-----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, OCg3RqV8+c5KsvL3nr9B4gy8SiHJdlsj28gWrCQexS2evKjebdaNfj/LqCs+Yif2 bmcyFT1PwLjOYO6AM66jiA== 0000950134-99-004771.txt : 19990623 0000950134-99-004771.hdr.sgml : 19990623 ACCESSION NUMBER: 0000950134-99-004771 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19990524 GROUP MEMBERS: EOS PARTNERS LP GROUP MEMBERS: EOS PARTNERS SBIC II LP GROUP MEMBERS: EOS PARTNERS SBIC LP SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BARGO ENERGY CO CENTRAL INDEX KEY: 0000051072 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 870239185 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-31203 FILM NUMBER: 99633482 BUSINESS ADDRESS: STREET 1: 700 LOUISIANA, SUITE 3700 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7132369792 MAIL ADDRESS: STREET 1: 700 LOUISIANA SUITE 3700 CITY: HOUSTON STATE: TX ZIP: 77002 FORMER COMPANY: FORMER CONFORMED NAME: FUTURE PETROLEUM CORP/UT/ DATE OF NAME CHANGE: 19940401 FORMER COMPANY: FORMER CONFORMED NAME: INTERMOUNTAIN EXPLORATION CO DATE OF NAME CHANGE: 19920703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: EOS PARTNERS LP CENTRAL INDEX KEY: 0000927020 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 320 PARK AVENUE STREET 2: 22ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 MAIL ADDRESS: STREET 1: EOS PARTNERS LP STREET 2: 320 PARK AVENUE 22ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 SC 13D 1 SCHEDULE 13D 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934* BARGO ENERGY COMPANY (NAME OF ISSUER) COMMON STOCK, PAR VALUE $.01 PER SHARE (TITLE OF CLASS OF SECURITIES) 067587 10 5 (CUSIP NUMBER) BRIAN D. YOUNG EOS PARTNERS, L.P. 320 PARK AVENUE, 22ND FLOOR NEW YORK, NEW YORK 10022 (212) 832-5807 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS) MAY 14, 1999 (DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 204.13d-1(g), check the following box. [ ] NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Section 240.13d-7(b) for other parties to whom copies are to be sent. *The remainder of the cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). 2 CUSIP NO. 067587 10 5 SCHEDULE 13D (1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons (entities only) Eos Partners, L.P. - -------------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [X] - -------------------------------------------------------------------------------- (3) SEC Use Only - -------------------------------------------------------------------------------- (4) Source of Funds (See Instructions) OO (SEE ITEM 3) - -------------------------------------------------------------------------------- (5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- (6) Citizenship or Place of Organization Eos Partners, L.P. ("Eos Partners") is a limited partnership organized under the laws of the State of Delaware - -------------------------------------------------------------------------------- Number of (7) Sole Voting Power 328,619 Shares Bene- -------------------------------------------------------- ficially (8) Shared Voting Power 0 Owned by -------------------------------------------------------- Each (9) Sole Dispositive Power 328,619 Reporting -------------------------------------------------------- Person With (10) Shared Dispositive Power 0 - -------------------------------------------------------------------------------- (11) Aggregate Amount Beneficially Owned by Each Reporting Person 328,619 - -------------------------------------------------------------------------------- (12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ] - -------------------------------------------------------------------------------- (13) Percent of Class Represented by Amount in Row (11) 0.4% - -------------------------------------------------------------------------------- (14) Type of Reporting Person (See Instructions) PN - -------------------------------------------------------------------------------- Page 2 3 CUSIP NO. 067587 10 5 SCHEDULE 13D (1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons (entities only) EOS PARTNERS SBIC, L.P. - -------------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [X] - -------------------------------------------------------------------------------- (3) SEC Use Only - -------------------------------------------------------------------------------- (4) Source of Funds (See Instructions) OO (SEE ITEM 3) - -------------------------------------------------------------------------------- (5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- (6) Citizenship or Place of Organization Eos Partners, SBIC, L.P. ("Eos SBIC") is a limited partnership organized under the laws of the State of Delaware - -------------------------------------------------------------------------------- Number of (7) Sole Voting Power 3,417,633 Shares Bene- -------------------------------------------------------- ficially (8) Shared Voting Power 0 Owned by -------------------------------------------------------- Each (9) Sole Dispositive Power 3,417,633 Reporting -------------------------------------------------------- Person With (10) Shared Dispositive Power 0 - -------------------------------------------------------------------------------- (11) Aggregate Amount Beneficially Owned by Each Reporting Person 3,417,633 - -------------------------------------------------------------------------------- (12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ] - -------------------------------------------------------------------------------- (13) Percent of Class Represented by Amount in Row (11) 3.7% - -------------------------------------------------------------------------------- (14) Type of Reporting Person (See Instructions) PN - -------------------------------------------------------------------------------- Page 3 4 CUSIP NO. 067587 10 5 SCHEDULE 13D (1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons (entities only) EOS PARTNERS SBIC II, L.P. - -------------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [X] - -------------------------------------------------------------------------------- (3) SEC Use Only - -------------------------------------------------------------------------------- (4) Source of Funds (See Instructions) OO (SEE ITEM 3) - -------------------------------------------------------------------------------- (5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- (6) Citizenship or Place of Organization Eos Partners SBIC II, L.P. ("Eos SBIC II") is a limited partnership organized under the laws of the State of Delaware - -------------------------------------------------------------------------------- Number of (7) Sole Voting Power 635,329 Shares Bene- -------------------------------------------------------- ficially (8) Shared Voting Power 0 Owned by -------------------------------------------------------- Each (9) Sole Dispositive Power 635,329 Reporting -------------------------------------------------------- Person With (10) Shared Dispositive Power 0 - -------------------------------------------------------------------------------- (11) Aggregate Amount Beneficially Owned by Each Reporting Person 635,329 - -------------------------------------------------------------------------------- (12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ] - -------------------------------------------------------------------------------- (13) Percent of Class Represented by Amount in Row (11) 0.7% - -------------------------------------------------------------------------------- (14) Type of Reporting Person (See Instructions) PN - -------------------------------------------------------------------------------- Page 4 5 ITEM 1. SECURITY AND ISSUER. The class of equity securities to which this statement relates is common stock, par value $.01 per share (the "Common Stock"), of Bargo Energy Company, a Texas corporation and successor by merger to Future Petroleum Corporation, a Utah corporation (the "Issuer"). The address of the principal executive offices of the Issuer is 700 Louisiana, Suite 3700, Houston, Texas 77002. ITEM 2. IDENTITY AND BACKGROUND. (a) - (c) The principal business of Eos Partners, L.P., a Delaware limited partnership ("Eos Partners"), is investments. The general partners of Eos Partners are Steven M. Friedman and Brian D. Young, and their principal occupation is serving as the general partners of Eos Partners. The executive offices of Eos Partners and Messrs. Young and Friedman are located at 320 Park Avenue, 22nd Floor, New York, New York 10022. Eos Partners SBIC, L.P. ("Eos SBIC") is a Delaware limited partnership with its principal executive offices at 320 Park Avenue, 22nd Floor, New York, New York 10022. The principal business of Eos SBIC is investments. Eos SBIC, Inc. is the ultimate general partner of Eos SBIC. The principal business of Eos SBIC, Inc., a Delaware corporation ("Eos SBIC GP"), is serving as the ultimate general partner of Eos SBIC. The principal executive offices of Eos SBIC GP are at 320 Park Avenue, 22nd Floor, New York, New York 10022. The name, business address and present principal occupation or employment of each of the executive officers and directors of Eos SBIC GP, are set forth below:
