, SUITE 960

HOUSTON, TEXAS 77098

(Address of principal executive offices)

(713) 960-1901

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

In connection with the acquisitions described in Item 2.01 below, which were completed on September 2, 2005, the limited liability company agreements of each of Republic Exploration LLC (“REX”) and Contango Offshore Exploration LLC (“COE”), limited liability companies owned in part by subsidiaries of Contango Oil & Gas Company (together with its subsidiaries, the “Company”), were amended to, among other things, admit Centaurus Oil and Gas, LP (“Centaurus”) as a new member of each of REX and COE, reflect the current membership interests of the members, and restrict the ability of Centaurus and its affiliates to use certain seismic data provided to REX and COE.

The Amendment to Limited Liability Company Agreement and Additional Agreements of REX, dated as of September 1, 2005 (the “REX Amendment”), was entered into among Fairfield Industries Incorporated, Juneau Exploration, L.P. (“JEX”), Centaurus, and REX Offshore Corporation (“REX Offshore”), a wholly-owned subsidiary of the Company. The First Amendment to Limited Liability Company Agreement and Additional Agreements of COE, dated as of September 1, 2005 (the “COE Amendment”), was entered into among JEX, Centaurus, and COE Offshore, LLC (“COE Offshore”), a wholly-owned subsidiary of the Company.

Copies of the REX Amendment and COE Amendment are attached hereto as Exhibits 10.2 and 10.4, respectively, and each is incorporated by reference into this Item 1.01.

ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS

On September 2, 2005, the Company acquired an additional 9.4% in each of its two partially-owned offshore Gulf of Mexico exploration subsidiaries, REX for $5.6 million and COE for $1.9 million, for a total expenditure of $7.5 million. Both interests were purchased from JEX, which prior to the sale, owned 33.3% of each of REX and COE. As a result of these two purchases, the Company’s equity ownership interest in REX has increased from 33.3% to 42.7% and in COE from 66.7% to 76.1%. The purchases were financed from the Company’s existing cash on hand. Following the acquisition, the Company has approximately $29.1 million of remaining cash, cash equivalents and short term investments and no debt.

Centaurus, an independent third party, also purchased a 9.4% interest in both REX and COE from JEX for the same total purchase price of $7.5 million. JEX will continue in its capacity as the managing member of both REX and COE and following these two sales, now owns a 14.6% interest in both REX and COE.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

(c) Exhibits

The following is a list of exhibits filed as part of this Form 8-K. Where so indicated by footnote, exhibits, which were previously filed, are incorporated by reference.


Exhibit No.		Description of Document
2.1		Purchase and Sale Agreement, by and between JEX and REX Offshore, dated as of September 1, 2005.

2.2		Purchase and Sale Agreement, by and between JEX and COE Offshore, dated as of September 1, 2005.

10.1		Limited Liability Company Agreement of REX, dated August 24, 2000.

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10.2		Amendment to Limited Liability Company Agreement and Additional Agreements of REX, dated as of September 1, 2005.

10.3		Limited Liability Company Agreement of COE, dated November 1, 2000.

10.4		First Amendment to Limited Liability Company Agreement and Additional Agreements of COE, dated as of September 1, 2005.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	CONTANGO OIL & GAS COMPANY

Date: September 8, 2005	By:	/s/ KENNETH R. PEAK
		Kenneth R. Peak
		Chairman and Chief Executive Officer

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EX-2.1 2 dex21.htm PURCHASE AND SALE AGREEMENT Purchase and Sale Agreement

EXHIBIT 2.1

PURCHASE AND SALE AGREEMENT

by and between

Juneau Exploration, L.P.

and

REX Offshore Corporation

September 1, 2005

TABLE OF CONTENTS


		Page
ARTICLE 1	CERTAIN DEFINITIONS	1

1.1	Certain Defined Terms	1
1.2	References, Gender, Number	3

ARTICLE 2	PURCHASE AND SALE	3

ARTICLE 3	PURCHASE PRICE AND PAYMENT	3

3.1	Purchase Price	3
3.2	Payment	3

ARTICLE 4	REPRESENTATIONS AND WARRANTIES	3

4.1	Representations and Warranties of Seller	3
4.2	Representations and Warranties of Buyer	4

ARTICLE 5	COVENANTS OF SELLER AND BUYER	5

5.1	Public Announcements	5
5.2	Further Assurances	5
5.3	Fees and Expenses	5
5.4	Continuing Management of REX by Seller	5

ARTICLE 6	CLOSING CONDITIONS	5

6.1	Seller’s Closing Conditions	5
6.2	Buyer’s Closing Conditions	6

ARTICLE 7	CLOSING	6

7.1	Closing	6
7.2	Seller’s Closing Obligations	6
7.3	Buyer’s Closing Obligations	6

ARTICLE 8	INDEMNIFICATION	7

8.1	Indemnification By Seller	7
8.2	Indemnification By Buyer	7
8.3	Third Party Claims	7
8.4	Survival and Time Limitation	8
8.5	Sole and Exclusive Remedy	8
8.6	Compliance with Express Negligence Rule	8

ARTICLE 9	OTHER PROVISIONS	8

9.1	Counterparts	8
9.2	Governing Law	8
9.3	Entire Agreement	8
9.4	Notices	9
9.5	Successors and Assigns	9
9.6	Amendments and Waivers	9

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TABLE OF CONTENTS

(continued)


		Page
9.7	Schedules and Exhibits	10
9.8	Interpretation and Rules of Construction	10
9.9	Agreement for the Parties’ Benefit Only	10
9.10	Attorneys’ Fees	10
9.11	Severability	10

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PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT (this “Agreement”), dated as of September 1, 2005, is by and between Juneau Exploration, L.P., a Texas limited partnership (“Seller”), and REX Offshore Corporation, a Delaware corporation (“Buyer”). Seller and Buyer are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

Recitals:

A. Seller, Buyer and Fairfield Industries Incorporated each own a 33.33333% membership interest in Republic Exploration LLC, a Delaware limited liability company (“REX”).

B. Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, 28.10136% of Seller’s 33.33333% membership interest in REX, or a net 9.36712% of the membership interest in REX (the “LLC Interests”), upon the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, the Parties agree as follows:

ARTICLE 1

CERTAIN DEFINITIONS

1.1 Certain Defined Terms. As used in this Agreement, the following terms have the respective meanings set forth below or set forth in the Sections referred to below:

“Action” means any action, suit, investigation, proceeding, condemnation, or audit by or before any court or other Governmental Authority or any arbitration proceeding.

“Affiliate” means, as to the Person specified, any Person controlling, controlled by or under common control with such specified Person. The concept of control, controlling or controlled as used in the aforesaid context means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of another, whether through the ownership of voting securities, by contract or otherwise. No Person shall be deemed an Affiliate of any Person by reason of the exercise or existence of rights, interests, or remedies under this Agreement.

“Agreement” is defined in the preamble.

“Business Day” means any day which is not a Saturday, Sunday, or legal holiday recognized by the United States of America.

“Buyer” is defined in the preamble.

“Buyer Indemnified Party” and “Buyer Indemnified Parties” are defined in Section 8.1.

“Closing” is defined in Section 7.1.

“Closing Date” means September 1, 2005, or such other date as may be mutually agreed to by Seller and Buyer.

“Dollar,” “Dollars” and “$” mean United States dollars.

“Governmental Authority” means (i) the United States of America, (ii) any state, county, municipality, or other governmental subdivision within the United States of America, and (iii) any court or any governmental department, commission, board, bureau, agency, or other instrumentality of the United States of America or of any state, county, municipality, or other governmental subdivision within the United States of America.

“Indemnified Party” is defined in Section 8.3.

“Indemnifying Party” is defined in Section 8.3.

“Knowledge of Seller” means the actual knowledge of any fact, circumstance or condition by John B. Juneau.

“Law” means any applicable statute, law (including common law), ordinance, regulation, rule, treaty, code, permit, certificate, license, interpretation, judgment, ruling, order, writ, injunction, decree, or other official act of or by any Governmental Authority.

“Lien” means any lien, security interest, charge, claim, mortgage, deed of trust, option, warrant, purchase right, lease, or other encumbrance.

“LLC Agreement” means that certain Limited Liability Company Agreement of REX dated August 24, 2000, as the same may be amended from time to time.

“LLC Interests” is defined in the Recitals.

“Losses” means any and all claims, liabilities, losses, causes of action, fines, penalties, litigation, lawsuits, administrative proceedings, administrative investigations, costs, and expenses, including reasonable attorneys’ fees, court costs, and other costs of suit or proceeding.

“Material Adverse Effect” means a material adverse effect on the value of REX, excluding any effect resulting from any change in economic, industry, or market conditions (whether general or regional in nature or limited to any area where any assets of REX are located) or from any change in law or regulatory policy.

“Party” and “Parties” are defined in the preamble.

“Person” means any Governmental Authority or any individual, firm, partnership, corporation, limited liability company, joint venture, trust, unincorporated organization or other entity or organization.

“Purchase Price” is defined in Section 3.1.

“Schedules” means Seller’s disclosure schedules attached to this Agreement.

“Seller” is defined in the preamble.

1.2 References, Gender, Number. All references in this Agreement to an “Article,” “Section” or “subsection” shall be to an Article, Section, or subsection of this Agreement, unless the context requires otherwise. Unless the context otherwise requires, the words “this Agreement,” “hereof,” “hereunder,” “herein,” “hereby” or words of similar import shall refer to this Agreement as a whole and not to a particular Article, Section, subsection, clause or other subdivision hereof. Whenever the context requires, the words used herein shall include the masculine, feminine and neuter gender, and the singular and the plural.

ARTICLE 2

PURCHASE AND SALE

On and subject to the terms and conditions of this Agreement, Seller agrees to sell and convey to Buyer, and Buyer agrees to purchase and receive, all of the LLC Interests.

ARTICLE 3

PURCHASE PRICE AND PAYMENT

3.1 Purchase Price. The purchase price for the sale and conveyance of the LLC Interests to Buyer shall consist of a cash purchase price of Five Million Six Hundred Twenty Five Thousand US Dollars ($5,625,000) (the “Purchase Price”) and shall be payable by Buyer as provided in Section 3.2.

3.2 Payment. At the Closing, Buyer shall wire transfer the Purchase Price in immediately available funds to a bank account of the Seller previously identified by the Seller.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

4.1 Representations and Warranties of Seller. As of the date of this Agreement, Seller represents and warrants to Buyer as follows:

(a) Organization and Good Standing. Seller is a limited partnership duly formed, validly existing and in good standing under the Laws of the State of Texas and has the requisite powers under its formation documents to carry on its business as now being conducted.

(b) Authority. Seller has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution, delivery and performance of this Agreement and the transactions contemplated hereby have been duly and validly authorized by all requisite limited partnership action on the part of Seller.

(c) Enforceability. This Agreement has been duly and validly executed and delivered by Seller and constitutes a legal, valid and binding obligation of Seller enforceable against it in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium, and other similar Laws of general application from time to time in effect that affect creditors’ rights generally, (ii) general principles of equity, and (iii) the power of a court to deny enforcement of remedies generally based upon public policy.

(d) LLC Interests. At the Closing, Seller will deliver, or cause to be delivered, to Buyer good and valid title to the LLC Interests free and clear of any Liens (except as created by this Agreement, and restrictions on sales of securities under applicable securities Laws).

(e) Capitalization. The LLC Interests will constitute 9.36712% of the outstanding equity ownership in REX on the Closing Date. All of the LLC Interests have been duly authorized and are validly issued, fully paid, and nonassessable and were not issued in violation of the preemptive rights of any person.

(f) No Violation or Breach. Except as set forth in Schedule 4.1(f), neither the execution and delivery of this Agreement nor the consummation of the transactions and performance of the terms and conditions hereof by Seller will result in a violation or breach of any provision, including but not limited to any change of control provision, of any agreement relating to seismic data under which REX is bound.

(g) Consents. No consent, approval, authorization or permit of, or filing with or notification to, any Person is required for or in connection with the execution and delivery of this Agreement by Seller or for or in connection with the consummation of the transactions and performance of the terms and conditions contemplated hereby by Seller, except for (i) the consents, filings, and notices set forth on Schedule 4.1(g) and (ii) consents, approvals, authorizations, permits, filings or notices that, if not obtained or made, would not, individually or in the aggregate, have a Material Adverse Effect.

(h) Actions. Except as set forth on Schedule 4.1(h), there is no Action pending or, to the Knowledge of Seller, threatened against Seller or REX, except for threatened Actions that are not reasonably expected by Seller, individually or in the aggregate, to have a Material Adverse Effect or adversely affect the ability of Seller to perform its obligations under this Agreement.

(i) Federal Offshore Leases. Schedule 4.1(i) lists all federal offshore leases in the Gulf of Mexico held by REX as of the Closing Date and any and all contracts, farm-ins, farm-outs, assignments and amendments related thereto.

4.2 Representations and Warranties of Buyer. Buyer represents and warrants to Seller as follows:

(a) Organization and Good Standing. Buyer is a corporation duly organized, validly existing, and in good standing under the Laws of the State of Delaware and has the requisite power under its formation documents to carry on its business as now being conducted.

(b) Authority. Buyer has all requisite power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement. The execution, delivery, and performance of this Agreement and the transactions contemplated hereby have been duly and validly authorized by all requisite corporate action on the part of Buyer.

(c) Enforceability. This Agreement has been duly and validly executed and delivered by Buyer and constitutes a valid and binding agreement of Buyer enforceable against it

in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium, and other similar Laws of general application from time to time in effect that affect creditors’ rights generally, (ii) general principles of equity, and (iii) the power of a court to deny enforcement of remedies generally based upon public policy.

ARTICLE 5

COVENANTS OF SELLER AND BUYER

5.1 Public Announcements. Prior to the Closing Date, without the prior written approval of the other Party (which approval shall not be unreasonably withheld, conditioned, or delayed), no Party will issue, or permit any agent or Affiliate of such Party to issue, any press releases or otherwise make, or cause any agent or Affiliate of such Party to make, any public statements with respect to this Agreement and the transactions contemplated hereby, except when such release or statement is deemed in good faith by the releasing Party to be required by Law or under the applicable rules and regulations of a stock exchange or market on which the securities of the releasing Party or any of its Affiliates are listed. In each case to which such exception applies, the releasing Party will use its reasonable efforts to provide a copy of such release or statement to the other Party and incorporate any reasonable changes which are suggested by the non-releasing Party prior to releasing or making the statement. After the Closing Date, the Parties will confer with each other regarding their initial public announcement for the transaction contemplated herein.

5.2 Further Assurances. Seller and Buyer each agree that from time to time after the Closing Date, it will execute and deliver such further instruments, and take such other action, as may be reasonably necessary to carry out the purposes and intents of this Agreement.

5.3 Fees and Expenses. Except as otherwise expressly provided in this Agreement, all fees and expenses, including fees and expenses of counsel, financial advisors, and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party incurring such fee or expense, whether or not the Closing shall have occurred.

5.4 Continuing Management of REX by Seller. Notwithstanding the sale of the LLC Interests contained herein, Seller shall continue to manage the business and affairs of REX and, except as provided in the LLC Agreement, Seller shall make all decisions with respect to the business, affairs and operations of REX.

ARTICLE 6

CLOSING CONDITIONS

6.1 Seller’s Closing Conditions. The obligation of Seller to proceed with the Closing contemplated hereby is subject, at the option of Seller, to the satisfaction on or prior to the Closing Date of all of the following conditions:

(a) Representations, Warranties, and Covenants. The representations and warranties of Buyer contained in Section 4.2 of this Agreement shall be true and correct in all material respects on and as of the Closing Date.

(b) Closing Documents. On or prior to the Closing Date, Buyer shall have delivered, or be standing ready to deliver at the Closing, all agreements, instruments, and documents required to be delivered by Buyer under Section 7.3.

(c) Purchase Price. Buyer shall have delivered the Purchase Price to Seller by wire transfer in immediately available funds.

6.2 Buyer’s Closing Conditions. The obligation of Buyer to proceed with the Closing contemplated hereby is subject, at the option of Buyer, to the satisfaction on or prior to the Closing Date of all of the following conditions:

(a) Representations, Warranties, and Covenants. The representations and warranties of Seller in Section 4.1 of this Agreement shall be true and correct in all material respects on and as of the Closing Date.

(b) Closing Documents. On or prior to the Closing Date, Seller shall have delivered, or be standing ready to deliver at the Closing, all agreements, instruments, and documents required to be delivered by Seller pursuant to Section 7.2.

ARTICLE 7

CLOSING

7.1 Closing. A closing (the “Closing”) shall be held on the Closing Date at the offices of Morgan, Lewis & Bockius LLP, in Los Angeles, California, or at such other time or place as Seller and Buyer may otherwise agree in writing. To facilitate the Closing, Buyer and Seller agree that a pre-closing at which all closing agreements shall be signed shall occur (if practicable at least two (2) Business Days), prior to the Closing Date.

7.2 Seller’s Closing Obligations. At the Closing, Seller shall execute and deliver, or cause to be executed and delivered, to Buyer the following:

(a) duly executed copies of the Assignment and Assumption Agreement; and

(b) any other documents or instruments reasonably required by Buyer to consummate the transactions contemplated hereunder.

7.3 Buyer’s Closing Obligations. At the Closing, Buyer shall deliver, or cause to be delivered, to Seller the following:

(a) the Purchase Price to Seller in immediately available funds to the bank account as provided in Section 3.2;

(b) duly executed copies of the Assignment and Assumption Agreement; and

(c) any other documents or instruments reasonably required by Seller to consummate the transaction contemplated hereunder.

ARTICLE 8

INDEMNIFICATION

8.1 Indemnification By Seller. From and after the Closing, subject to the other terms and limitations in this Agreement, Seller shall indemnify, defend, reimburse, and hold harmless Buyer and its Affiliates, and its and their directors, officers, members, partners, employees, consultants, agents, representatives, advisors, successors, and assigns (individually a “Buyer Indemnified Party” or collectively, the “Buyer Indemnified Parties”) from and against any and all Losses asserted against or incurred by any of the Buyer Indemnified Parties (i) for any breach of Seller’s representations or warranties made in this Agreement, or (ii) for any breach of the covenants or obligations of Seller under this Agreement. In the event and to the extent that any such Losses incurred by the Buyer Indemnified Parties are adjudicated to be attributable to contributory negligence, concurrent liability or fault of the Buyer Indemnified Parties, Seller shall remain liable to indemnify the Buyer Indemnified Parties for all such Losses that are not so attributable.

8.2 Indemnification By Buyer. From and after the Closing, subject to the other terms and limitations in this Agreement, Buyer shall indemnify, defend, reimburse, and hold harmless Seller, its Affiliates, and its and their directors, officers, members, partners, employees, consultants, agents, representatives, advisors, successors, and assigns (individually a “Seller Indemnified Party” or collectively, the “Seller Indemnified Parties”) from and against any and all Losses asserted against or incurred by any of the Seller Indemnified Parties (i) for any breach of Buyer’s representations or warranties made in this Agreement, or (ii) for any breach of the covenants or obligations of Buyer and its Affiliates under this Agreement. In the event and to the extent that any such Losses incurred by the Seller Indemnified Parties are adjudicated to be attributable to contributory negligence, concurrent liability or fault of the Seller Indemnified Parties’, Buyer shall remain liable to indemnify the Seller Indemnified Parties for all such Losses that are not so attributable.

8.3 Third Party Claims. If a claim by a Person is made against a Seller Indemnified Party or a Buyer Indemnified Party (each, an “Indemnified Party”), and if such Indemnified Party intends to seek indemnity with respect thereto under Article 8, such Indemnified Party shall promptly furnish written notice to other party (the “Indemnifying Party”) of such claim. The failure of the Indemnified Party to deliver prompt written notice of a claim shall not affect the indemnity obligations of the Indemnifying Party hereunder except to the extent the Indemnifying Party was substantially disadvantaged by such delay in delivery notice of such claim. The Indemnifying Party shall have thirty (30) days after receipt of such notice to undertake, conduct, and control (through counsel of its own choosing and at its own expense) the settlement or defense thereof, and the Indemnified Party shall cooperate with it in connection therewith. The Indemnifying Party shall permit the Indemnified Party to participate in such settlement or defense through counsel chosen by such Indemnified Party (but the fees and expenses of such counsel shall be borne by such Indemnified Party). So long as the Indemnifying Party, at the Indemnifying Party’s cost and expense, (i) has undertaken the defense of, and assumed full responsibility for all indemnified liabilities with respect to, such claim, (ii) is reasonably contesting such claim in good faith, by appropriate proceedings, and (iii) has taken such action (including the posting of a bond, deposit, or other security) as may be necessary to prevent any action to foreclose a Lien against or attachment of the property of the

Indemnified Party for payment of such claim, the Indemnified Party shall not pay or settle any such claim. Notwithstanding compliance by the Indemnifying Party with the preceding sentence, the Indemnified Party shall have the right to pay or settle any such claim, but in such event it shall waive any right to indemnity by the Indemnifying Party for such claim. If within thirty (30) days after the receipt of the Indemnified Party’s notice of a claim of indemnity hereunder, the Indemnifying Party does not notify the Indemnified Party that it elects (at the Indemnifying Party’s cost and expense) to undertake the defense thereof and assume full responsibility for all indemnified liabilities with respect thereto, or gives such notice and thereafter fails to contest such claim in good faith or to prevent action to foreclose a Lien against or attachment of the Indemnified Party’s property as contemplated above, the Indemnified Party shall have the right to contest, settle, or compromise such claim and the Indemnified Party shall not thereby waive any right to indemnity for such claim under this Agreement.

8.4 Survival and Time Limitation. The terms and provisions of this Agreement shall survive the Closing of the transactions contemplated hereunder. Notwithstanding the foregoing, after Closing, any assertion by Buyer or any Buyer Indemnified Party that Seller is liable to Buyer or any Buyer Indemnified Party for indemnification under the terms of this Agreement or otherwise in connection with the transactions contemplated in this Agreement must be made in writing and must be given to Seller (or not at all) on or prior to the date that is twelve (12) months after the Closing Date, except for indemnification for matters addressed in Section 4.1(d) which must be made in writing and must be given to Seller (or not at all) on or prior to the date that is three (3) years after the Closing Date.

8.5 Remedies. The indemnification provisions of this Article 8 shall be in addition to, and not a limitation of, any other remedy a Party has for any breach of the other Party’s representations, warranties, covenants, or agreements contained in this Agreement or otherwise with respect to this Agreement or the transactions contemplated hereby.

8.6 Compliance with Express Negligence Rule. All releases, disclaimers, limitations on liability, and indemnities in this Agreement, including those in this Article 8, shall apply even in the event of the sole, joint, and/or concurrent negligence, strict liability, or fault of the party whose liability is released, disclaimed, limited, or indemnified.

ARTICLE 9

OTHER PROVISIONS

9.1 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party.

9.2 Governing Law. This Agreement and the rights and obligations of the parties hereunder and the transactions contemplated hereby shall be governed by, enforced, and interpreted in accordance with the laws of the State of Delaware.

9.3 Entire Agreement. This Agreement and the Schedules and Exhibits hereto contain the entire agreement between the Parties with respect to the subject matter hereof and there are no agreements, understandings, representations, or warranties between the Parties other than those set forth or referred to herein.

9.4 Notices. All notices hereunder shall be sufficiently given for all purposes hereunder if in writing and delivered personally, sent by documented overnight delivery service or, to the extent receipt is confirmed, by United States Mail, telecopy or overnight delivery to the appropriate address or number as set forth below. Notices to Seller shall be addressed as follows:

Juneau Exploration, L.P.

26902 Nichols Sawmill Road

Magnolia, Texas 77355-3586

Fax No.: (281) 356-2666

Attention: John B. Juneau

or at such other address and to the attention of such other Person as may designate by written notice to Buyer.

Notices to Buyer shall be addressed to:

REX Offshore Corporation

3700 Buffalo Speedway, Suite 960

Houston, Texas 77098

Fax No.: (713) 960-1065

Attention: Kenneth R. Peak

or at such other address and to the attention of such other Person as Buyer may designate by written notice to Seller.

Notice given by overnight delivery or mail shall be effective upon actual receipt. Notice given by telecopier shall be effective upon actual receipt if received during the recipient’s normal business hours, or at the beginning of the recipient’s next Business Day after receipt if not received during the recipient’s normal business hours. All notices by telecopier shall be confirmed promptly after transmission in writing by certified mail or overnight delivery.

9.5 Successors and Assigns. The rights and obligations of the Parties shall not be assigned or delegated by either Party without the written consent of the other Party, which may be withheld in such Party’s sole discretion. Subject to the preceding, this Agreement shall be binding upon and inure to the benefit of the Parties and their successors and assigns.

9.6 Amendments and Waivers. This Agreement may not be modified or amended except by an instrument or instruments in writing signed by the Party against whom enforcement of any such modification or amendment is sought. Any Party may, only by an instrument in writing, waive compliance by the other Party with any term or provision of this Agreement on the part of such other Party to be performed or complied with. The waiver by a Party of a breach of any term or provision of this Agreement shall not be construed as a waiver of any subsequent breach.

9.7 Schedules and Exhibits. All Schedules and Exhibits hereto which are referred to herein are hereby made a part hereof and incorporated herein by such reference.

9.8 Interpretation and Rules of Construction. This Agreement shall not be construed against either Party, and no consideration shall be given or presumption made, on the basis of who drafted this Agreement or any particular provision hereof or who supplied the form of Agreement. In construing this Agreement:

(a) examples shall not be construed to limit, expressly or by implication, the matter they illustrate;

(b) the word “includes” and its derivatives means “includes, but is not limited to” and corresponding derivative expressions;

(c) a defined term has its defined meaning throughout this Agreement and each Exhibit and Schedule to this Agreement, regardless of whether it appears before or after the place where it is defined;

(d) each Exhibit and Schedule to this Agreement is a part of this Agreement, but if there is any conflict or inconsistency between the main body of this Agreement and any Exhibit or Schedule, the provisions of the main body of this Agreement shall prevail; and

(e) the headings and titles herein are for convenience only and shall have no significance in the interpretation hereof.

9.9 Agreement for the Parties’ Benefit Only. This Agreement is not intended to confer upon any Person not a party hereto any rights or remedies hereunder, and no Person, other than the Parties, is entitled to rely on any representation, warranty, covenant, or agreement contained herein.

9.10 Attorneys’ Fees. The prevailing Party in any legal proceeding brought under or to enforce this Agreement shall be additionally entitled to recover court costs and reasonable attorneys’ fees from the nonprevailing Party.

9.11 Severability. If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by any Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any adverse manner to a Party. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each of the Parties as of the day first above written.


Seller:

Juneau Exploration, L.P.,
a Texas limited partnership

By:	Juneau GP, LLC, its General Partner

	By:
	Name:	John B. Juneau
	Title:	Sole Manager

Buyer:

REX Offshore Corporation,
a Delaware corporation

By:
Name:	Kenneth R. Peak
Title:	President and CEO

LIST OF EXHIBITS AND SCHEDULES

List of Exhibits


Exhibit 7.2(a)		Form of Assignment and Assumption Agreement

List of Schedules


Schedule 4.1(f)		Violations or Breaches
Schedule 4.1(g)		Consents
Schedule 4.1(h)		Actions
Schedule 4.1(i)		Federal Offshore Leases

Exhibit 7.2(a)

FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT

Schedule 4.1(f)

Violations or Breaches

None.

Schedule 4.1(g)

Consents

None.

Schedule 4.1(h)

Actions

None.