Name and Capacity in Which Principal Business Address Serves Eos SBIC GP Occupation ---------------- ------------------ ---------- Brian D. Young Chairman and Secretary General Partner of Eos 320 Park Avenue, 22nd Floor Partners New York, NY 10022 Steven M. Friedman President and Treasurer General Partner of Eos 320 Park Avenue, 22nd Floor Partners New York, NY 10022
Eos Partners SBIC II, L.P. ("Eos SBIC II") is a Delaware limited partnership with its principal executive offices at 320 Park Avenue, 22nd Floor, New York, New York 10022. The principal business of Eos SBIC II is investments. Eos SBIC II, Inc. is the ultimate general partner of Eos SBIC II. The principal business of Eos SBIC II, Inc., a Delaware corporation ("Eos SBIC II GP"), is serving as the ultimate general partner of Eos SBIC II. The principal executive offices of Eos SBIC II GP are at 320 Park Avenue, 22nd Floor, New York, New York 10022. The name, Page 5 6 business address and present principal occupation or employment of each of the executive officers and directors of Eos SBIC II GP, are set forth below:
Name and Capacity in Which Principal Business Address Serves Eos SBIC II GP Occupation ---------------- --------------------- ---------- Brian D. Young Chairman and Secretary General Partner of Eos 320 Park Avenue, 22nd Floor Partners New York, NY 10022 Steven M. Friedman President and Treasurer General Partner of Eos 320 Park Avenue, 22nd Floor Partners New York, NY 10022
(d) During the last five years, none of the parties listed in this Item 2 has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) During the last five years, none of the parties listed in this Item 2 was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. (f) Brian D. Young and Steven M. Friedman are citizens of the United States of America. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. PURCHASE OF CAPITAL STOCK On May 14, 1999, the Issuer closed a transaction pursuant to which it issued and sold to Kayne Anderson Energy Fund, L.P. ("Kayne"), BancAmerica Capital Investors SBIC I, L.P. ("BancAmerica"), Eos Partners, Eos SBIC, Eos SBIC II (collectively, "Eos"), Energy Capital Investment Company PLC, EnCap Energy Capital Fund III-B, L.P., BOCP Energy Partners, L.P., EnCap Energy Capital Fund III, L.P. (collectively, "EnCap") and SGC Partners II LLC ("SGC" and together with Kayne, BancAmerica, Eos and EnCap, the "Investors") shares of a newly created class of preferred stock. Pursuant to a Stock Purchase Agreement among the Issuer and the Investors, five million shares of the Issuer's Cumulative Redeemable Preferred Stock, Series B ("Preferred Stock") were issued in exchange for an aggregate purchase price of $50 million paid by the Investors. As additional consideration, the Issuer issued to the Investors an aggregate of 43,815,810 shares of its Common Stock, representing 40% of the outstanding Common Stock (on a fully diluted basis). If the Issuer redeems all of the outstanding shares of Preferred Stock prior to May 14, 2001, the Investors must sell back, for a total of $100, to the Issuer 12.5% of the shares of Common Stock originally issued to the Investors. Page 6 7 Dividends on the Preferred Stock equal to 10% per annum are payable quarterly. The dividend rate is subject to increase (but in no event to more than 16%) or decrease (but in no event to less than 10%) based upon the Issuer's ratio of certain assets to liabilities, which is calculated on January 1 and July 1 of each year or at such other time as requested by the Investors. The Preferred Stock may be redeemed at any time by the Issuer and must be redeemed upon the occurrence of certain events, including upon the fifth anniversary of the issue date or upon a change of control. A change of control is deemed to occur upon any merger, reorganization, purchase or sale of more than 50% of the Issuer's voting securities, the sale of substantially all of the assets of the Issuer or at any time Tim Goff ceases to serve as the Issuer's Chief Executive Officer. The Issuer is prohibited from taking certain actions, including authorizing, creating or issuing any shares of capital stock, amending the articles of incorporation of the Issuer and authorizing a merger or change of control, without the consent of the holders of a majority of the outstanding shares of Preferred Stock. SECOND AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT In connection with the transaction, the Issuer, Bargo Energy Resources, Ltd., TJG Investments, Inc., Bargo Energy Company, Tim J. Goff, Thomas Barrow, James E. Sowell and Bargo Operating Company, Inc. (collectively, the "Bargo Group"), B. Carl Price, Don Wm. Reynolds (Mr. Price and Mr. Reynolds are referred to as the "Price Group"), EnCap Equity 1994 Limited Partnership and the Investors entered into a Second Amended and Restated Shareholders' Agreement (the "New Shareholders' Agreement"), thereby amending the Amended and Restated Shareholders' Agreement formerly in place with the Issuer and certain of its shareholders. Under the New Shareholders' Agreement, the holders of the Preferred Stock have the right, for so long as the Preferred Stock is outstanding and until the occurrence of certain other events, to appoint designated nominees to the Issuer's Board of Directors. Accordingly, as part of these transactions, B. Carl Price, Mary Elizabeth Vanderhider and Kimberley G. Seekely have resigned from the Issuer's Board of Directors. Of the three vacancies on the Board of Directors, one will be filled by a nominee to be named by Kayne, one was filled by a nominee of BancAmerica and one was jointly filled by a nominee of Eos and SGC. Brian D. Young was appointed to serve as the Eos/SGC nominee and J. Travis Hain was appointed to serve as BancAmerica's nominee. The EnCap entities have the right to appoint two nominees to the Board of Directors and the members of the Bargo Group have the right to appoint two nominee to the Board of Directors. The Price Group no longer has the right to appoint nominees to the Board of Directors. The continuing members of Bargo's Board are Tim J. Goff and Thomas D. Barrow (as the Bargo Group nominees) and Gary R. Petersen and D. Martin Phillips (as the EnCap nominees). The New Shareholders' Agreement also sets forth certain rights of first refusal and tag along rights among the parties thereto. The provisions of the New Shareholders' Agreement relating to voting and transfer of Common Stock may be deemed to form a group composed of the parties to the New Shareholders' Agreement. SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT The Issuer, the Investors and EnCap Equity 1994 Limited Partnership also entered into a Second Amendment to Registration Rights Agreement dated May 14, 1999 providing for registration rights under an existing Registration Rights Agreement among the Issuer and certain of the EnCap entities. The Registration Rights Agreement, as amended, provides certain demand and piggyback registration rights for the shares of Common Stock issued to the Investors. Page 7 8 AMENDMENT TO ISSUER'S BY-LAWS In connection with the transaction, the Issuer amended its Bylaws to provide that for so long as each of (i) EOS