Schedule 4.1(i)

Federal Offshore Leases

Area/Block

Eugene Island 113B

Eugene Island 76

Vermilion 154*

West Cameron 133

East Cameron 107

West Delta 36

West Cameron 174

High Island 113

South Timbalier 191*

Vermilion 36

Vermilion 109

Vermilion 134

West Cameron 179

West Cameron 185

West Cameron 200

West Delta 18

West Delta 33

West Delta 34

West Delta 43

Ship Shoal 220*

South Timbalier 240*

South Marsh Island 247

Vermilion 130

West Cameron 80

West Cameron 167

Eugene Island 168 *

West Cameron 107

S-L 18640 (LA)

EI-10 – Farm out

VR 73

*	Owned 50% by Contango Offshore Exploration LLC and 50% by Republic Exploration LLC.

EX-2.2 3 dex22.htm PURCHASE AND SALE AGREEMENT Purchase and Sale Agreement

EXHIBIT 2.2

PURCHASE AND SALE AGREEMENT

by and between

Juneau Exploration, L.P.

and

COE Offshore, LLC

September 1, 2005

TABLE OF CONTENTS


		Page
ARTICLE 1	CERTAIN DEFINITIONS	1

1.1	Certain Defined Terms	1
1.2	References, Gender, Number	3

ARTICLE 2	PURCHASE AND SALE	3

ARTICLE 3	PURCHASE PRICE AND PAYMENT	3

3.1	Purchase Price	3
3.2	Payment	3

ARTICLE 4	REPRESENTATIONS AND WARRANTIES	3

4.1	Representations and Warranties of Seller	3
4.2	Representations and Warranties of Buyer	4

ARTICLE 5	COVENANTS OF SELLER AND BUYER	5

5.1	Public Announcements	5
5.2	Further Assurances	5
5.3	Fees and Expenses	5
5.4	Continuing Management of COE by Seller	5

ARTICLE 6	CLOSING CONDITIONS	5

6.1	Seller’s Closing Conditions	5
6.2	Buyer’s Closing Conditions	6

ARTICLE 7	CLOSING	6

7.1	Closing	6
7.2	Seller’s Closing Obligations	6
7.3	Buyer’s Closing Obligations	6

ARTICLE 8	INDEMNIFICATION	7

8.1	Indemnification By Seller	7
8.2	Indemnification By Buyer	7
8.3	Third Party Claims	7
8.4	Survival and Time Limitation	8
8.5	Sole and Exclusive Remedy	8
8.6	Compliance with Express Negligence Rule	8

ARTICLE 9	OTHER PROVISIONS	8

9.1	Counterparts	8
9.2	Governing Law	8
9.3	Entire Agreement	9
9.4	Notices	9
9.5	Successors and Assigns	9
9.6	Amendments and Waivers	9

-i-

TABLE OF CONTENTS

(continued)


		Page
9.7	Schedules and Exhibits	10
9.8	Interpretation and Rules of Construction	10
9.9	Agreement for the Parties’ Benefit Only	10
9.10	Attorneys’ Fees	10
9.11	Severability	10

-ii-

PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT (this “Agreement”), dated as of September 1, 2005, is by and between Juneau Exploration, L.P., a Texas limited partnership (“Seller”), and COE Offshore, LLC, a Delaware limited liability company (“Buyer”). Seller and Buyer are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

Recitals:

A. Seller owns a 33.33333% membership interest in Contango Offshore Exploration LLC, a Delaware limited liability company (“COE”) and Buyer owns a 66.66666% membership interest in COE.

B. Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, 28.10136% of Seller’s 33.33333% membership interest in COE, or a net 9.36712% of the membership interest in COE (the “LLC Interests”), upon the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, the Parties agree as follows:

ARTICLE 1

CERTAIN DEFINITIONS

1.1 Certain Defined Terms. As used in this Agreement, the following terms have the respective meanings set forth below or set forth in the Sections referred to below:

“Action” means any action, suit, investigation, proceeding, condemnation, or audit by or before any court or other Governmental Authority or any arbitration proceeding.

“Agreement” is defined in the preamble.

“Business Day” means any day which is not a Saturday, Sunday, or legal holiday recognized by the United States of America.

“Buyer” is defined in the preamble.

“Buyer Indemnified Party” and “Buyer Indemnified Parties” are defined in Section 8.1.

“Closing” is defined in Section 7.1.

“Closing Date” means September 1, 2005, or such other date as may be mutually agreed to by Seller and Buyer.

“Dollar,” “Dollars” and “$” mean United States dollars.

“Indemnified Party” is defined in Section 8.3.

“Indemnifying Party” is defined in Section 8.3.

“Knowledge of Seller” means the actual knowledge of any fact, circumstance or condition by John B. Juneau.

“Lien” means any lien, security interest, charge, claim, mortgage, deed of trust, option, warrant, purchase right, lease, or other encumbrance.

“LLC Agreement” means that certain Limited Liability Company Agreement of COE dated November 1, 2002, as the same may be amended from time to time.

“LLC Interests” is defined in the Recitals.

“Material Adverse Effect” means a material adverse effect on the value of COE, excluding any effect resulting from any change in economic, industry, or market conditions (whether general or regional in nature or limited to any area where any assets of COE are located) or from any change in law or regulatory policy.

“Party” and “Parties” are defined in the preamble.

“Purchase Price” is defined in Section 3.1.

“Schedules” means Seller’s disclosure schedules attached to this Agreement.

“Seller” is defined in the preamble.

ARTICLE 2

PURCHASE AND SALE

On and subject to the terms and conditions of this Agreement, Seller agrees to sell and convey to Buyer, and Buyer agrees to purchase and receive, all of the LLC Interests.

ARTICLE 3

PURCHASE PRICE AND PAYMENT

3.1 Purchase Price. The purchase price for the sale and conveyance of the LLC Interests to Buyer shall consist of a cash purchase price of One Million Eight Hundred Seventy Five Thousand US Dollars ($1,875,000) (the “Purchase Price”) and shall be payable by Buyer as provided in Section 3.2.

3.2 Payment. At the Closing, Buyer shall wire transfer the Purchase Price in immediately available funds to a bank account of the Seller previously identified by the Seller.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

4.1 Representations and Warranties of Seller. As of the date of this Agreement, Seller represents and warrants to Buyer as follows:

(e) Capitalization. The LLC Interests will constitute 9.36712% of the outstanding equity ownership in COE on the Closing Date. All of the LLC Interests have been duly authorized and are validly issued, fully paid, and nonassessable and were not issued in violation of the preemptive rights of any person.

(h) Actions. Except as set forth on Schedule 4.1(h), there is no Action pending or, to the Knowledge of Seller, threatened against Seller or COE, except for threatened Actions that are not reasonably expected by Seller, individually or in the aggregate, to have a Material Adverse Effect or adversely affect the ability of Seller to perform its obligations under this Agreement.

(i) Federal Offshore Leases. Schedule 4.1(i) lists all federal offshore leases in the Gulf of Mexico held by COE as of the Closing Date and any and all contracts, farm-ins, farm-outs, assignments and amendments related thereto.

4.2 Representations and Warranties of Buyer. Buyer represents and warrants to Seller as follows:

(a) Organization and Good Standing. Buyer is a limited liability company duly organized, validly existing, and in good standing under the Laws of the State of Delaware and has the requisite power under its formation documents to carry on its business as now being conducted.

(c) Enforceability. This Agreement has been duly and validly executed and delivered by Buyer and constitutes a valid and binding agreement of Buyer enforceable against it in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium, and other similar Laws of general application from time to time in effect that affect creditors’ rights generally, (ii) general principles of equity, and (iii) the power of a court to deny enforcement of remedies generally based upon public policy.

ARTICLE 5

COVENANTS OF SELLER AND BUYER

5.4 Continuing Management of COE by Seller. Notwithstanding the sale of the LLC Interests contained herein, Seller shall continue to manage the business and affairs of COE and, except as provided in the LLC Agreement, Seller shall make all decisions with respect to the business, affairs and operations of COE.

ARTICLE 6

CLOSING CONDITIONS

(c) Purchase Price. Buyer shall have delivered the Purchase Price to Seller by wire transfer in immediately available funds.

ARTICLE 7

CLOSING

7.2 Seller’s Closing Obligations. At the Closing, Seller shall execute and deliver, or cause to be executed and delivered, to Buyer the following:

(a) duly executed copies of the Assignment and Assumption Agreement; and

(b) any other documents or instruments reasonably required by Buyer to consummate the transactions contemplated hereunder.

7.3 Buyer’s Closing Obligations. At the Closing, Buyer shall deliver, or cause to be delivered, to Seller the following:

(a) the Purchase Price to Seller in immediately available funds to the bank account as provided in Section 3.2;

(b) duly executed copies of the Assignment and Assumption Agreement; and

(c) any other documents or instruments reasonably required by Seller to consummate the transaction contemplated hereunder.

ARTICLE 8

INDEMNIFICATION

(ii) is reasonably contesting such claim in good faith, by appropriate proceedings, and (iii) has taken such action (including the posting of a bond, deposit, or other security) as may be necessary to prevent any action to foreclose a Lien against or attachment of the property of the Indemnified Party for payment of such claim, the Indemnified Party shall not pay or settle any such claim. Notwithstanding compliance by the Indemnifying Party with the preceding sentence, the Indemnified Party shall have the right to pay or settle any such claim, but in such event it shall waive any right to indemnity by the Indemnifying Party for such claim. If within thirty (30) days after the receipt of the Indemnified Party’s notice of a claim of indemnity hereunder, the Indemnifying Party does not notify the Indemnified Party that it elects (at the Indemnifying Party’s cost and expense) to undertake the defense thereof and assume full responsibility for all indemnified liabilities with respect thereto, or gives such notice and thereafter fails to contest such claim in good faith or to prevent action to foreclose a Lien against or attachment of the Indemnified Party’s property as contemplated above, the Indemnified Party shall have the right to contest, settle, or compromise such claim and the Indemnified Party shall not thereby waive any right to indemnity for such claim under this Agreement.

ARTICLE 9

OTHER PROVISIONS

Juneau Exploration, L.P.

26902 Nichols Sawmill Road

Magnolia, Texas 77355-3586

Fax No.: (281) 356-2666

Attention: John B. Juneau

or at such other address and to the attention of such other Person as may designate by written notice to Buyer.

Notices to Buyer shall be addressed to:

COE Offshore, LLC

3700 Buffalo Speedway, Suite 960

Houston, Texas 77098

Fax No.: (713) 960-1065

Attention: Kenneth R. Peak

or at such other address and to the attention of such other Person as Buyer may designate by written notice to Seller.

9.7 Schedules and Exhibits. All Schedules and Exhibits hereto which are referred to herein are hereby made a part hereof and incorporated herein by such reference.

(a) examples shall not be construed to limit, expressly or by implication, the matter they illustrate;

(b) the word “includes” and its derivatives means “includes, but is not limited to” and corresponding derivative expressions;

(c) a defined term has its defined meaning throughout this Agreement and each Exhibit and Schedule to this Agreement, regardless of whether it appears before or after the place where it is defined;

(e) the headings and titles herein are for convenience only and shall have no significance in the interpretation hereof.

IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each of the Parties as of the day first above written.


Seller:

Juneau Exploration, L.P.,
a Texas limited partnership

By:	Juneau GP, LLC, its General Partner

	By:
	Name:	JohnB. Juneau
	Title:	Sole Manager

Buyer:

COE Offshore, LLC, a Delaware limited liability company

By:
Name:	Kenneth R. Peak
Title:	Chairman and CEO

LIST OF EXHIBITS AND SCHEDULES

List of Exhibits


Exhibit 7.2(a)		Form of Assignment and Assumption Agreement

List of Schedules


Schedule 4.1(f)		Violations or Breaches
Schedule 4.1(g)		Consents
Schedule 4.1(h)		Actions
Schedule 4.1(i)		Federal Offshore Leases

Exhibit 7.2(a)

FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT

Schedule 4.1(f)

Violations or Breaches

None.

Schedule 4.1(g)

Consents

None.

Schedule 4.1(h)

Actions

None.

Schedule 4.1(i)

Federal Offshore Leases

Area/Block

Ship Shoal 358, A-3 well

Vermilion 154*

East Breaks 369

East Breaks 370

Main Pass 221

Vermilion 231

Eugene Island 209

Eugene Island 168*

High Island A16

East Breaks 283

South Timbalier 191*

Grand Isle 63

Grand Isle 72

Grand Isle 73

Ship Shoal 220*

South Timbalier 240*

Viosca Knoll 75

Viosca Knoll 167

Viosca Knoll 161

Viosca Knoll 118

Viosca Knoll 116

Viosca Knoll 119

Viosca Knoll 475

East Breaks – 366 – AHB

East Breaks – 410 – AHB

*	Owned 50% by Contango Offshore Exploration LLC and 50% by Republic Exploration LLC.

EX-10.1 4 dex101.htm LIMITED LIABILITY COMPANY AGREEMENT Limited Liability Company Agreement

Exhibit 10.1

LIMITED LIABILITY COMPANY AGREEMENT

REPUBLIC EXPLORATION LLC

AGREEMENT dated the 24th day of August, 2000 among (1) Fairfield Industries Incorporated, a Delaware corporation (“Fairfield”), with offices at 14100 Southwest Freeway, Suite 600, Sugar Land, Texas 77478, U.S.A., Fax: (281) 275-7550, (2) Juneau Exploration Company, LLC, a Texas limited liability company (“Juneau”), with offices at 26902 Nichols Sawmill Rd., Magnolia, Texas, 77355-3586, Fax: (281) 356-2666, and (3) REX Offshore Corporation, a Delaware corporation (“REX”), with offices at 3700 Buffalo Speedway, Suite 960, Houston, Texas 77098, Fax (713) 960-1065.

WITNESSETH:

WHEREAS, Fairfield and Juneau caused Republic Exploration LLC (the “Company”) to be formed under the Limited Liability Company Act of the State of Delaware (the “Act”, which term will include any future amendments thereto), a copy of the certificate of formation (the “Certificate”) being attached hereto as EXHIBIT A;

WHEREAS, Fairfield, Juneau and REX wish to provide, among other things, for membership in and management of the Company, all on the terms hereinafter set forth;

NOW, THEREFORE, Fairfield, Juneau and REX agree as follows.

1. Limited Liability Company Agreement. This Agreement is a limited liability company agreement under and as provided in the Act.

2. Members. Concurrently with the execution of this Agreement, Fairfield, Juneau and REX will become and be the members of the Company. Fairfield, Juneau and REX and any other individual, corporation or other entity that becomes a member of the Company in accordance with the terms of this Agreement are collectively called “Members”; and any one of them is called a “Member”. The neuter pronoun will refer to a Member regardless of the Member’s gender.

3. Duration of the Company. The Company will have perpetual existence.

4. Business of the Company. The business of the Company will be the identification, recovery and exploitation of hydrocarbon deposits.

5. Contributions by the Members.

(a) Fairfield. Fairfield grants the Company, without charge, a non-exclusive, non-transferable license on the terms hereinafter set forth to the seismic data identified in EXHIBIT 5a-1 hereto and to any reprocessed data that Fairfield makes available to the Company as hereinafter provided (the “Data”, which term will also include any result or product derived from any processing, interpretation or other use of the Data by the Company). The Company may use the Data solely to identify, recover and exploit hydrocarbon prospects for itself. Neither the Company nor any of the Members may (i) use any of the Data for any other purpose, or (ii) except as hereinafter provided disclose

any of the, Data or make any of the Data available to anyone else (including, without limitation, any parent, subsidiary or affiliated entity); but these restrictions will not preclude Fairfield from licensing to others Data it has licensed to the Company.

Fairfield’s capital account will not be credited to any extent for the grant of this license to the Company.

FAIRFIELD MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND OR DESCRIPTION, EXPRESS OR IMPLIED, WITH RESPECT TO THE DATA EXCEPT THAT IT MAY LICENSE IT TO THE COMPANY PURSUANT TO THIS AGREEMENT WITHOUT THE CONSENT OR APPROVAL OF ANY THIRD PARTY AND WITHOUT VIOLATING ANY RIGHT OF ANY THIRD PARTY. ANY USE WHICH THE COMPANY MAKES OF THE DATA AND ANY ACTION WHICH THE COMPANY TAKES BASED ON THE DATA WILL BE AT THE COMPANY’S SOLE RISK, EXPENSE AND LIABILITY, AND THE COMPANY WILL NOT HAVE ANY CLAIM AGAINST FAIRFIELD BY REASON OF ANY SUCH USE OR ACTION.

Juneau, REX and the Company acknowledge that Fairfield’s business is the licensing and other exploitation of the very Data licensed to the Company under this Agreement and that the protection of the Data as provided in this Agreement is essential to Fairfield.

The Company’s right to use the Data will expire on the earlier of the twenty-fifth anniversary of the date of this Agreement or the dissolution and winding up of the Company. On expiration of its license to the Data, the Company will destroy all of the Data.

If the Company wishes to disclose any of the Data to a prospective partner or joint venturer in a prospect or to a prospective purchaser or lender, the Company may do so in accordance with the procedures set forth in EXHIBIT 5a-2, hereto or under other arrangements approved by Fairfield in writing. EXHIBIT 5a-2 also contains other provisions with respect to disclosure of the Data and additional obligations of the Company, all of which the Company and the Members acknowledge.

Within ten (10) days after the date of this Agreement, Fairfield will deliver to the Company the Data identified in EXHIBIT 5a-1.

If Fairfield reprocesses any of the Data other than under a processing contract with a third party, Fairfield will make that reprocessed Data available to the Company under the terms of the license set forth in this Agreement.

(b) REX. Concurrently with the execution of this Agreement, REX is contributing Four Million dollars ($4,000,000.00) to the Company for working capital.

Of these funds, the Company will deposit up to Two Hundred Fifty Thousand dollars ($250,000.00) in its general checking account and will maintain the balance in an interest bearing account until it requires them.

- 2 -

Prior to the execution of this Agreement, Juneau acquired for and on behalf of the Company Texas State Lease No. M-101255 covering the N/2 of the NE4 of the area designated as Galveston Block 149L according to the map thereof in the General Land Office of the State of Texas. Concurrently with the execution of this Agreement, Juneau is transferring that Lease to the Company. As soon as the contribution of REX becomes available funds, the Company will pay Juneau Two Hundred Ten Thousand Two Hundred dollars ($210,200.00) in reimbursement of its cost in acquiring the Lease. Accordingly, this Lease does not constitute a capital contribution by Juneau to the Company.

Fairfield consents to the transfer of the aforesaid Lease to the Company and releases all rights it has under a separate agreement with Juneau in respect of that Lease.

(d) The Company will not pay interest on capital contributions.

(e) Each of the Members confirms to the Company and to the other Members that it and/or its principal equity owner are experienced in the oil and gas industry and that it is fully aware of the risks involved in the venture set forth in this Agreement.

6. Management of the Company.

(a) Juneau will manage the business and affairs of the Company, and, except as hereinafter provided, Juneau will make all decisions with respect to the business, affairs and operations of the Company.

(b) As part of its management responsibilities, Juneau will, for and on behalf of the Company, analyze, process, interpret and use the Data to identify hydrocarbon prospects in which the Company should acquire an interest, and, except as hereinafter provided, Juneau will make all decisions with respect to the acquisition of an interest, the development of the prospect, and the exploitation of the production from the prospect.

Juneau will cause its employees and others who work on the Data to use the Data only for the business of the Company and not to disclose any of the Data to anyone.

(c) Before the Company acquires an interest in any prospect, Juneau will advise the other Members of (i) the prospect and its potential and risks, (ii) the terms and other details of the interest to be acquired including whether that interest will be acquired alone or in conjunction with one or more other parties, (iii) the manner in which the Company will develop the prospect, (iv) the estimated cost to the Company to acquire the interest and develop the prospect, and (v) any other information about venture that a Member requests.

Notwithstanding the foregoing paragraph, if, under Section 6(d)(i) below, Juneau may cause the Company to acquire an interest in a prospect without the approval of the other Members, and if Juneau determines that the Company may lose a worthwhile

- 3 -

opportunity if Juneau must report about the prospect to the other Members before the acquisition is made, then Juneau may cause the Company to acquire the interest before making the report; and if Juneau does so, then Juneau will, promptly thereafter, advise the other Members of the information required under the foregoing paragraph.

(d) Juneau may, without the approval of the other Members, cause the Company to do any of the following and to enter into agreements to accomplish the same:

(i) acquire an interest in a prospect, either alone or in conjunction with one or more other parties, and make all arrangements with respect to that interest and prospect provided Juneau’s estimated cost for the Company to acquire the interest and develop the prospect does not exceed Five Hundred Thousand dollars ($500,000.00);

(ii) borrow up to and including One Million dollars ($1,000,000.00) in connection with any prospect in which the Company has acquired an interest and grant a security interest in the Company’s interest in that prospect to secure the Company’s obligations in respect of that borrowing;

(iii) sell, lease or otherwise dispose of any asset of the Company which has a reasonable value not exceeding Five Hundred Thousand dollars ($500,000.00);

(iv) settle any claim for an amount not exceeding One Hundred Thousand dollars ($100,000.00);

(v) apart from the costs to acquire an interest and develop a prospect, budget and incur expenses for the operation of the Company not in excess of Five Hundred Thousand dollars ($500,000.00) per fiscal year of the Company (pro rata thereof for the fiscal year ending December 31, 2000). Juneau will prepare the budget for each fiscal year with expenses itemized and furnish the Members copies thereof (i) approximately thirty (30) days after the date of this Agreement for the 2000 fiscal year, and (ii) approximately thirty (30) days prior to the commencement of each fiscal year thereafter. The budgets may include fees for professionals to provide expertise required to conduct the business of the Company effectively and which none of the Members can provide.

In making its estimate of the cost to the Company to acquire an interest and develop a prospect, Juneau may take into account investments by participants to the extent that Juneau reasonably and in good faith determines that it can obtain participations by others in the prospect.

The amounts set forth in items (i) through (v) above may be reduced according to the determination of Members owning at least two-thirds (2/3) of the profits of the Company.

(e) Approval by Members owning at least two-thirds (2/3) of the profits of the Company will be required (i) for any matter described in Section 6(d) above for which Juneau does not have sole authority, (ii) for the Company to borrow money or enter into

- 4 -

any agreement other than for the express purposes in the express situations described in Section 6(d) above, (iii) for the Company to lend money or issue a guarantee, (iv) except as provided in Section 6(d)(v) above, for the Company to engage the services of anyone, and (v) for the Company to arrange the defense or prosecution of any claim.

(f) Approval by all of the Members will be required (i) for the Company to merge, consolidate or otherwise combine with another entity, (ii) for the Company to make an assignment for the benefit of creditors or seek relief under any bankruptcy, insolvency or similar law, and (iii) for the Company to engage in any business other than that set forth in Section 4 above.

(g) At the request of any Member, the Members will meet to discuss the business of the Company.

(h) The Members will record in writings signed by them their approvals, agreements, determinations and other actions under or in respect of this Agreement.

7. Compensation; Expenses.

(a) The Company will grant to Juneau or to those whom Juneau designates in writing, by an instrument substantially in the form of EXHIBIT 7a hereto, an overriding royalty of three and one-third percent (3¹/3%) of one hundred percent (100%) [proportionately reducible as provided in EXHIBIT 7a] burdening any oil, gas and/or mineral interest that the Company acquires.

(b) Except as expressly provided in this Agreement, the Members will not be entitled to compensation or reimbursement for their services to the Company or for the services of their employees to the Company. Further, the Members will cause their employees not to seek compensation from the Company, and each Member will indemnify the Company against and hold it harmless from (i) any claims for compensation by any of its employees, and (ii) any expenses (including, without limitation, legal fees) which the Company incurs in connection with any such claim.

(c) The Members will pay their own expenses (including, without limitation, legal fees) in connection with the preparation and negotiation of this Agreement; but the Company will reimburse Fairfield for the filing fees and service company fees to establish the Company and qualify it to do business in Texas.

8. Profits and Losses; Taxation.

(a) Fairfield and Juneau will each have a forty-five percent (45%) interest in the profits of the Company; REX will have a ten percent (10%) interest in the profits of the Company.

The losses of the Company for any fiscal year will be shared by the Members in proportion to their capital accounts on thee day before the last day of that fiscal year.

- 5 -

The capital accounts of the Members will be determined in accordance with the requirements of the Internal Revenue Code and the rules and regulations thereunder from time to time in effect (collectively called the “Code”).

(b) The profits and losses of the Company and items of income, gain, loss, deduction, expense, credit and similar items will be determined by the Company’s accountants in accordance with generally accepted accounting principles.

(c) REX will have the option to acquire an additional twenty-three and one-third percent (23¹/3%) interest in the profits of the Company in exchange for additional contributions to the Company at the rate of One Hundred Seven Thousand One Hundred Forty-three dollars ($107,143.00) for each one percent (1%) interest acquired plus the product of (A) Thirty-five and 23/100 dollars ($35.23) for each one percent interest acquired [pro rata for a fraction of one percent (1%)] and (B) the number of days that have elapsed from the date of this Agreement until the date payment is made.

The option may be exercised in whole or in part, at any time and from time to time, on or prior to December 29, 2000, by giving notice of exercise to the Company and to each of the Members of the Company as hereinafter provided on or prior to that date. Each notice of exercise must specify the additional percentage interest that REX is acquiring, and the notice to the Company must be accompanied by full payment for that interest. The option will be deemed exercised on the day the Company receives such notice and payment of the required amount, and without precluding other methods of payment, receipt by the Company of a check in the required amount drawn on a bank in Houston, Texas, will constitute payment provided the check clears in the normal course.

The Company will deposit the payments it receives on exercise of the option in an interest bearing account until it requires those funds.

If REX exercises the option, the interest of each other Member in the profits of the Company will be reduced by the product of (A) the amount of the interest acquired by REX, and (B) a fraction the numerator of which is the interest of the Member in the profits of the Company immediately prior to the exercise of the option and the denominator of which is the aggregate of the interests of all Members other than REX in the profits of the Company immediately prior to the exercise of the option.

Further, the interest in the profits of the Company acquired by REX on exercise of the option will be deemed to have been acquired on the date of this Agreement; and the resulting interests of the other Members in the profits of the Company (after giving effect to REX’s exercise of the option) will also be deemed to have taken effect on the date of this Agreement.

(d) The Company will be treated as a partnership for federal income tax purposes and, wherever possible, for state and local income tax purposes.

The Company will make the following elections for its first and subsequent tax years:

(i) to deduct currently, in accordance with the Code and the relevant provisions of state law, all intangible drilling and development costs with respect to drilling productive and non-productive wells and the preparation of wells for the production of hydrocarbons;

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(ii) to recover the basis of recovery property using the maximum recovery rate permitted by the Code;

(iii) to deduct expenses of organizing the Company ratably over a sixty-month period in accordance with Section 709 of the Code.

The Company will make all other elections required or permitted to be made by it under the Code or applicable state law in accordance with the written agreement of all of the Members.

The Company will elect Juneau the “tax matters Member” under and pursuant to the Code. Juneau will have authority to apply the provisions of this Agreement relating to the maintenance of capital accounts and the allocation of profits and losses and of each item of income, gain, loss and deduction of the Company so as to comply with Treasury Regulation Sections 1-704-1(b) and 1.704-2 from time to time in effect. In the event that Juneau determines that it is prudent to modify any allocations of profits or losses or items of income, gain, loss or deduction, or debits or credits, or the manner in which they are computed, in order to comply with said Treasury Regulations, then Juneau may make such modification provided that such modification will not have a material effect on the allocation of profits or losses or on cash or other property in kind that would otherwise be allocable or distributable to any Member pursuant to this Agreement had no such modification been made. Juneau will promptly notify the other Members of any modification that it makes under this paragraph and of the nature, extent and effect of the modification.