and SGC (jointly), (ii) Kayne, (iii) BancAmerica, (iv) EnCap and (v) the Bargo Group (each, a "Nominee Group") is entitled to nominate one or more persons to the Board of Directors of the Issuer as provided in the New Shareholders' Agreement, no act shall be deemed to be an act of the Board of Directors or to be authorized and approved by the Board of Directors without the approval of at least three directors that are nominated by at least three separate Nominee Groups. In addition, Article VIII of the Bylaws providing certain voting rights to the nominee of the Bargo Group, was deleted. ITEM 4. PURPOSE OF TRANSACTION. The reporting persons hold an ownership position in the Issuer in order to be able to influence the business and management of the Issuer. Such reporting persons, through their nominee on the Board of Directors, intend to actively participate in the business and management of the Issuer. Under the New Shareholders' Agreement, the Investors collectively have the ability to control the Issuer with respect to the election of directors. The reporting persons intend to monitor and evaluate their investment in the Issuer in light of pertinent factors, including oil and gas prices, market conditions, the Issuer's performance and prospects, the trading prices of the Common Stock, conditions in the oil and gas industry and general economic conditions. The reporting persons may make additional purchases of Common Stock in the future through market transactions or otherwise, maintain their current investment or dispose of some or all of the Common Stock. Except as set forth above, the reporting persons have no present plans or proposals that relate to or that would result in any of the actions specified in clauses (a) though (j) of Item 4 of Schedule 13D. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) The following table describes the number of shares of Common Stock, including shares of Common Stock issuable upon exercise or conversion of derivative securities and the percent of outstanding Common Stock owned by the reporting persons and the other parties to the New Shareholders' Agreement and their officers, directors, partners and control persons ("Related Parties"), other than those Related Parties that own no shares of Common Stock or securities convertible into or exerciseable for shares of Common Stock. All percentages are based on 48,357,784 shares of Common Stock issued and outstanding on May 14, 1999, as represented by the Issuer in the Stock Purchase Agreement dated May 14, 1999 among Bargo and the Investors, plus the 43,815,810 shares of Common Stock issued to the Investors on May 14, 1999. Page 8 9
SHARES OUTSTANDING DERIVATIVE SECURITIES TOTAL -------------------------- -------------------------- ------------------------------- NAME SOLE SHARED SOLE SHARED NUMBER %(1) - ------------------------------------ ----------- ------------- ----------- ------------- -------------- --------------- Bargo Energy Company -- 7,078,333 -- -- 7,078,333 7.68% Bargo Energy Resources, Ltd. -- 4,694,859 -- 250,000(2) 4,944,859 5.35% Bargo Operating Company, Inc. -- 4,954,859 -- 250,000(2) 5,204,859 5.63% Tim J. Goff 8,406,667 13,288,192 -- 250,000(2) 21,944,859 23.74% TJG Investments, Inc. -- 1,255,000 -- -- 1,255,000 1.36% Thomas D. Barrow 8,666,667 -- -- -- 8,666,667 9.40% James E. Sowell 8,666,666 -- -- -- 8,666,666 9.40% Energy Capital Investment Company PLC -- 4,241,598 -- -- 4,241,598 4.60% EnCap Equity 1994 Limited Partnership 2,424,973 -- -- -- 2,424,973 2.63% EnCap Energy Capital Fund III, L.P. 5,583,755 -- -- -- 5,583,755 6.06% EnCap Energy Capital Fund III-B, L.P. 4,222,999 -- -- -- 4,222,999 4.58% BOCP Energy Partners, L.P. -- 1,366,277 -- -- 1,366,277 1.48% EnCap Investments, L.L.C.. -- 17,839,602 -- -- 17,839,602 19.35% B. Carl Price 1,126,869 -- -- 613,131(3) 1,740,000 1.88% Don Wm. Reynolds 753,362 -- -- -- 753,362 0.82% Kayne 8,763,162 -- -- -- 8,763,162 9.51% BancAmerica 13,144,743 -- -- -- 13,144,743 14.26% SGC Partners II LLC 4,381,581 -- -- -- 4,381,581 4.75% Eos Partners, L.P. 328,619 -- -- -- 328,619 0.36% Eos Partners SBIC, L.P. 3,417,633 -- -- -- 3,417,633 3.71% Eos Partners SBIC II, L.P. 635,329 -- -- -- 635,329 0.69%
- -------------- (1) In accordance with SEC regulations under Section 13(d) of the Act, the percent shown in this column for each stockholder represents the number of shares of Common Stock owned by the stockholder plus the derivative securities (on an as converted basis) owned by such stockholder divided by the number of shares outstanding plus the number of derivative securities (on an as converted basis) owned by such stockholder. (2) Represents warrants to purchase Common Stock. (3) Includes 550,000 shares of Common Stock that may be acquired pursuant to employee stock options which may be exercised immediately. Also includes 63,131 shares of Common Stock, the maximum number of shares which Mr. Price has the right to acquire during the 60 days following May 14, 1999 under an employment agreement with Bargo. Under this agreement, Mr. Price may elect to receive all or a portion of his salary in shares of Common Stock at a price per share of $0.33 per share until December 31, 1999. From January 1, 2000 and until the employment agreement terminates, the purchase price per share is the average midpoint between the bid and asked price of the Common Stock on the OTC Bulletin Board for the last five days of the calendar year prior to the year the compensation is earned. The 63,131 shares included in the foregoing table represents the maximum number of shares which Mr. Price could acquire during the 60 day period following May 14, 1999 if he converted all of his salary into shares of Common Stock. Page 9 10 (b) Eos Partners. Eos Partners has the sole power to vote or direct the vote and to dispose or direct the disposition of 328,619 shares of Common Stock. In addition, all shares of Common Stock owned by Eos Partners are subject to the voting and transfer provisions of the New Shareholders' Agreement. Eos SBIC. Eos SBIC has the sole power to vote or direct the vote and to dispose or direct the disposition of 3,417,633 shares of Common Stock. In addition, all shares of Common Stock owned by Eos SBIC are subject to the voting and transfer provisions of the New Shareholders' Agreement. Eos SBIC II. Eos SBIC II has the sole power to vote or direct the vote and to dispose or direct the disposition of 635,329 shares of Common Stock. In addition, all shares of Common Stock owned by Eos SBIC II are subject to the voting and transfer provisions of the New Shareholders' Agreement. Messrs. Friedman and Young. Steven M. Friedman and Brian D. Young may be deemed to have the power to vote and direct the vote or to dispose or direct the disposition of the 328,619 shares of Common Stock owned by Eos Partners (as its general partners). Messrs. Friedman and Young disclaim beneficial ownership of any shares of Common Stock owned by Eos Partners. Eos SBIC GP. Eos SBIC GP may be deemed to have the power to vote and direct the vote or to dispose or direct the disposition of the 3,417,633 shares of Common Stock owned by Eos SBIC (as its general partner). Eos SBIC II GP. Eos SBIC II GP may be deemed to have the power to vote and direct the vote or to dispose or direct the disposition of the 635,329 shares of Common Stock owned by Eos SBIC II (as its general partner). Executive Officers and Directors. Except as otherwise described herein, to the knowledge of the reporting persons, no executive officer or director of the reporting persons or other party listed in Item 2 has the power to vote or direct the vote or dispose or direct the disposition of any shares of Common Stock. (c) Except as otherwise described herein or in any Exhibit filed herewith, to the knowledge of the reporting persons, none of the persons named in response to paragraph (a) above has effected any transaction in shares of the Common Stock during the past 60 days. (d) Except as otherwise described herein, no person other than the reporting persons has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of Common Stock deemed to be beneficially owned by the reporting persons. (e) It is inapplicable for the purposes herein to state the date on which a party ceased to be the owner of more than five percent (5%) of the shares of Common Stock. Page 10 11 ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SECURITIES OF THE ISSUER. Except as described in this Schedule 13D, there are no contracts, arrangements, understandings or relationships (legal or otherwise) between any of the individuals or entities described in Item 2 or between such persons and any other person with respect to the shares of Common Stock deemed to be beneficially owned by the reporting persons. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit 1 - Joint Filing Agreement dated May 21, 1999 among Eos Partners, Eos SBIC and Eos SBIC II.* Exhibit 4.1 - Registration Rights Agreement dated August 14, 1998 between Future Petroleum Corporation, Energy Capital Investment Company PLC and EnCap Equity 1994 Limited Partnership.** Exhibit 4.2 - Second Amendment to Registration Rights Agreement dated May 14, 1999 by and among Bargo Energy Company, a Texas corporation, Energy Capital Investment Company PLC, an English investment company, EnCap Equity 1994 Limited Partnership, a Texas limited partnership, EnCap Energy Capital Fund III-B, L.P., a Texas limited partnership, BOCP Energy Partners, L.P., a Texas limited partnership, EnCap Energy Capital Fund III, L.P., a Texas limited partnership, Kayne Anderson Energy Fund, L.P., a Delaware limited partnership, BancAmerica Capital Investors SBIC I, L.P., a Delaware limited partnership, Eos Partners, L.P., a Delaware limited partnership, Eos Partners SBIC, L.P., a Delaware limited partnership, Eos Partners SBIC II, L.P., a Delaware limited partnership, and SGC Partners II LLC, a Delaware limited liability company.* Exhibit 4.3 - Second Amended and Restated Shareholders' Agreement dated May 14, 1999 by and among Bargo Energy Company, a Texas corporation, B. Carl Price, a Texas resident, Don Wm. Reynolds, a Texas resident, Energy Capital Investment Company PLC, an English investment company, EnCap Equity 1994 Limited Partnership, a Texas limited partnership, Bargo Energy Resources, Ltd., a Texas limited partnership, TJG Investments, Inc., a Texas corporation, Bargo Energy Company, a Texas general partnership, Tim J. Goff, Thomas Barrow, James E. Sowell, Bargo Operating Company, Inc., a Texas corporation, EnCap Energy Capital Fund III-B, L.P., a Texas limited partnership, BOCP Energy Partners, L.P., a Texas limited partnership, EnCap Energy Capital Fund III, L.P., a Texas limited partnership, Kayne Anderson Energy Fund, L.P., a Delaware limited partnership, BancAmerica Capital Investors SBIC I, L.P., a Delaware limited partnership, Eos Partners, L.P., a Delaware limited partnership, Eos Partners SBIC, L.P., a Delaware limited partnership, Eos Partners SBIC II, L.P., a Delaware limited partnership, and SGC Partners II LLC, a Delaware limited liability company.* Page 11 12 Exhibit 10.1 - Stock Purchase Agreement dated May 14, 1999 by and among Energy Capital Investment Company PLC, an English investment company, EnCap Energy Capital Fund III-B, L.P., a Texas limited partnership, BOCP Energy Partners, L.P., a Texas limited partnership, EnCap Energy Capital Fund III, L.P., a Texas limited partnership, Kayne Anderson Energy Fund, L.P., a Delaware limited partnership, BancAmerica Capital Investors SBIC I, L.P., a limited partnership, Eos Partners, L.P., a Delaware limited partnership, Eos Partners SBIC, L.P., a Delaware limited partnership, Eos Partners SBIC II, L.P., a Delaware limited partnership, SGC Partners II LLC, a Delaware limited liability company and Bargo Energy Company, a Texas corporation.* * Filed herewith. ** Incorporated by reference to Exhibit 4.9 to Schedule 13D/A dated August 14, 1998, as filed regarding the common stock of Future Petroleum Corporation owned by Energy Capital Investment Company PLC, EnCap Equity 1994 Limited Partnership and EnCap Investments L.L.C. Page 12 13 SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: May 21, 1999 EOS PARTNERS, L.P. By: /s/ BRIAN D. YOUNG ---------------------------------------- Name: Brian D. Young ------------------------------ Title: Chairman ----------------------------- Date: May 21, 1999 EOS PARTNERS SBIC, L.P. By: Eos SBIC General, L.P., its general partner By: Eos SBIC, Inc., its general partner By: /s/ BRIAN D. YOUNG ---------------------------------------- Name: Brian D. Young ------------------------------ Title: Chairman ----------------------------- Date: May 21, 1999 EOS PARTNERS SBIC II, L.P. By: Eos SBIC General II, L.P., its general partner By: Eos SBIC II, Inc., its general partner By: /s/ BRIAN D. YOUNG ---------------------------------------- Name: Brian D. Young ------------------------------ Title: Chairman ----------------------------- Page 13 14 INDEX TO EXHIBITS
Exhibit No. Description - ----------- ----------- Exhibit 1 - Joint Filing Agreement dated May 21, 1999 among Eos Partners, Eos SBIC and Eos SBIC II.* Exhibit 4.1 - Registration Rights Agreement dated August 14, 1998 between Future Petroleum Corporation, Energy Capital Investment Company PLC and EnCap Equity 1994 Limited Partnership.** Exhibit 4.2 - Second Amendment to Registration Rights Agreement dated May 14, 1999 by and among Bargo Energy Company, a Texas corporation, Energy Capital Investment Company PLC, an English investment company, EnCap Equity 1994 Limited Partnership, a Texas limited partnership, EnCap Energy Capital Fund III-B, L.P., a Texas limited partnership, BOCP Energy Partners, L.P., a Texas limited partnership, EnCap Energy Capital Fund III, L.P., a Texas limited partnership, Kayne Anderson Energy Fund, L.P., a Delaware limited partnership, BancAmerica Capital Investors SBIC I, L.P., a Delaware limited partnership, Eos Partners, L.P., a Delaware limited partnership, Eos Partners SBIC, L.P., a Delaware limited partnership, Eos Partners SBIC II, L.P., a Delaware limited partnership, and SGC Partners II LLC, a Delaware limited liability company.* Exhibit 4.3 - Second Amended and Restated Shareholders' Agreement dated May 14, 1999 by and among Bargo Energy Company, a Texas corporation, B. Carl Price, a Texas resident, Don Wm. Reynolds, a Texas resident, Energy Capital Investment Company PLC, an English investment company, EnCap Equity 1994 Limited Partnership, a Texas limited partnership, Bargo Energy Resources, Ltd., a Texas limited partnership, TJG Investments, Inc., a Texas corporation, Bargo Energy Company, a Texas general partnership, Tim J. Goff, Thomas Barrow, James E. Sowell, Bargo Operating Company, Inc., a Texas corporation, EnCap Energy Capital Fund III-B, L.P., a Texas limited partnership, BOCP Energy Partners, L.P., a Texas limited partnership, EnCap Energy Capital Fund III, L.P., a Texas limited partnership, Kayne Anderson Energy Fund, L.P., a Delaware limited partnership, BancAmerica Capital Investors SBIC I, L.P., a Delaware limited partnership, Eos Partners, L.P., a Delaware limited partnership, Eos Partners SBIC, L.P., a Delaware limited partnership, Eos Partners SBIC II, L.P., a Delaware limited partnership, and SGC Partners II LLC, a Delaware limited liability company.* Exhibit 10.1 - Stock Purchase Agreement dated May 14, 1999 by and among Energy Capital Investment Company PLC, an English investment company, EnCap Energy Capital Fund III-B, L.P., a Texas limited partnership, BOCP Energy Partners, L.P., a Texas limited partnership, EnCap Energy Capital Fund III, L.P., a Texas limited partnership, Kayne Anderson Energy Fund, L.P., a Delaware limited partnership, BancAmerica Capital Investors SBIC I, L.P., a limited partnership, Eos Partners, L.P., a Delaware limited partnership, Eos Partners SBIC, L.P., a Delaware limited partnership, Eos Partners SBIC II, L.P., a Delaware limited partnership, SGC Partners II LLC, a Delaware limited liability company and Bargo Energy Company, a Texas corporation.* * Filed herewith. ** Incorporated by reference to Exhibit 4.9 to Schedule 13D/A dated August 14, 1998, as filed regarding the common stock of Future Petroleum Corporation owned by Energy Capital Investment Company PLC, EnCap Equity 1994 Limited Partnership and EnCap Investments L.L.C.