(e) If a Member transfers all or a part of its interest in the Company [see Section 13], the Company may — but will not be required to — elect to adjust the basis of the Company’s property in accordance with the provisions of the Internal Revenue Code from time to time in effect. The Company will make this election only in accordance with the written agreement of all of the Members.

(f) The Company and its Members will use their best efforts to cause the firm that audits the Company’s financial statements to sign the Company’s federal income tax return as preparer thereof. The Members will also use their best efforts to cause the Company to furnish the Members, within ninety (90) days after the close of the Company’s fiscal year, all information reasonably necessary for the Members to prepare their federal income tax returns.

9. Distributions.

(a) Except as provided in Section 15(b), distributions by the Company will be made to the Members in the same percentages as their interests in the profits of the Company.

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(b) During each of its fiscal years the Company will set aside and maintain in a separate interest bearing account forty percent (40%) of the revenues it receives, as it receives them (the funds so set aside and the interest thereon are called the “Tax Reserve”). If the Members have taxable income from the Company for a fiscal year, the Company will distribute to the Members, from and to the extent of the Tax Reserve for that year, an amount equal to forty percent (40%) of the aggregate taxable income of the Members from the Company for that fiscal year. To the extent the Tax Reserve for any fiscal year is not distributed to the Members, it will be used for the general purposes of the Company.

(c) Except as provided above, the Company will make distributions to the Members only in accordance with the determination of all of the Members.

(d) The Company will not make distributions to the Members before 2001.

10. Bank Accounts.

(a) The Company will maintain bank accounts at such banks with such signatories having such authority as Members owning at least two-thirds (2/3) of the profits of the Company determine.

(b) Initially the Company will maintain its accounts at Bank One Corporation, 910 Travis Street, Sixth Floor, Houston, Texas, with the following signatories, each with single signature authority for any amount: John B. Juneau, Tony Ping and Kenneth Peak.

11. Books and Records; Financial Statements.

(a) Unless Members owning at least two-thirds (2/3) of the profits of the Company decide otherwise, Juneau will, without charge, keep the books and records of the Company and will prepare and furnish to the Members quarterly and annual balance sheets and profit and loss and cash flow statements and such other reports as Juneau deems appropriate.

(b) The Company will maintain its books and records on an accrual basis.

(d) The Company will engage the services of an accounting firm approved by all of the Members to audit the Company’s annual balance sheet and profit and loss statement. Until the Members decide otherwise, the Company will engage the services of Arthur Anderson, LLP, Houston, Texas, to perform this function.

(e) The Members may examine the books and records of the Company during normal hours.

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12. Restrictions on the Activities of Members.

(a) While the Company is in existence and for a period of one (1) year thereafter, Juneau and John B. Juneau will not — and John B. Juneau will cause any entity which he and/or his wife and/or any of his children, either directly or indirectly, control not to — without the approval of the other Members, (i) acquire any interest in any area covered by any of the Data, or (ii) exploit, participate in the recovery or exploitation of, derive any benefit from, or assist anyone else to recover or exploit or derive any benefit from any area covered by any of the Data.

(b) While the Company is in existence and for a period of one (1) year thereafter, REX and Contango Oil & Gas Company, a Nevada corporation (“Contango”), will not — and Contango will cause any entity which it, either directly or indirectly, controls not to — without the approval of the other Members, (i) acquire any interest in any area covered by any of the Data, or (ii) exploit, participate in the recovery or exploitation of, derive any benefit from, or assist anyone else to recover or exploit or derive any benefit from any area covered by any of the Data.

(c) Control means the ability to control or determine the management of an entity, whether by voting power or other means.

(d) While the Company is in existence and thereafter, Fairfield may engage in any activities it wishes.

13. Resignation; Expulsion; Assignment.

(a) A Member may not resign from the Company prior to its dissolution and winding up.

(b) A Member may not be expelled from the Company.

(c) Prior to the dissolution and winding up of the Company, a Member may not assign, transfer, encumber or otherwise dispose of all or a portion of its interest in the Company (including its interest in profits or losses) except for (i) transfers on the dissolution or death of a Member, but in either of these cases the transfer may only be to the shareholders, members or heirs, as the case may be, of the Member, and (ii) transfers approved by all of the Members, other than the Member which is transferring its interest. Any assignment, transfer, encumbrance or other disposition of a Member’s interest in the Company in violation of the provisions of this Agreement will be null and void.

(d) A transferee (other than the Company) of all or a portion of a Member’s interest in the Company pursuant to the provisions of this Agreement is called a “Transferee”. A Transferee that is not a Member of the Company at the time of the transfer will, without further act, become and be a Member of the Company. A Transferee will be subject to the terms and provisions of this Agreement, will be entitled to the rights and benefits of the transferor (a “Transferor”) to the extent of the interest transferred and will be subject to the obligations of the Transferor to the extent of the interest transferred; but a Transferee that is not a signatory to this Agreement at the time of the transfer will not be entitled to receive any distributions unless and until that Transferee executes this Agreement by signing an instrument in the form of

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EXHIBIT 13d-1 hereto. In addition, if a Member transfers all or a portion of its interest in the Company, all of the Members will enter into an amendment to this Agreement substantially in the form of EXHIBIT 13d-2 hereto reflecting the changes in the ownership of the profits and losses of the Company resulting from the transfer and any other matters to which the Members and the Transferee agree.

The Transferor and Transferee will agree between themselves as to the allocation between them of the profits and losses and items of income, gain, loss, deduction, expense, credit and similar items for the fiscal year in which the transfer occurs, and they will jointly advise the Company in writing of their allocation.

(e) The Company may not transfer or assign any of its rights under this Agreement, and any such transfer will be null and void.

14. Events of Bankruptcy. None of the events listed in Section 18-304 of the Act (EVENTS OF BANKRUPTCY) will result in a Member ceasing to be a member of the Company.

15. Dissolution.

(a) The Company will be dissolved and its affairs will be wound up upon the occurrence of any of the following: (i) approval by all of the Members, or (ii) the election of any Member (other than Juneau) made by written notice to the Company and the other Members at any time after the dissolution of or cessation of business by Juneau or after the death of John B. Juneau or John B. Juneau’s ceasing to control Juneau including any incapacity that renders John B. Juneau incapable of controlling Juneau, or (iii) the election of any Member (other than REX) made by written notice to the Company and the other Members at any time after Contango’s ceasing to control REX, or (iv) the election of any Member (other than a Member in breach or default) made by written notice to the Company and the other Members within a period of one hundred twenty (120) days after (A) a Member materially breaches this Agreement or materially defaults in any of its obligations under this Agreement, and (B) the Member making the election becomes aware of the breach or default. The right to elect to dissolve the Company because of a breach or default is in addition to any other rights and remedies each Member has by reason of that breach or default.

Control means the ability to control or determine the management of an entity, whether by voting power or other means.

Except as provided above, the dissolution or death of a Member or the occurrence of any other event which terminates the membership of a Member in the Company will not result in the dissolution and winding up of the Company.

(b) On the dissolution and winding up of the Company, after the obligations of the Company have been paid or provided for, the Company will distribute its remaining assets as follows:

(i) first, to REX to the extent, if any, that its contributions under Sections 5 and 8 and interest earned by the Company on those contributions as provided in Sections 5(b) and 8(c) exceed the aggregate amount of all expenditures of the Company after the date of this Agreement;

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(ii) then, to the Members in the same percentages as their interests in the profits of the Company.

If REX’s contributions are commingled with other funds of the Company in the same interest bearing account, then, to determine the amount of interest earned on REX’s contributions, the funds which the Company withdraws from that account will be deemed to come first from REX’s contributions.

16. Indemnity.

(a) The Company will indemnify each of its Members against any claim, demand, liability, fine or expense (including, without limitation, reasonable legal fees and disbursements, court costs and the cost of appellate proceedings) arising out of any act or inaction by the Member done in good faith and reasonably believed by the Member to be in the best interests of the Company and provided, in the case of any fine, that the Member had no reasonable cause to believe its conduct was unlawful.

(b) The Company will, to the extent approved by all of the Members other than the one seeking indemnity, pay the expenses of the Member seeking indemnity in advance of the final disposition of the matter upon receipt of an undertaking from that Member satisfactory to those Members to repay the amount advanced if it is ultimately determined that the Member seeking indemnity is not entitled to indemnification. The Members required to approve the payment of these expenses will grant such approval (i) if they determine that the Member seeking indemnity will, in fact, be entitled to indemnity under Section 16(a), and (ii) to the extent that they determine that the payment of those expenses will not jeopardize the Company.

(c) Each Member will indemnify each other Member against any liability and any loss, damage or expense (including, without limitation, reasonable legal fees and disbursements, court costs and the cost of appellate proceedings) arising out of any claim by a third party against the indemnitee because of any act or inaction by the indemnitee which does not constitute negligence, gross negligence, willful misconduct, malfeasance, a breach of duty, or other wrongdoing — but only to the extent that the Company does not perform its obligation to the indemnitee under Section 16(a), and then only for a portion of the Company’s unperformed obligation equal to the product of such unperformed obligation and the indemnitor’s percentage interest in the profits of the Company at the time of the occurrence giving rise to the indemnification.

(d) No Member will incur liability to any other Member, and no Member will have a claim against any other Member, because of an error or mistake in judgment made in good faith and in what the Member believed to be in the best interests of the Company.

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(e) No Member will have any liability to the Company or any other Member with respect to any deficit in its capital account.

17. Amendment; Admission of New Members.

(a) This Agreement may be amended only by an instrument in writing signed by all of the Members.

(b) The certificate of formation of the Company may be amended only by an instrument in writing signed by all of the Members.

(c) Except as provided in Section 13 (transfers of interests in the Company), a person may not become a member in the Company unless that person’s admission is approved by all of the Members as evidenced by an amendment to this Agreement signed by all of the Members and by that person.

18. Waiver. The Company and each Member of the Company may not waive any of its rights or any obligation of another or any provision of this Agreement except by an instrument in writing signed by the party issuing the waiver.

19. Severability. If any, provision of this Agreement or the application of any such provision to any individual, corporation or other entity or to any circumstance is held invalid, the remainder of this Agreement, and the application of such provision other than to the extent it is held invalid, will not be invalidated or affected thereby.

20. Governing Law; Submission to Jurisdictions. This Agreement and the rights and obligations of the Members of the Company will be governed by and construed in accordance with the law of the State of Delaware. For purposes of any proceeding involving this Agreement or any of the rights or obligations of any of the Members, each Member hereby submits to the non-exclusive jurisdiction of the courts of the State of Delaware, and agrees not to raise and waives any objection to or defense based upon the venue of any such court or based upon forum non conveniens. Each Member and the Company agree not to bring any action or other proceeding with respect to this Agreement or the Company or with respect to any of the rights or obligations of any of the Members of the Company in any other court unless such courts of the State of Delaware determine that they do not have jurisdiction in the matter.

21. Entire Agreement. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof, and it supersedes all prior understandings and agreements, whether written or oral, and all prior dealings of the parties with respect to the subject matter hereof.

22. Execution by the Company. By executing this Agreement, the Company agrees to abide by and to be bound by all of the terms of this Agreement.

23. Section Headings. Section headings are for reference purposes only and will not in any way affect the meaning or interpretation of any provision of this Agreement.

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IN WITNESS WHEREOF, the Members have executed this Agreement as of the day and year first written above.


FAIRFIELD INDUSTRIES INCORPORATED

By:
Name:		Marc Lawrence
Title:		Sr. Vice President

JUNEAU EXPLORATION COMPANY, LLC

By:
Name:		John B. Juneau
Title:		Sole Manager

REX OFFSHORE CORPORATION

By:
Name:		Kenneth R. Peak
Title:		President and CEO


ACKNOWLEDGED AND AGREED:

REPUBLIC EXPLORATION LLC By: Fairfield Industries Incorporated

By:
		Marc Lawrence
		Sr. Vice President

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To induce Fairfield and REX to enter into this Agreement, and in consideration thereof, the undersigned, John B. Juneau, agrees to the provisions of Section 12 of this Agreement and agrees to abide by and perform those provisions that apply to him.

John B. Juneau confirms to the Company, Fairfield and REX that he controls Juneau. John B. Juneau will notify the Company and its Members if he ceases to control Juneau.

John B. Juneau

To induce Fairfield and Juneau to enter into this Agreement, and in consideration thereof, the undersigned, Contango Oil & Gas Company, a Nevada corporation (“Contango”), agrees to the provisions of Section 12 of this Agreement and agrees to abide by and perform those provisions that apply to it.

Contango confirms to the Company, Fairfield and Juneau that it controls REX. Contango will notify the Company and its Members if it ceases to control REX.


CONTANGO OIL & GAS COMPANY

By:
Name:		Kenneth R. Peak
Title:		President and CEO

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EX-10.2 5 dex102.htm AMENDMENT TO LIMITED LIABILITY COMPANY AGREEMENT Amendment to Limited Liability Company Agreement

EXHIBIT 10.2

REPUBLIC EXPLORATION LLC

AMENDMENT TO

LIMITED LIABILITY COMPANY AGREEMENT

AND ADDITIONAL AGREEMENTS

The undersigned, being all of the members of Republic Exploration LLC, a Delaware limited liability company, hereby (1) amend, as set forth below, the Limited Liability Company Agreement among them dated August 24, 2000, as previously amended (the “LLC Agreement”), and (2) agree to additional matters respecting the LLC agreement as set forth below.

1. Definitions. Terms defined in the LLC Agreement are used in this Agreement with the same meanings assigned to them in the LLC Agreement.

2. Transfer of Interest: Change in Defined Term. Juneau Exploration, L.P., a Texas limited partnership “Juneau”, which was formerly know as Juneau Exploration Company, LLC has transferred portions of its interests in the Company to REX and to Centaurus Oil and Gas, LP, a Texas limited partnership (“Centaurus”). Fairfield and REX consent to those transfers on the terms hereinafter set forth.

The term “Juneau” as used in the LLC Agreement refers to the said Juneau Exploration, L.P., a Texas limited partnership.

3. Execution of LLC Agreement by Centaurus. By signing this Agreement, Centaurus executes the LLC Agreement, hereby acknowledging acceptance by Centaurus of all of the terms and provisions of the LLC Agreement.

4. Amendments. The LLC Agreement is hereby amended as follows:

(a) The first paragraph of section 8(a) is amended in its entirety to read:

Effective as of September 1, 2005, the Members will have the following interests in the profits of the Company:


REX	42.70046	%
Fairfield	33.33334	%
Centaurus	9.36712	%
Juneau	14.59908	%

For the purposes of the Company’s fiscal year ending December 31, 2005 and in respect of the interests transferred by Juneau to REX and Centaurus: Centaurus will have no interest n the profit or loss of the Company through August 31, 2005, and the shares of REX and Juneau in that profit or loss will be determined on the basis of their respective interest prior to September 1, 2005; for the balance of the 2005 fiscal year, the shares of REX, Juneau and Centaurus in the profit or loss of the Company will be determined on the basis of their respective interests as set forth above. Distributions pursuant to Section 9 for the Company’s fiscal year ending December 31, 2005 will be made in accordance with the preceding sentence.

(b) Section 12 of the LLC Agreement is amended by adding a new subdivision (c) as flows and by relettering the current subdivisions (c) and (d) to (d) and (e):

(c) While the Company is in existence and for a period of one (1) year thereafter, Centaurus and Centaurus Oil and Gas GP, LLC, a Delaware limited liability company (“Centaurus GP”), will not — and Centaurus and Centaurus GP will cause any entity which it, either directly or indirectly, controls not to — without the approval of the other Members, (i) acquire any interest in any area covered by any of the Data, or (ii) exploit, participate in the recovery or exploitation of, derive any benefit from, or assist anyone else to recover or exploit or derive any benefit from any area covered by any of the Data; but the restrictions of this Section 12 (c) will only apply to areas with respect to which Centaurs gains knowledge as a result of its membership in the Company.

5. Internal Revenue Code Election. In accordance with Section 8(e) of the LLC Agreement, the Company will elect to adjust the basis of the Company’s property in accordance with the provisions of the Internal Revenue Code.

6. Other Matters Pertaining to the Transfer to Centaurus.

(a) Centaurus makes the same acknowledgement that Juneau, REX and the Company make in the fourth paragraph of Section 5(a) of the LLC Agreement, to wit: Centaurus acknowledges that Fairfield’s business is the licensing and other exploitation of the very Data licensed to the Company under the LLC Agreement and that the protection of the Data as provided in the LLC Agreement is essential to Fairfield.

(b) Centaurus acknowledges and confirms (i) that neither Fairfield nor REX made any representation, warranty, promise or other statement to it about the Company or in the connection with Centaurus’s investment in the Company, and (ii) that Centaurus made its investment in the Company based solely on its own investigation and due diligence. Centaurus will not have any claim whatsoever against Fairfield or REX arising out of or in connection with its investment in the Company.

(c) Centaurus confirms to the Company and to the other Members that it is experienced in the oil and gas industry and that it is fully aware of the risks involved in the venture set forth in the LLC Agreemment.

7. Transfer by Centaurus of its Interest. Centaurus may transfer its entire interest under the LLC Agreement or a newly-formed limited liability company or limited partnership of which Centuarus is the sole member or sole manager or sole general partner or sole limited partner, as the case may be, provided that

(a) if the transferee is not a limited liability company of which Centaurus is the sole member, Centaurus certifies to the Company and the other Members that the transfer was made in exchange for fair consideration or that the investors in Centaurus approved the transfer;

(b) if the transferee is not a limited liability company of which Centaurus is the sole member of a limited partnership of which Centaurus is the sole general partner, Centaurus certifies to the Company and the other Members that the transferee is controlled (as defined below) by Centaurus or by an entity that Centaurus controls or by an entity that controls Centaurus; and

(c) the transferee signs the LLC Agreement by executing an instrument in the form of EXHIBIT 13d-1 to the LLC Agreement as required by Section 13 (d) of the LLC Agreement.

Control means the ability to elect a majority of the directors or members of the governing body of an entity or in any other manner to control or determine the management of an entity. Control may be direct of indirect through one or more entities.

Centaurus will indemnify each of the other Members against any liability and hold each of them harmless from and pay any loss, damage, cost or expense (including, without limitation, legal fees and court costs) that any such Member incurs on account of any claim against it arising out of or in connection with a transfer by Centaurus of its interest in the Company.

IN WITNESS WHEREOF, the Members have executed this Amendment dated September 1, 2005.


FAIRFIELD INDUSTRIES INCORPORATED

By:
Name:		Marc Lawrence
Title:		Sr. Vice President

(SIGNATURES CONTINUED ON NEXT PAGE)


JUNEAU EXPLORATION, L.P.

By:
Name:		John B. Juneau
Title:		General Partner

REX OFFSHORE CORPORATION

By:
Name:		Kenneth R. Peak
Title:		President and CEO

CENTAURUS OIL AND GAS, LP
By:		Centaurus Oil and Gas GP, LLC, General Partner

By:
Name:		Timothy J. Detmering
Title:		Manager

To include Fairfield, REX and Juneau to enter into the foregoing Agreement, and in consideration thereof, the undersigned, Centaurus Oil and Gas GP, LLC, a Delaware limited liability company (“Centaurus GP”), agree to the provisions of Section 12 (c) of the LLC Agreement and agrees to abide by and perform those provisions that apply to it.

Centaurs GP confirms to the Company, Fairfield, REX and Juneau that it controls Centaurus. Centaurus GP will notify the Company and its Members if it ceases to control Centaurus.


CENTAURUS OIL AND GAS GP, LLC

By:
Name:		Timothy J. Detmering
Title:		Manager

EX-10.3 6 dex103.htm LIMITED LIABILITY COMPANY AGREEMENT Limited Liability Company Agreement

Exhibit 10.3

LIMITED LIABILITY COMPANY AGREEMENT

CONTANGO OFFSHORE EXPLORATION LLC

THIS Limited Liability Company Agreement dated effective the 1^st day of November, 2002 (this “AGREEMENT”), among Juneau Exploration, L.P., a Texas limited partnership (“JEX”), with offices at 26902 Nichols Sawmill Road, Magnolia, TX 77355-3586, and COE Offshore, LLC, a Delaware limited liability company (“COE O/S”), with offices at 3700 Buffalo Speedway, Suite 960, Houston, TX 77098.

WITNESSETH:

WHEREAS, JEX and COE O/S caused Contango Offshore Exploration LLC (the “COMPANY”) to be formed under the Delaware Limited Liability Company Act (the “ACT,” which term will include any future amendments thereto), a copy of the certificate of formation being attached hereto as EXHIBIT A; and

WHEREAS, JEX and COE O/S wish to provide for, among other things, membership in and management of the COMPANY, all on the terms hereinafter set forth.

NOW, THEREFORE, JEX and COE O/S hereby agree as follows:

1.	Limited Liability Company Agreement. This AGREEMENT is a limited liability company agreement under and as provided in the ACT.

Members. Concurrently with the execution of this AGREEMENT, JEX and COE O/S will become and be the MEMBERS of the COMPANY. JEX and COE O/S and any other individual, corporation or other entity that becomes a member of the COMPANY in accordance with the terms of this AGREEMENT are collectively called “MEMBERS,” and any one of them is called a “MEMBER.” The neuter pronoun will refer to a MEMBER regardless of the MEMBER’s gender.

3.	Duration of the Company. The COMPANY will have perpetual existence.

4.	Business of the Company. The business of the COMPANY will be the acquisition, reprocessing, interpretation and evaluation of speculative and proprietary geophysical and geological data (“DATA”) and the identification, recovery and exploitation of hydrocarbon deposits.

5.	Contributions by the Members.

COE O/S. COE O/S agrees to contribute Seven Million Four Hundred Thousand Dollars ($7,400,000.00) to the COMPANY for working capital in the manner hereinafter provided, which dollar amount may be revised at any time and from time to time upon approval by all of the MEMBERS. JEX, on behalf of the COMPANY, shall have the right to demand and receive from COE O/S working capital for the COMPANY as and when needed, at any time and from time to time. Upon receipt of a cash call from JEX on behalf of the COMPANY (“CASH CALL”), COE O/S shall wire transfer the requested funds to the COMPANY within the time period specified in the CASH CALL and shall provide evidence of the same to JEX. In the event COE O/S fails to pay any CASH CALL when due, JEX, on behalf of the COMPANY, will give COE O/S written notice of such nonpayment (“FINAL NOTICE”), and COE O/S will have forty-eight (48) hours (excluding weekends and federal holidays) from receipt of such FINAL NOTICE (the “DEADLINE”) within which to make payment in full to the COMPANY of the CASH CALL.

Due to the vagaries involved in any given CASH CALL, JEX will set forth in the FINAL NOTICE the ramifications of nonpayment by COE O/S on or before the DEADLINE, citing the specific wells, prospects, blocks, leases and/or DATA involved or affected thereby (“COVERED ASSETS”). Failure by COE O/S to timely remit payment in full of a CASH CALL on or before the DEADLINE after receiving FINAL NOTICE will be deemed a material breach by COE O/S of its obligations under this AGREEMENT, and thereafter COE O/S shall be considered in default with respect to the COVERED ASSETS. In addition to any other available remedies available to JEX, the penalty under this AGREEMENT for such default shall be forfeiture by COE O/S (and reassignment to JEX, if applicable) of its interests in or rights to the COVERED ASSETS (“FORFEITED OWNERSHIP”). Thereafter, the COVERED ASSETS shall be excluded from this AGREEMENT, and the FORFEITED OWNERSHIP shall automatically inure to the benefit of JEX.

JEX. JEX will provide its know-how and expertise in oil and gas exploration and development to the COMPANY. In addition, JEX will from time to time make available to the COMPANY certain DATA license and use agreements (“LICENSES”), subject to the terms and conditions of the applicable LICENSES and this Section 5.B. Concurrent with the MEMBERS’ execution of this AGREEMENT, JEX will contribute the following LICENSES to the COMPANY as hereinafter provided, and COE O/S hereby agrees to assume and bear full responsibility for payment of all amounts due under or in connection with the DATA or LICENSES, including, but in no way limited to, the amounts set forth below:

(i)

Volume License Agreement dated September 9, 2002, as amended October 18, 2002, between JEX and Seismic Exchange, Inc., in the amount of Eight Hundred Seventy-Five Thousand and No/100 Dollars ($875,000.00)¹;

(ii)

Master Geophysical Data-Use License dated May 10, 2001 and Supplemental Agreement No. VMS01 effective October 7, 2002, between JEX and Veritas Marine Surveys, in the amount of Three Hundred Twenty-Six Thousand and No/100 Dollars ($326,000.00)²;

(iii)

Seismic Data Review and Possession Agreement (Contract No. 02-10-001 AJF) dated October 3, 2002, between JEX and Seitel Data Ltd., in the amount of One Million Two Hundred Fifty Thousand and No/100 Dollars ($1,250,000.00)³; and

(iv)

Master License Agreement dated November 7, 2002 together with Supplementary Agreement for License of Geophysical Data - Supplement Number 1 of even date, between JEX and TGS-NOPEC Geophysical Company (“TGS”), in the amounts of:

(a)

One Million Five Hundred Thousand Dollars ($1,500,000.00)⁴ due on or before November 30, 2002;

(b)

Sixty-Two Thousand Five Hundred Dollars ($62,500.00) due on or before December 1, 2002 and monthly thereafter [on or before the first of each month] for twenty-three (23) consecutive months; and

(c)

Fifty Thousand Dollars ($50,000.00) per block for each OCS block leased or earned using the TGS dataset, and One Hundred Thousand and No/100 ($100,000.00) per block for each OCS block covered by the TGS dataset that is drilled to total depth, said performance bonuses, if any, due and payable until the earlier of: November 7, 2007 or such time as TGS participates in the net profits from Viosca Knoll Block 75, Viosca Knoll Block 211 or Ship Shoal Block 155.

¹	Paid in full by Contango Oil & Gas Company on 9/26/02.

²	Paid in full by Contango Oil & Gas Company on 10/04/02.

³	Paid in full by Contango Oil & Gas Company on 10/29/02.

⁴	Paid in full by Contango Oil & Gas Company on 11/26/02.

It is understood and agreed that payment of such sums by COE O/S represents only a cash contribution to the COMPANY, not the purchase of an interest in the LICENSES or a right to use or receive delivery of the DATA. JEX will be the only MEMBER of the COMPANY entitled to use said DATA, and neither the COMPANY nor COE O/S nor any other MEMBER of the COMPANY shall have any ownership interest in or rights to use or receive delivery of said DATA including any resulting or related interpretations, derivatives or reprocessings. The COMPANY’s and the other MEMBERS’ access to the DATA will be limited to the same rights afforded non-licensees under the LICENSES.

The COMPANY will not pay interest on capital contributions.

Each MEMBER confirms to the COMPANY and to the other MEMBERS that it and/or its principal equity owners are experienced in the oil and gas industry and that it is fully aware of the risks involved in the venture set forth in this AGREEMENT.

6.	Management of the Company.

JEX will manage the business, affairs and day-to-day operations of the COMPANY and, except as hereinafter provided, will make all decisions with respect to the foregoing and the strategic direction of the COMPANY.

As part of its management responsibilities, JEX will, for and on behalf of the COMPANY, acquire, analyze, process and/or reprocess, interpret and use the DATA to identify hydrocarbon prospects in which the COMPANY should acquire an interest; and, except as hereinafter provided, JEX will make all decisions with respect to the acquisition of DATA and leases, the development of prospects and the exploitation of production from the prospects.