EX-1 2 JOINT FILING AGREEMENT 1 EXHIBIT 1 AGREEMENT The undersigned reporting persons hereby agree that the statements filed pursuant to this Schedule 13D, to which this Agreement is filed as an exhibit, are filed on behalf of each of them. Date: May 21, 1999 EOS PARTNERS, L.P. By: /s/ BRIAN D. YOUNG ---------------------------------------- Name: Brian D. Young ------------------------------ Title: Chairman ----------------------------- Date: May 21, 1999 EOS PARTNERS SBIC, L.P. By: Eos SBIC General, L.P., its general partner By: Eos SBIC, Inc., its general partner By: /s/ BRIAN D. YOUNG ---------------------------------------- Name: Brian D. Young ------------------------------ Title: Chairman ----------------------------- Date: May 21, 1999 EOS PARTNERS SBIC II, L.P. By: Eos SBIC General II, L.P., its general partner By: Eos SBIC II, Inc., its general partner By: /s/ BRIAN D. YOUNG ---------------------------------------- Name: Brian D. Young ------------------------------ Title: Chairman ----------------------------- Page 14 EX-4.2 3 2ND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT 1 SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT This SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT ("Amendment") is made and entered into this 14th day of May, 1999, by and among Bargo Energy Company, a Texas corporation (the "Company"), Energy Capital Investment Company PLC, an English investment company ("Energy PLC"), EnCap Equity 1994 Limited Partnership, a Texas limited partnership ("EnCap LP"), EnCap Energy Capital Fund III-B, L.P., a Texas limited partnership ("EnCap III-B"), BOCP Energy Partners, L.P., a Texas limited partnership ("BOCP"), EnCap Energy Capital Fund III, L.P., a Texas limited partnership ("EnCap III"), Kayne Anderson Energy Fund, L.P., a Delaware limited partnership ("Kayne"), BancAmerica Capital Investors SBIC I, L.P., a Delaware limited partnership ("BACI"), Eos Partners, L.P., a Delaware limited partnership ("Eos Partners"), Eos Partners SBIC, L.P., a Delaware limited partnership ("Eos SBIC"), Eos Partners SBIC II, L.P., a Delaware limited partnership ("Eos SBIC II" and together with Eos Partners and Eos SBIC, collectively referred to as "EOS"), and SGC Partners II LLC, a Delaware limited liability company ("SGCP"), and evidences the following: RECITALS: A. The Company (as successor by merger to Future Petroleum Corporation, a Utah corporation), Energy PLC and EnCap LP entered into a Registration Rights Agreement on August 14, 1998, as amended by a First Amendment to Registration Rights Agreement dated December 15, 1998 (as amended, the "Agreement"), covering shares of Common Stock (as defined in the Agreement) issued to Energy PLC and EnCap LP; B. Energy PLC, EnCap III-B, BOCP, EnCap III, Kayne, BACI, EOS and SGCP (collectively, the "Investors") are parties, along with the Company, to that certain Stock Purchase Agreement dated May 14, 1999 ("Purchase Agreement"), pursuant to which the Investors will be issued 43,815,810 shares of Common Stock (the "New Common Shares"); C. The parties to the Agreement desire to amend the Agreement to cover the New Common Shares and to make certain other changes. AGREEMENT: NOW, THEREFORE, for and in consideration of the foregoing Recitals and the mutual covenants contained herein, the sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows: Section 1. Amendments to the Agreement. (a) Section 1(a) of the Agreement is amended as follows: 2 Clause (i) of the first line in the definition of "Registrable Securities" shall be replaced with: "(i) the Fund I Shares and the New Common Shares and" There shall be added to Section 1(a) a definition of "New Common Shares" as follows: " 'New Common Shares' shall mean all the shares of Common Stock issued by the Company pursuant to that certain Stock Purchase Agreement dated May 14, 1999 by and among the Company, Energy Capital Investment Company PLC, an English investment company ("Energy PLC"), EnCap Energy Capital Fund III-B, L.P., a Texas limited partnership ("EnCap III-B"), BOCP Energy Partners, L.P., a Texas limited partnership ("BOCP"), EnCap Energy Capital Fund III, L.P., a Texas limited partnership ("EnCap III"), Kayne Anderson Energy Fund, L.P., a Delaware limited partnership ("Kayne"), BancAmerica Capital Investors SBIC I, L.P., a Delaware limited partnership ("BACI"), Eos Partners, L.P., a Delaware limited partnership ("Eos Partners"), Eos Partners SBIC, L.P., a Delaware limited partnership ("Eos SBIC"), Eos Partners SBIC II, L.P., a Delaware limited partnership ("Eos SBIC II" and together with Eos Partners and Eos SBIC, collectively referred to as "EOS"), and SGC Partners II LLC, a Delaware limited liability company ("SGCP")." (b) In Section 12(e), "If to Energy PLC or EnCap LP:" shall be replaced with: "If to Energy PLC, EnCap LP, EnCap III-B, BOCP or EnCap III:" (c) There shall be added to Section 12(e) the following: "If to Kayne: Kayne Anderson Investment Management 1800 Ave. of the Stars, # 1425 Los Angeles, California 90067 Telecopier No.: 310-284-6490 Attention: Robert B. Sinnott If to BACI: Bank of America Capital Investors 100 North Tryon Street, 25th Floor Charlotte, North Carolina 28255 Telecopier No.: 704-386-6432 3 Attention: J. Travis Hain If to EOS: EOS Partners, L.P. 320 Park Avenue New York, New York 10022 Telecopier No.: 212-832-5815 Attention: Brian D. Young If to SGCP: SGC Partners II LLC c/o SG Capital Partners, LLC 1221 Avenue of the Americas, 15th Floor New York, NY 10020 Attention: V. Frank Pottow Fax No.: 212-278-5454" Section 2. Binding Effect. Each of EnCap III-B, BOCP, EnCap III, Kayne, BACI, EOS and SGCP by execution of this Amendment shall be bound by and subject to the terms and conditions of the Agreement, as amended by this Amendment. Section 3. No Other Changes. Except as explicitly amended by this Amendment, the terms, conditions, rights and obligations under the Agreement shall remain in full force and effect. Section 4. Consents. The Company represents and warrants that no consent, approval, order, or authorization of, or declaration, filing, or registration with, any party is required to be obtained or made in connection with the execution, delivery, or performance by the Company of the Agreement, as amended by this Amendment, or the consummation by it of the transactions contemplated hereby or thereby, other than those consents that have been received by the Company as of the date hereof and requisite filings and registrations with, and orders of, the Commission. Section 5. Counterparts. This Amendment may be executed by the parties hereto in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same agreement. 4 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth above. BARGO ENERGY COMPANY By: ---------------------------------------- Name: ----------------------------------- Title: ---------------------------------- ENCAP EQUITY 1994 LIMITED PARTNERSHIP By: EnCap Investments L.C., General Partner By: --------------------------------------- D. Martin Phillips Managing Director ENERGY CAPITAL INVESTMENT COMPANY PLC By: --------------------------------------- Gary R. Petersen Director ENCAP ENERGY CAPITAL FUND III, L.P. By: EnCap Investments L.C., General Partner By: --------------------------------------- D. Martin Phillips Managing Director ENCAP ENERGY CAPITAL FUND III-B, L.P. By: EnCap Investments L.C., General Partner By: --------------------------------------- D. Martin Phillips Managing Director 5 BOCP ENERGY PARTNERS, L.P. By: EnCap Investments L.C., Manager By: --------------------------------------- D. Martin Phillips Managing Director EOS PARTNERS, L.P. By: --------------------------------------- Name: ---------------------------------- Title: --------------------------------- EOS PARTNERS SBIC, L.P. By: Eos SBIC General, L.P., its general partner By: Eos SBIC, Inc., its general partner By: ------------------------------------ Name: ------------------------------- Title: ------------------------------ EOS PARTNERS SBIC II, L.P. By: Eos SBIC General II, L.P., its general partner By: Eos SBIC II, Inc., its general partner By: ------------------------------------ Name: ------------------------------- Title: ------------------------------ SGC PARTNERS II LLC By: --------------------------------------- V. Frank Pottow Managing Director 6 BANCAMERICA CAPITAL INVESTORS SBIC I, L.P. By: BancAmerica Capital Management SBIC I, LLC, its general partner By: BancAmerica Capital Management I, L.P., its its sole member By: BACM I GP, LLC, its general partner By: ------------------------------------ J. Travis Hain Managing Director KAYNE ANDERSON ENERGY FUND, L.P. By: --------------------------------------- Name: ---------------------------------- Title: --------------------------------- EX-4.3 4 2ND AMENDED & RESTATED SHAREHOLDERS' AGREEMENT 1 SECOND AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT THIS SECOND AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT (this "Agreement") is made and entered into this 14th day of May, 1999, by and among Bargo Energy Company, a Texas corporation ("Company"), B. Carl Price, a Texas resident ("Price"), Don Wm. Reynolds, a Texas resident ("Reynolds"), Energy Capital Investment Company PLC, an English investment company ("Energy PLC"), EnCap Equity 1994 