Before the COMPANY acquires an interest in any prospect (other than prospects to be bid upon at regularly scheduled federal and/or state lease sales), JEX will advise the other MEMBERS of the prospect and its potential risks; the terms and other details of the interest to be acquired, including whether that interest will be acquired alone or in conjunction with one or more other parties; the manner in which the COMPANY will develop the prospect; the estimated cost to the COMPANY to acquire the interest and develop the prospect; and any other information about the venture that the other MEMBERS may request. Prior to bidding upon prospects at federal and/or state lease sales, JEX will advise the other MEMBERS in general terms of the number of prospects the COMPANY expects to bid on and the approximate dollars the COMPANY anticipates exposing at any such lease sale. Immediately following the lease sale, JEX will provide the other MEMBERS with full particulars regarding the COMPANY’s participation at such sale.

Notwithstanding the foregoing paragraph, if, under Section 6D(ii) below, JEX may cause the COMPANY to acquire an interest in a prospect without the approval of the other MEMBERS, and if JEX determines that the COMPANY may lose a worthwhile opportunity if JEX must report about the prospect to the other MEMBERS before the acquisition is made, then JEX may cause the COMPANY to acquire the interest before making the report; and if JEX does so, then JEX will promptly thereafter advise the other MEMBERS of the information required under the foregoing paragraph.

JEX may, without the approval of the other MEMBERS, cause the COMPANY to do any of the following and to enter into agreements to accomplish the same:

(i)

license or acquire DATA, provided the cost to the COMPANY does not exceed One Hundred Thousand Dollars ($100,000.00);

(ii)

acquire an interest in a prospect, either alone or in conjunction with one or more other parties, and make all arrangements with respect to that interest and prospect, provided JEX’s estimated cost for the COMPANY to acquire the interest and develop the prospect does not exceed Five Hundred Thousand Dollars ($500,000.00);

(iii)

borrow up to and including One Million Dollars ($1,000,000.00) in connection with any prospect in which the COMPANY has acquired an interest and grant a security interest in the COMPANY’s interest in that prospect to secure the COMPANY’s obligations in respect of that borrowing;

(iv)

sell, lease or otherwise dispose of any asset of the COMPANY which has a reasonable value not exceeding Five Hundred Thousand Dollars ($500,000.00);

(v)

settle any claim for an amount not exceeding One Hundred Thousand Dollars ($100,000.00); and

(vi)

apart from the direct costs and expenses to acquire, interpret, evaluate and reprocess the DATA and acquire interests in and develop prospects, budget and incur expenses for the operation of the COMPANY not in excess of One Million Dollars ($1,000,000.00) per fiscal year of the COMPANY. Beginning with fiscal year 2004, JEX will prepare the budget for each fiscal year, with expenses itemized, and furnish the other MEMBERS a copy thereof. The budget may include: fees for professionals to provide expertise [which none of the MEMBERS can provide] necessary to effectively conduct the business of the COMPANY, and all costs, risks and expenses, direct, indirect and/or allocated, that are related to, associated with or in support of reprocessing the DATA by JEX in-house (“REPROCESSING G&A”). In the event JEX receives third party reimbursement for all or any portion of the REPROCESSING G&A, COE O/S shall receive credit for such reimbursed amounts.

In making its estimate of the cost to the COMPANY to acquire an interest and develop a prospect, JEX may take into account investments by participants to the extent that JEX reasonably and in good faith determines that it can obtain participation by others in the prospect.

The amounts set forth in items (i) through (vi) above may be amended according to the determination of two (2) or more MEMBERS owning at least fifty-one percent (51%) of the profits of the COMPANY.

Approval by two (2) or more MEMBERS owning at least fifty-one percent (51%) of the profits of the COMPANY will be required for any matter described in Section 6.D above for which JEX does not have sole authority; for the COMPANY to borrow money or enter into any agreement other than for the express purposes in the express situations described in Section 6.D above; for the COMPANY to lend money or issue a guarantee; except as provided in Section 6D(vi) above, for the COMPANY to engage the services of anyone; and for the COMPANY to arrange the defense or prosecution of any claim.

Approval by all of the MEMBERS will be required for the COMPANY to merge, consolidate or otherwise combine with another entity, make an assignment for the benefit of creditors or seek relief under any bankruptcy, insolvency or similar law and engage in any business other than that set forth in Section 4 above.

At the request of any MEMBER, the MEMBERS will meet to discuss the business of the COMPANY.

The MEMBERS will record, in writings signed by them, their approvals, agreements, determinations and other actions under or in respect of this AGREEMENT.

7.	Compensation; Expenses.

The COMPANY will grant to certain JEX employees (as designated by JEX), by an instrument substantially in the form of EXHIBIT 7.A hereto, an overriding royalty of three and one-third percent (3¹/3%) of one hundred percent (100%) [proportionately reducible as provided in EXHIBIT 7.A] burdening any oil, gas and/or mineral interest that the COMPANY acquires.

Except as expressly provided in this AGREEMENT, the MEMBERS will not be entitled to compensation or reimbursement for their services to the COMPANY or for the services of their employees to the COMPANY. Further, the MEMBERS will cause their employees not to seek compensation from the COMPANY, and each MEMBER will indemnify the COMPANY against and hold it harmless from any claims for compensation by any of its employees and any expenses (including, without limitation, legal fees) that the COMPANY incurs in connection with any such claim.

The MEMBERS will pay their own expenses (including, without limitation, legal fees) in connection with the preparation and negotiation of this AGREEMENT, but the COMPANY will reimburse JEX for the filing fees and service company fees to establish the COMPANY and to qualify the COMPANY to do business in Texas, Louisiana and any other venues or governing bodies deemed necessary by JEX.

8.	Profits and Losses; Taxation.

JEX and COE O/S will have a one-third (1/3) and two-thirds (2/3) interest, respectively, in the profits of the COMPANY. However, notwithstanding the foregoing or anything contained in this AGREEMENT to the contrary, the MEMBERS agree that in the event COE O/S fails or refuses to pay in full the One Million Five Hundred Thousand and No/100 Dollars set forth under Section 5B(iv)(b) of this AGREEMENT, the MEMBERS’ interests in the profits of the COMPANY will become JEX one-half (1/2) and COE O/S one-half (1/2).

The losses of the COMPANY for any fiscal year will be shared by the MEMBERS in proportion to their capital accounts on the day before the last day of that fiscal year. The capital accounts of the MEMBERS will be determined in accordance with the requirements of the Internal Revenue Code and the rules and regulations thereunder from time to time in effect (collectively called the “CODE”).

The profits and losses of the COMPANY and items of income, gain, loss, deduction, expense, credit and similar items will be determined by the COMPANY’s accountants in accordance with generally accepted accounting principles.

The COMPANY will be treated as a partnership for federal income tax purposes and, wherever possible, for state and local income tax purposes.

The COMPANY will make the following elections for its first and subsequent tax years:

(i)

to deduct currently, in accordance with the CODE and the relevant provisions of state law, all intangible drilling and development costs with respect to drilling productive and non-productive wells and the preparation of wells for the production of hydrocarbons;

(ii)

to recover the basis of recovery property using the maximum recovery rate permitted by the CODE; and

(iii)

to deduct expenses of organizing the COMPANY ratably over a sixty (60) month period in accordance with Section 709 of the CODE.

The COMPANY will make all other elections required, or permitted to be made, by it under the CODE or applicable state law in accordance with the written agreement of all of the MEMBERS.

The COMPANY will elect COE O/S the “tax matters MEMBER” under and pursuant to the CODE. COE O/S will have authority to apply the provisions of this AGREEMENT relating to the maintenance of capital accounts and the allocation of profits and losses and of each item of income, gain, loss and deduction of the COMPANY so as to comply with Treasury Regulation Sections 1.704-1(b) and 1.704-2 from time to time in effect. In the event COE O/S determines it is prudent to modify any allocations of profits or losses or items of income, gain, loss or

deduction, or debits or credits, or the manner in which they are computed, in order to comply with said Treasury Regulations, then COE O/S may make such modification provided that such modification will not have a material effect on the allocation of profits or losses or on cash or other property in kind that would otherwise be allocable or distributable to any MEMBER pursuant to this AGREEMENT had no such modification been made. COE O/S will promptly notify the other MEMBERS of any modification that it makes under this paragraph and of the nature, extent and effect of the modification.

If a MEMBER transfers all or a part of its interest in the COMPANY [see Section 13], the COMPANY may, but will not be required to, elect to adjust the basis of the COMPANY’s property in accordance with the provisions of the CODE from time to time in effect. The COMPANY will make this election only in accordance with the written agreement of all of the MEMBERS.

The COMPANY and its MEMBERS will use their best efforts to cause the firm that audits the COMPANY’s financial statements to sign the COMPANY’s federal income tax return as preparer thereof. The MEMBERS will also use their best efforts to cause the COMPANY to furnish the MEMBERS, within ninety (90) days after the close of the COMPANY’s fiscal year, all information reasonably necessary for the MEMBERS to prepare their federal income tax returns.

9.	Distributions.

Distributions by the COMPANY will be made to the MEMBERS in the same percentages as their interests in the profits of the COMPANY.

During each of its fiscal years, the COMPANY will set aside and maintain, in a separate interest bearing account, forty percent (40%) of the revenues it receives, as it receives them (the funds so set aside and the interest thereon are called the “TAX RESERVE”). If the MEMBERS have taxable income from the COMPANY for a fiscal year, the COMPANY will distribute to the MEMBERS, from and to the extent of the TAX RESERVE for that year, an amount equal to forty percent (40%) of the aggregate taxable income of the MEMBERS from the COMPANY for that fiscal year. To the extent the TAX RESERVE for any fiscal year is not distributed to the MEMBERS, it will be used for the general purposes of the COMPANY.

Except as provided above, the COMPANY will make distributions to the MEMBERS only in accordance with the determination of all of the MEMBERS; provided, however, any MEMBER may request a meeting by written notice to the other MEMBERS to discuss a recommendation for a distribution.

The COMPANY will not make distributions to the MEMBERS before year 2004.

10.

Bank Accounts.

The COMPANY will maintain bank accounts at such banks with such signatories having such authority as two (2) or more MEMBERS owning at least fifty-one percent (51%) of the profits of the COMPANY determine.

Initially the COMPANY will maintain its accounts at Whitney Bank and/or Guaranty Bank, Houston, Texas, with the following signatories: John B. Juneau, Mark A. Stephens, Linda G. Ferszt, Tracy Mevs, Kenneth R. Peak, William H. Gibbons and Lesia Bautina. Each of the foregoing will have single signature authority up to Ten Thousand Dollars ($10,000.00); anything in excess of such amount will require two (2) such signatories.

11.

Books and Records; Financial Statements.

Unless two (2) or more MEMBERS owning at least fifty-one percent (51%) of the profits of the COMPANY decide otherwise:

(i)

Commencing on the date of this AGREEMENT and ending on June 30, 2003, JEX will, without charge, keep the books and records of the COMPANY and will prepare and furnish to the other MEMBERS quarterly and annual balance sheets and profit and loss and cash flow statements and such other reports as the MEMBERS deem appropriate.

(ii)

Effective as of July 1, 2003, COE O/S may assume such duties from JEX and perform the same, without charge, on behalf of the COMPANY; provided, however, until such time as any given oil and gas lease acquired under this AGREEMENT qualifies as producible, JEX will handle all payments in connection with such lease, including, but not limited to, payment of lease sale bids, bonuses, delay rentals and shut-in rentals.

The COMPANY will maintain its books and records on an accrual basis.

The COMPANY’s fiscal year will end on June 30^th, and its first fiscal year will end June 30, 2003.

Unless changed by approval of all of the MEMBERS, the COMPANY will initially engage the services of the accounting firm of Grant Thornton to audit the COMPANY’s annual balance sheet and profit and loss statement.

Any MEMBER may examine the books and records of the COMPANY during normal business hours.

12.

Restrictions on the Activities of the Members.

While the COMPANY is in existence and for a period of one (1) year thereafter, JEX and John B. Juneau will not – and John B. Juneau will cause any entity which he and/or his wife and/or any of his children, either directly or indirectly, control not to – without the approval of the other MEMBERS, (i) acquire any interest in any area covered by any seismic data utilized hereunder or (ii) exploit, participate in the recovery or exploitation of, derive any benefit from or assist anyone else to recover or exploit or derive any benefit from any area covered by any DATA utilized hereunder.

While the COMPANY is in existence and for a period of one (1) year thereafter, COE O/S and Contango Oil & Gas Company, a Delaware corporation (“CONTANGO”) will not – and CONTANGO will cause any entity which it, either directly or indirectly, controls not to – without the approval of the other MEMBERS, (i) acquire any interest in any area covered by any seismic data utilized hereunder or (ii) exploit, participate in the recovery or exploitation of, derive any benefit from or assist anyone else to recover or exploit or derive any benefit from any area covered by any DATA utilized hereunder.

Control means the ability to control or determine the management of an entity, whether by voting power or other means.

13.

Resignation; Expulsion; Assignment.

A MEMBER may not resign from the COMPANY prior to its dissolution and winding up.

A MEMBER may not be expelled from the COMPANY.

Prior to the dissolution and winding up of the COMPANY, a MEMBER may not assign, transfer, encumber or otherwise dispose of all or a portion of its interest in the COMPANY (including its interest in profits and losses) except for (i) transfers on the dissolution or death of a MEMBER,

but in either of these cases the transfer may only be to the shareholders, members or heirs, as the case may be, of the MEMBER and (ii) transfers approved by all of the MEMBERS other than the MEMBER which is transferring its interest. Any assignment, transfer, encumbrance or other disposition of a MEMBER’s interest in the COMPANY in violation of the provisions of this AGREEMENT will be null and void.