Limited Partnership, a Texas limited partnership ("EnCap LP"), Bargo Energy Resources, Ltd., a Texas limited partnership ("Resources"), TJG Investments, Inc., a Texas corporation ("TJG"), Bargo Energy Company, a Texas general partnership ("BEC"), Tim J. Goff ("Goff"), Thomas Barrow ("Barrow"), James E. Sowell ("Sowell"), Bargo Operating Company, Inc., a Texas corporation ("Operating"), EnCap Energy Capital Fund III-B, L.P., a Texas limited partnership ("EnCap III-B"), BOCP Energy Partners, L.P., a Texas limited partnership ("BOCP"), EnCap Energy Capital Fund III, L.P., a Texas limited partnership ("EnCap III"), Kayne Anderson Energy Fund, L.P., a Delaware limited partnership ("Kayne"), BancAmerica Capital Investors SBIC I, L.P., a Delaware limited partnership ("BACI"), Eos Partners, L.P., a Delaware limited partnership ("Eos Partners"), Eos Partners SBIC, L.P., a Delaware limited partnership ("Eos SBIC"), Eos Partners SBIC II, L.P., a Delaware limited partnership ("Eos SBIC II" and together with Eos Partners and Eos SBIC, collectively referred to as "EOS"), and SGC Partners II LLC, a Delaware limited liability company ("SGCP"). RECITALS: A. Company (as successor by merger to Future Petroleum Corporation, a Utah corporation), Price, Reynolds, Energy PLC, EnCap LP, Resources, TJG, BEC, Goff, Barrow, Sowell and Operating are currently parties to that certain Amended and Restated Shareholder's Agreement dated December 15, 1998 ("Original Agreement"), pursuant to which such parties agreed, among other things, to vote their shares in favor of the election of the Designated Nominees (as defined by and more specifically provided in the Original Agreement) named from time to time by the parties, including the designation by Energy PLC and EnCap LP of two of the seven directors on Company's Board. B. EnCap III-B, Energy PLC, BOCP, EnCap III, Kayne, BACI, EOS and SGCP (the "Investors") are parties, along with Company, to that certain Stock Purchase Agreement dated May 14, 1999 ("Purchase Agreement"), pursuant to which the Investors will be issued shares of Company's common stock, $0.01 par value ("Common Stock") and Company's Cumulative Redeemable Preferred Stock, Series B (the "Preferred Shares"). C. The parties hereto deem it in their mutual best interests to make the agreements contained herein, including providing Company Board of Directors representation to those Investors making their initial investment in Company. 2 AGREEMENT: NOW, THEREFORE, for and in consideration of the foregoing Recitals and the mutual agreements contained herein, the sufficiency of which is hereby acknowledged and confirmed, the parties hereto, intending to be legally bound hereby, amend and restate the Original Agreement to read in its entirety as follows: Section 1. Definitions. (a) The following defined terms shall have the respective meanings assigned to them below: "Affiliate" shall mean, with respect to any person, (i) any person directly or indirectly controlling, controlled by or under common control with, such other person, or (ii) any account over which such person has management authority in such a manner that the person has the power to control the voting and disposition of the securities in such account. For purposes of this definition, the term "control," when used with respect to any person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing. "Bargo Group" shall mean TJG, BEC, Resources, Operating, Goff, Barrow and Sowell and any transferee of a member of the Bargo Group that executes or is required to execute an Addendum Agreement. "Designated Nominee" shall mean a person designated as a nominee for election to Company's Board of Directors pursuant to this Agreement. "EnCap" shall mean EnCap LP, Energy PLC, EnCap III-B, BOCP, EnCap III and any transferee of a member of EnCap that executes or is required to execute an Addendum Agreement. "Exempt Transfer" shall mean any sale, disposition or transfer effected (i) through a registration under the Securities Act of 1933, as amended (the "Securities Act"), (ii) pursuant to and in compliance with Rule 144 promulgated by the Securities and Exchange Commission pursuant to the Securities Act, provided that such sale does not involve a sale of Stock to any person who has beneficial ownership of, or who is a member of a "group," as defined under Section 13(d) and corresponding rules of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which has beneficial ownership of, more than 5% of the outstanding Common Stock, (iii) transfers by a Shareholder to any person who is a partner or equity holder of such Shareholder, a successor of, or an entity all of the equity interests of which are directly or indirectly owned by, the selling Shareholder or an Affiliate 2 3 of the selling Shareholder, provided that no transfer pursuant to this clause (iii) shall be an Exempt Transfer unless the transferee agrees in writing to be bound by this Agreement and executes an Addendum Agreement hereto, (iv) by any member of the Bargo Group to any person who as of the date hereof is an employee of the Company, or (v) any bona fide charge, pledge or mortgage by any Shareholder of any shares of Stock or Preferred Shares owned or held by it or its rights under this Agreement, provided that any disposition of any such shares of Stock or Preferred Shares after foreclosure of such charge, pledge or mortgage shall be governed by the provisions of this Agreement, and the purchaser or purchasers of the shares shall have entered into an Addendum Agreement with Company and the other Shareholders. "Investor Group" shall mean the Investors and any transferee of an Investor that executes or is required to execute an Addendum Agreement. "Investors" has the meaning provided in the Recitals hereto. "Market Price" shall mean the average closing prices of the Common Stock for the ten trading days preceding an Offering Notice under Section 4(e) over the principal securities exchange in which the Common Stock is traded or, if not traded on an exchange, the average closing price for ten trading days preceding such Offering Notice as reported on the Nasdaq NMS, or if not traded on an exchange or the Nasdaq NMS, the average of the closing bid and asked prices of the Common Stock for such ten day period. "Original Agreement" has the meaning provided in the Recitals hereto. "Price Group" shall mean Price, Reynolds and any transferee of a member of the Price Group that executes or is required to execute an Addendum Agreement. "Proportionate Share" shall mean the number of shares of Stock equal to the product of: (i) the total number of Remaining Subject Shares which a proposed transferee has offered to purchase, multiplied by (ii) the fraction equal to the total number of shares of Stock which a Tag Along Shareholder or Drag Along Shareholder, as the case may be, owns, divided by the aggregate number of shares of Stock then outstanding. "Purchase Price" shall mean, for purposes of Section 4, an amount stated in dollars equal to the total value of a bona fide written offer from a person to purchase shares from a Shareholder determined as follows: (i) cash payable at closing shall be valued at the amount thereof, (ii) a security trading on a public market and for which published trading prices are readily available shall be valued at its closing sales price (or if a sales price is not available, at the average of its closing bid and asked prices) on the last business day preceding the date of the first Offering Notice with respect to such offer, and (iii) a security not described in clause (ii) or other property, including cash payable in one or more installments after closing, shall be valued at its fair market value on the last business day preceding the date of the first 3 4 Offering Notice with respect to such offer as determined at the option of the Selling Shareholder or Selling Preferred Shareholder (both as defined in Section 4) either (a) by a qualified independent third party appraiser (the expense of which shall be paid by the Company) or (b) in good faith by the Board of Directors of the Company (excluding any member of the Board who is a director, officer or shareholder of the Selling Shareholder (or Selling Preferred Shareholder, as applicable) or who has the right to purchase a portion of such shares under this Agreement) but only if all of such Board members agree to accept the assignment to make such determination. "Same Group Shareholders" shall mean with respect to any Selling Shareholder, those other members, if any, of the same Shareholder Group of which such Selling Shareholder is a member. "Shareholder Group" shall mean the Bargo Group, the Investor Group or the Price Group, as applicable. "Shareholders" shall mean the parties to this Agreement and any person who executes or is required to execute an Addendum Agreement (attached hereto as Exhibit "A"). "Stock" shall mean all shares of Common Stock owned or to be owned by the Shareholders, whether issued and outstanding at the time of the execution of this Agreement or issued subsequent thereto. "Total Voting Power" shall mean the aggregate number of votes which may be cast by holders of outstanding Voting Securities. "Voting Securities" shall mean Common Stock and any other securities of Company entitled to