A transferee (other than the COMPANY) of all or a portion of a MEMBER’s interest in the COMPANY pursuant to the provisions of this AGREEMENT is called a “Transferee.” A Transferee that is not a MEMBER of the COMPANY at the time of the transfer will, without further act, become and be a MEMBER of the COMPANY. A Transferee will be subject to the terms and provisions of this AGREEMENT, will be entitled to the rights and benefits of the transferor (“Transferor”) to the extent of the interest transferred and will be subject to the obligations of the Transferor to the extent of the interest transferred; but a Transferee that is not a signatory to this AGREEMENT at the time of the transfer will not be entitled to receive any distributions unless and until that Transferee executes this AGREEMENT by signing an instrument in the form of EXHIBIT 13.D-1 hereto. In addition, if a MEMBER transfers all or a portion of its interest in the COMPANY, all of the MEMBERS will enter into an amendment of this AGREEMENT, substantially in the form of EXHIBIT 13.D-2 hereto, reflecting the changes in the ownership of the profits and losses of the COMPANY resulting from the transfer and any other matters to which the MEMBERS and a Transferee agree.

A Transferor and Transferee will agree between themselves as to the allocation between them of the profits and losses and items of income, gain, loss, deduction, expense, credit and similar items for the fiscal year in which the transfer occurs, and they will jointly advise the COMPANY in writing of their allocation.

The COMPANY may not transfer or assign any of its rights under this AGREEMENT, and any such transfer will be null and void.

14.

Events of Bankruptcy. None of the events listed in Section 18-304 of the ACT (EVENTS OF BANKRUPTCY) will result in a MEMBER ceasing to be a MEMBER of the COMPANY.

15.

Dissolution.

The COMPANY will be dissolved and its affairs will be wound up upon the occurrence of any of the following: approval by all of the MEMBERS; or the election of any MEMBER (other than JEX), made by written notice to the COMPANY and the other MEMBERS, at any time after the dissolution of or cessation of business by JEX, or after the death of John B. Juneau, or John B. Juneau’s ceasing to control JEX, including any incapacity that renders John B. Juneau incapable of controlling JEX; or the election of any MEMBER (other than COE O/S), made by written notice to the COMPANY and the other MEMBERS, at any time after CONTANGO’s ceasing to control COE O/S; or the election of any MEMBER (other than the MEMBER in breach or default), made by written notice to the COMPANY and the other MEMBERS, within a period of one hundred twenty (120) days after: a MEMBER materially breaches this AGREEMENT or materially defaults in any of its obligations under this AGREEMENT and the MEMBER making the election becomes aware of the breach or default. The right to elect to dissolve the COMPANY because of a breach or default is in addition to any other rights and remedies each MEMBER has by reason of that breach or default.

Control means the ability to control or determine the management of an entity, whether by voting power or other means.

Except as provided above, the dissolution or death of a MEMBER or the occurrence of any other event which terminates the membership of a MEMBER in the COMPANY will not result in the dissolution and winding up of the COMPANY.

On the dissolution and winding up of the COMPANY, after the obligations of the COMPANY have been paid or provided for, the COMPANY will distribute its remaining assets to the MEMBERS in the same percentages as their interests in the profits of the COMPANY.

16.

Indemnity.

The COMPANY will indemnify each of the MEMBERS, their officers and employees from and against any claim, demand, liability, fine or expense (including, without limitation, reasonable legal fees and disbursements, court costs and the cost of appellate proceedings) arising out of any act or inaction by a MEMBER done in good faith and reasonably believed by such MEMBER to be in the best interests of the COMPANY and provided, in the case of any fine, that such MEMBER had no reasonable cause to believe its conduct was unlawful.

The COMPANY will, to the extent approved by all of the MEMBERS (other than the one seeking indemnity), pay the expenses of a MEMBER seeking indemnity in advance of the final disposition of the matter upon receipt of an undertaking from that MEMBER satisfactory to those MEMBERS to repay the amount advanced if it is ultimately determined that the MEMBER seeking indemnity is not entitled to indemnification. The MEMBERS required to approve the payment of these expenses will grant such approval if they determine that the MEMBER seeking indemnity will, in fact, be entitled to indemnity under Section 16.A and to the extent that they determine that the payment of those expenses will not jeopardize the COMPANY.

Each MEMBER will indemnify each other MEMBER, its officers and employees from and against any liability and any loss, damage or expense (including, without limitation, reasonable legal fees and disbursements, court costs and the cost of appellate proceedings) arising out of any claim by a third party against the indemnitee because of any act or inaction by the indemnitee which does not constitute negligence, gross negligence willful misconduct, malfeasance, a breach of duty or other wrongdoing – but only to the extent that the COMPANY does not perform its obligation to the indemnitee under Section 16.A, and then only for a portion of the COMPANY’s unperformed obligation equal to the product of such unperformed obligation and the indemnitor’s percentage interest in the profits of the COMPANY at the time of the occurrence giving rise to the indemnification.

No MEMBER will incur liability to any other MEMBER, and no MEMBER will have a claim against any other MEMBER, because of an error or mistake in judgment made in good faith and in what the MEMBER believed to be in the best interests of the COMPANY.

No MEMBER will have any liability to the COMPANY or any other MEMBER with respect to any deficit in its capital account.

17.

Amendment; Admission of New Members.

This AGREEMENT may be amended only by an instrument in writing signed by all of the MEMBERS.

The certificate of formation of the COMPANY may be amended only by an instrument in writing signed by all of the MEMBERS.

Except as provided in Section 13, a person may not become a MEMBER in the COMPANY unless that person’s admission is approved by all of the MEMBERS as evidenced by an amendment to this AGREEMENT signed by all of the MEMBERS and by that person.

18.

Waiver. The COMPANY and each MEMBER of the COMPANY may not waive any of its rights or any obligation of another or any provision of this AGREEMENT except by an instrument in writing signed by the party issuing the waiver.

19.

Severability. If any provision of this AGREEMENT or the application of any such provision to any individual, corporation or other entity or to any circumstance is held invalid, the remainder of this AGREEMENT, and the application of such provision, other than to the extent it is held invalid, will not be invalidated or affected thereby.

20.

Governing Law; Submission to Jurisdiction. This AGREEMENT and the rights and obligations of the MEMBERS of the COMPANY will be governed by and construed in accordance with the laws of the State of Texas. For purposes of any proceeding involving this AGREEMENT or any of the rights or obligations of any of the MEMBERS, each MEMBER hereby submits to the non-exclusive jurisdiction of the courts of the State of Texas and agrees not to raise and waives any objection to or defense based upon the venue of any such court or based upon forum non conveniens. Each MEMBER and the COMPANY agree not to bring any action or other proceeding with respect to this AGREEMENT or the COMPANY or with respect to any of the rights or obligations of any of the MEMBERS of the COMPANY in any other court unless such courts of the State of Texas determine that they do not have jurisdiction in the matter.

21.

Entire Agreement. This AGREEMENT contains the entire agreement of the parties with respect to the subject matter hereof, and it supercedes all prior understandings and agreements, whether written or oral, and all prior dealings of the parties with respect to the subject matter hereof.

22.

Execution by the Company. By executing this AGREEMENT, the COMPANY agrees to abide by and to be bound by all of the terms of this AGREEMENT.

23.

Section Headings. Section headings are for reference purposes only and will not in any way affect the meaning or interpretation of any provision of this AGREEMENT.

IN WITNESS WHEREOF, the MEMBERS have executed this AGREEMENT as of the day and year first written above.


JUNEAU EXPLORATION, L.P.
By: Juneau GP, LLC, Its General Partner

By:
		John B. Juneau
		Sole Manager

COE OFFSHORE, LLC

By:
		Kenneth R. Peak
		Chairman and CEO

ACKNOWLEDGED AND AGREED:


CONTANGO OFFSHORE EXPLORATION LLC
By: Juneau Exploration, L.P.
By: Juneau GP, LLC, its General Partner

By:
		John B. Juneau
		Sole Manager

To induce COE Offshore, LLC to enter into this AGREEMENT, and in consideration thereof, the undersigned, John B. Juneau, agrees to the provisions of Section 12 of this AGREEMENT and agrees to abide by and perform those provisions that apply to him.

John B. Juneau confirms to the COMPANY and COE Offshore, LLC that he controls Juneau Exploration, L.P. John B. Juneau will notify the COMPANY and its MEMBERS if he ceases to control Juneau Exploration, L.P.

JOHN B. JUNEAU

To induce Juneau Exploration, L.P. to enter into this AGREEMENT, and in consideration thereof, the undersigned, Contango Oil & Gas Company agrees to the provisions of Section 12 of this AGREEMENT and agrees to abide by and perform those provisions that apply to it.

Contango Oil & Gas Company confirms to the COMPANY and Juneau Exploration, L.P. that it controls COE Offshore, LLC. Contango Oil & Gas Company will notify the COMPANY and its MEMBERS if it ceases to control COE Offshore, LLC.


CONTANGO OIL & GAS COMPANY

By:
		Kenneth R. Peak
		Chairman and CEO

EX-10.4 7 dex104.htm FIRST AMENDMENT TO LIMITED LIABILITY COMPANY AGREEMENT First Amendment to Limited Liability Company Agreement

EXHIBIT 10.4

First Amendment to Limited Liability Agreement

Contango Offshore Exploration LLC

and

Additional Agreements

This First Amendment to Limited Liability Company Agreement (this “Amendment”) of Contango Offshore Exploration LLC, a Delaware limited liability company (the “Company”), is entered into as of September 1, 2005, by and among COE Offshore, LLC, a Delaware limited liability company (“COE O/S”), Centaurus Oil and Gas, LP, a Texas limited partnership (“Centaurus”), and Juneau Exploration, L.P., a Texas limited partnership (“JEX”).

1. JEX has transferred portions of its interests in the Company to COE O/S and Centaurus. COE O/S consents to those transfers on the terms hereinafter set forth.

2. By signing this Amendment, Centaurus executes the Agreement, hereby acknowledging acceptance by Centaurus of all of the terms and provisions of the Agreement.

3. Section 5.A of the limited liability agreement of the Company dated November 1, 2002, as said agreement may have been amended (the “Agreement”), is hereby amended effective as of the date hereof by adding the following after the last sentence thereof:

“Notwithstanding the foregoing, Centaurus Oil and Gas, LP (“CENTAURUS”) shall have no obligation to contribute any amounts to the Company for working capital, and JEX shall have no right to demand any contribution from CENTAURUS.”

4. Section 5.B of the Agreement is hereby amended effective as of the date hereof by adding the following after the last sentence thereof:

“Notwithstanding the foregoing, CENTAURUS shall have no obligation to pay any amounts due under or in connection with the DATA or LICENSES.”

5. Section 8.A of the Agreement is hereby amended effective as of the date hereof in its entirety to read as follows:

“A. The Members will have the following interests in the profits and losses of the Company.


Name	Interest
COE Offshore, LLC	76.03380
Centaurus Oil and Gas, LP	9.36712	%
Juneau Exploration, L.P.	14.59908	%”

6. Section 12.B of the Agreement is hereby amended effective as of the date hereof in its entirety to read as follows:

“B. While the COMPANY is in existence and for a period of one (1) year thereafter, COE O/S, Contango Oil & Gas Company, a Delaware corporation (“CONTANGO”), and CENTAURUS will not – and each of CONTANGO and CENTAURUS will cause any of its affiliates not to – without the approval of the other Members, (i) acquire any interest in any area covered by any seismic data utilized hereunder, or (ii) exploit, participate in the recovery or exploitation of, derive any benefit from, or assist anyone else to recover or exploit or derive any benefit from any area covered by any DATA utilized hereunder; provided, however, that CENTAURUS and its affiliates shall only be subject to this Section 12.B with respect to any DATA which CENTAURUS or any of its affiliates gain knowledge as a result of CENTAURUS’ membership in the COMPANY.”

7. In accordance with Section 8.D of the Agreement, it is hereby agreed that the Company will file an election under Section 754 of the Internal Revenue Code on its return for the current fiscal year.

8. In accordance with Section 13.C(ii) of the Agreement, the transfers of portions of the interest in the Company held by Juneau Exploration, L.P. that result in the interests in profits and losses of the Company set forth in Section 8.A of the Agreement, as amended above, are hereby approved.

9. Centaurus may transfer its entire interest under the Agreement to a newly-formed limited liability company or limited partnership of which Centaurus is the sole member or sole manager or sole general partner or sole limited partner, as the case may be, provided that:

(a) if the transferee is not a limited liability company of which Centaurus is the sole member, Centaurus certifies to the Company and the other parties hereto that the transfer was made in exchange for fair consideration or that the investors in Centaurus approved the transfer;

(b) if the transferee is not a limited liability company of which Centaurus is the sole member or a limited partnership of which Centaurus is the sole general partner, Centaurus certifies to the Company and the other parties hereto that the transferee is controlled (as defined below) by Centaurus or by an entity that Centaurus controls or by an entity that controls Centaurus; and

Centaurus will indemnify each of the other parties hereto against any liability and hold each of them harmless from and pay any loss, damage, cost or expense (including, without

limitation, legal fees and court costs) that any such party incurs on account of any claim against it arising out of or in connection with a transfer by Centaurus of its interest in the Company.

10. As hereinabove amended, the Agreement will remain in full force and effect.

[SIGNATURES ON NEXT PAGE]


Dated as of September 1, 2005	JUNEAU EXPLORATION, L.P.,
	a Texas limited partnership

	By:	Juneau GP, LLC, Its General Partner

	By:
	Name:	John B. Juneau
	Title:	Sole Manager

	COE OFFSHORE, LLC,
	a Delaware limited liability company

	By:
	Name:	Kenneth R. Peak
	Title:	Chairman and CEO

	CENTAURUS OIL AND GAS, LP,
	a Texas limited partnership

	By:	Centaurus Oil and Gas GP, LLC, its General Partner

	By:
	Name:
	Title:

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