vote generally for the election of directors of Company. Section 2. Agreement Regarding Board Representation and Option Plan. (a) For so long as any of the Preferred Shares remain outstanding: each of (i) EOS and SGCP (jointly), (ii) Kayne and (iii) BACI (or the successor or transferee of any such party), shall be entitled to name one (1) Designated Nominee for Class III of Company's Board of Directors; the Bargo Group (including successors and transferees of its members) shall be entitled to name two (2) Designated Nominees for Class II of Company's Board of Directors; and EnCap (including successors and transferees of its members) shall be entitled to name two (2) Designated Nominees for Class I of Company's Board of Directors. In the event no Preferred Shares are outstanding, then for so long as the Investors shall beneficially own in the aggregate at least 20% of the issued and outstanding shares of capital stock of Company (excluding any shares held by the Bargo Group), on a fully-diluted basis reflecting all shares issuable upon the exercise of all outstanding rights to acquire shares of Company's capital stock, then the three members of the Investors owning the most shares of Common Stock shall be entitled from time to time to name (determined by any two of such 4 5 three parties) the smallest whole number of Designated Nominees necessary to constitute at least 40% of the total members of Company's Board of Directors. For purposes of this Agreement, "beneficial ownership" or "beneficially own" shall be determined in accordance with Rule 13d-3 under the Exchange Act). Notwithstanding the foregoing provisions of this Section 2(a), at the earlier of (i) two years following the final redemption of all Preferred Shares and (ii) 6 years following the date hereof, the Shareholders shall regain the rights regarding Designated Nominees provided by the first sentence of this Section 2(a), unless at such time the aggregate market value of the Common Stock, that is held by non-affiliates (excluding, without limitation, the Shareholders) and included for listing by The Nasdaq Stock Market or the New York Stock Exchange, is at least $100,000,000. (b) Each Shareholder agrees (i) to use its reasonable best efforts to cause Company's Board of Directors to be composed of seven members, (ii) to use its reasonable best efforts to cause Company to nominate or cause to be nominated to Company's Board of Directors all Designated Nominees and (iii) to vote or cause to be voted all Voting Securities beneficially owned by such Shareholder in favor of the election of the Designated Nominees to Company's Board of Directors. (c) In the event of the death, incapacity, resignation or removal of a Designated Nominee preventing his or her serving on Company's Board of Directors, each Shareholder will promptly cause the election or appointment of another Designated Nominee of such Shareholder or Shareholder Group, as applicable, to fill the vacancy created thereby. (d) Each Shareholder agrees to cause a designee of the Bargo Group to be elected Chairman of the Board of Directors of Company. Tim J. Goff shall serve as the Bargo Group's initial designee. In the event Mr. Goff no longer serves as the Bargo Group's designee, the Bargo Group agrees that all of its subsequent replacement designees as Chairman of the Board of Directors shall be subject to the prior approval of a majority of the Board of Directors of Company, which approval shall not be unreasonably withheld, and if a replacement designee is not so approved, the Bargo Group shall designate another designee acceptable to Company's Board of Directors. (e) Each Shareholder agrees to vote all Voting Securities beneficially owned by such Shareholder for approval of Company's 1999 Stock Incentive Plan contemplated by the Purchase Agreement. In addition, for so long as Tim Goff serves as Chief Executive Officer of Company, each Shareholder will cause its Designated Nominee(s) to approve and authorize the grant of stock option awards as recommended by Mr. Goff pursuant to Section 1.2(a) of Company's 1999 Stock Incentive Plan. (f) For so long as SGCP owns any shares of Series B Preferred, Company shall invite a representative designated by SGCP to attend all meetings of Company's Board of Directors in a non-voting capacity and, in this respect, shall give such representative copies of all notices, minutes, consents and other materials that Company provides to its directors; provided, however, that such SGCP representative shall hold in confidence and trust, and to act in a fiduciary manner regarding, 5 6 all information so provided by Company; and provided further, that Company reserves the right to exclude such SGCP representative from any meeting or portion thereof at which attendance by such representative could adversely affect the attorney-client privilege between Company and its legal counsel. Section 3. General Restrictions on Transfer. The Shareholders agree that, other than an Exempt Transfer, they will not in any way sell, transfer, assign or otherwise dispose of any shares of Stock, or any right or interest therein, whether voluntarily or involuntarily or by operation of law (each of the foregoing transactions is hereinafter referred to as a "Disposition"), except in accordance with the terms of this Agreement. Aside from an Exempt Transfer, any purported Disposition in violation of any provision of this Agreement will be void and will not operate to transfer any interest or title in such shares to the purported transferee, and will give the other Shareholders an option and preferential right to purchase such shares in the manner and on the terms and conditions provided in this Agreement. Section 4. Right of First Refusal; Tag-Along Rights; and Drag-Along Rights. (a) If any Shareholder desires to make a Disposition of any shares of Stock owned or held by it pursuant to a bona fide offer (other than in an Exempt Transfer or pursuant to Section 4(e) hereof), such Shareholder (for purposes of this Section 4, a "Selling Shareholder") shall offer such shares (the shares of Stock proposed to be transferred being called the "Subject Shares") for sale at the Purchase Price to the other Shareholders, all in accordance with the following provisions of this Section 4. (i) The Selling Shareholder shall deliver a written notice ("Offering Notice") to the other Shareholders to sell the Subject Shares to the Shareholders pursuant to this Agreement, indicating the number of Subject Shares and the proposed Purchase Price. Once the Offering Notice is delivered, the offer by the Selling Shareholder may not be withdrawn prior to the expiration of the options of the other Shareholders, as provided in this Section 4. Within 15 days from the receipt of such Offering Notice, the Same Group Shareholders of the Selling Shareholder may deliver to the Selling Shareholder written notice accepting the offer in the Offering Notice ("Reply Notice"), pursuant to which each such Same Group Shareholder may purchase no more than the number of shares equal to the product of: (A) the total number of Subject Shares, multiplied by (B) the fraction equal to the total number of shares of Stock owned by such Same Group Shareholder, divided by the aggregate number of shares of Stock owned by all Same Group Shareholders. If the Selling Shareholder's Same Group Shareholders do not timely elect to exercise their option to purchase all of the Subject Shares, then all the other Shareholders outside of such group may, within the subsequent 15 days, deliver a Reply Notice, pursuant to which each such other Shareholder may purchase no more than the number of shares equal to the product of: (A) the total number of Subject Shares remaining available for purchase, multiplied by (B) the fraction equal to the total number of shares of Stock owned by such other Shareholder, divided by 6 7 the aggregate number of shares of Stock owned by all other Shareholders (who are not members of the Selling Shareholder's Shareholder Group). Any such Reply Notice shall constitute an agreement binding upon the Selling Shareholder and the Shareholders delivering the Reply Notice to sell and purchase the stated portion of the Subject Shares at the Purchase Price. (ii) Any dispute concerning the calculation of the Purchase Price shall be resolved by the Board of Directors of the Company, excluding any member of the Board who is, or is a director, officer, partner or stockholder of, the Selling Shareholder or who has a right to purchase stock from the Selling Shareholder in the transaction for which the Purchase Price is being determined; provided that if all directors are excluded pursuant to the foregoing, such disputes shall be submitted to binding arbitration as provided in Exhibit B. The Purchase Price shall be paid in cash at the closing. (b) If the Shareholders do not elect to purchase all of the Subject Shares (such Subject Shares not being purchased are referred to herein as the "Remaining Subject Shares"), then the Selling Shareholder shall cause the proposed transferee (the "Proposed Purchaser") to offer in writing (a "Sale Notice"), not less than 30 nor more than 120 days prior to the consummation of any proposed Disposition, to the Shareholders other than the Selling Shareholder (the "Tag Along Shareholders") to purchase a Proportionate Share of the shares held by each Tag Along Shareholder. The Sale Notice shall set forth: (i) the name of the Selling Shareholder and the number of Subject Shares proposed to be transferred, (ii) the name and address of the Proposed Purchaser, (iii) the proposed amount and form of consideration and terms and conditions of payment offered by such Proposed Purchaser and (iv) that the Proposed Purchaser has been informed of the tag along right provided for in this Section 4(b) and has agreed to purchase shares of Stock owned by any Tag Along Shareholder in accordance with the terms hereof. The tag along right may be exercised by any Tag Along Shareholder by delivery of a written notice to the Proposed Purchaser and Selling Shareholder (the "Tag Along Notice") within 30 days following its receipt of the Sale Notice. The Tag Along Notice shall state the amount of shares of Stock (the "Tag Along Shares") that such Tag Along Shareholder proposes to include in such transfer to the Proposed Purchaser. To the extent that a Tag Along Shareholder accepts such tag along offer, the number of shares of Stock to be sold to the Proposed Purchaser by the Selling Shareholder shall be reduced to the extent necessary to comply with this Section 4(b). In the event that the Proposed Purchaser does not purchase all Tag Along Shares from the Tag Along Shareholders on the same terms and conditions as specified in the Sale Notice, then the Selling Shareholder shall not be permitted to sell any Subject Shares to the Proposed Purchaser in the proposed transfer. The closing of any purchase from the Tag Along Shareholders shall occur contemporaneously with the purchase and sale of the Subject Shares (as adjusted hereunder) or at such other time as such Tag Along Shareholders and the Proposed Purchaser shall agree. (c) In the event that (i) any Tag Along Shareholder elects not to exercise his/its tag-along rights described in Section 4(b) (a "Drag Along Shareholder"), and (ii) the total shares sought to be purchased by the Proposed Purchaser constitute at least 50% of the shares of Common Stock 7 8 outstanding on the date of the Sale Notice, and (iii) Company's Board of Directors approves such transaction, then each Selling Shareholder shall have the right (a "Drag Along Right"), beginning on the date that is the first day after such tag-along right has either expired or been rejected and ending 20 days thereafter, to require each Drag Along Owner to sell a Proportionate Share owned by such Drag Along Owner to the Proposed Purchaser. All such sales shall be on the same terms and conditions as, and occur simultaneously with, the sale of shares to such Proposed Purchaser by such Selling Shareholder. (d) If the other Shareholders do not elect to purchase all Subject Shares, the Selling Shareholder shall, subject to Sections 4(b) and 4(c) hereof, be freed and discharged, except as herein stated, from all obligations under the terms of this Agreement other than to sell the remaining Subject Shares to the purchaser and at the price and upon the terms stated in the Offering Notice, but only if such sale shall be completed within a period of 90 days from the date of delivery of the Offering Notice to the other Shareholders. If the Selling Shareholder does not complete such sale within such 90 day period, all the provisions of this Agreement, including the provisions of this Section 4, shall apply to any future sale or offer for sale of such shares of Stock owned by the Selling Shareholder. (e) Upon any involuntary Disposition of a Shareholder's shares of Stock, such Shareholder or its representative shall send notice thereof, disclosing in full to the Company and the other Shareholders the nature and details of such involuntary Disposition and offer such shares for sale at the Market Price to the other Shareholders, all in accordance with the following provisions of this Section 4(e). As used in this Section 4(e), the term "Selling Shareholder" shall mean such Shareholder or its representative, as the case may be. (i) The Selling Shareholder shall deliver an Offering Notice to the other Shareholders. Each of the other Shareholders shall have 30 days from the receipt of their respective Offering Notice to deliver a Reply Notice to the Selling Shareholder. If by their Reply Notice the other Shareholders accept the offer of the Selling Shareholder, such Reply Notice shall constitute an agreement binding upon the Selling Shareholder and the other Shareholders to sell and purchase the offered shares at the price and upon the terms stated in the Offering Notice of the Selling Shareholder. (ii) In connection with any purchase and sale of shares of Stock pursuant to paragraph (i) of this Section 4(e), the purchaser or purchasers shall pay the purchase price for the shares in cash at the closing. (iii) If the Shareholders do not accept the offer of the Selling Shareholder pursuant to the foregoing provisions of this Section 4(e), the Selling Shareholder shall be freed and discharged from all obligations under the terms of this Agreement except to dispose of the offered shares by involuntary Disposition but only if the transferee under any such Disposition shall have entered into and Addendum Agreement with the Company and the other Shareholders. If such involuntary Disposition is not effected, all the provisions of this 8 9 Agreement, including the provisions of this Section 4, shall apply to any future involuntary Disposition of such shares of Stock owned by the Selling Shareholder. (f) If any Shareholder desires to make a Disposition of any Preferred Shares owned or held by it pursuant to a bona fide offer (other than in an Exempt Transfer), such Shareholder (for purposes of this Section 4(f), a "Selling Preferred Shareholder") shall offer such shares (the Preferred Shares proposed to be transferred being called the "Subject Preferred Shares") for sale at the Purchase Price to the other Shareholders who then own Preferred Shares ("Preferred Shareholders"), all in accordance with the following provisions of this Section 4(f). (i) The Selling Preferred Shareholder shall deliver a written notice ("Preferred Stock Offering Notice") to the other Preferred Shareholders to sell the Subject Preferred Shares to the Preferred Shareholders pursuant to this Agreement, indicating the number of Subject Preferred Shares and the proposed Purchase Price. Once the Preferred Stock Offering Notice is delivered, the offer by the Selling Preferred Shareholder may not be withdrawn prior to the expiration of the options of the other Preferred Shareholders, as provided in this Section 4(f). Within 15 days from the receipt of such Preferred Stock Offering Notice, the other Preferred Shareholders may deliver to the Selling Preferred Shareholder written notice accepting the offer in the Preferred Stock Offering Notice, pursuant to which each such other Preferred Shareholder may purchase no more than the number of shares equal to the product of: (A) the total number of Subject Preferred Shares, multiplied by (B) the fraction equal to the total number of Preferred Shares owned by such other Preferred Shareholder, divided by the aggregate number of Preferred Shares owned by all other Preferred Shareholders. Any such reply to the Selling Preferred Shareholder shall constitute an agreement binding upon the Selling Preferred Shareholder and the Preferred Shareholders delivering such reply to sell and purchase the stated portion of the Subject Preferred Shares at the Purchase Price. (ii) Any dispute concerning the calculation of the Purchase Price shall be resolved by the Board of Directors of the Company, excluding any member of the Board who is, or is a director, officer, partner or stockholder of, the Selling Preferred Shareholder or who has a right to purchase Preferred Shares from the Selling Preferred Shareholder in the transaction for which the Purchase Price is being determined; provided that if all directors are excluded pursuant to the foregoing, such disputes shall be submitted to binding arbitration as provided in Exhibit B. The Purchase Price shall be paid in cash at the closing. If the Preferred Shareholders do not elect to purchase all of the Subject Preferred Shares (such Subject Preferred Shares not being purchased are referred to herein as the "Remaining Subject Preferred Shares"), then the Selling Preferred Shareholder shall cause the proposed transferee (the "Proposed Preferred Purchaser") to offer in writing (a "Preferred Sale Notice"), not less than 30 nor more than 120 days prior to the consummation of any proposed Disposition, to the Preferred Shareholders other than the Selling Preferred Shareholder (the "Tag Along Preferred Shareholders") to purchase from each Tag Along Preferred Shareholder a number of the Preferred Shares held by 9 10 each Tag Along Preferred Shareholder equal to the product of: (i) the total number of Remaining Subject Preferred Shares which a proposed transferee has offered to purchase, multiplied by (ii) the fraction equal to the total number of Preferred Shares which a Tag Along Preferred Shareholder owns, divided by the aggregate number of Preferred Shares then outstanding. The Preferred Sale Notice shall set forth: (i) the name of the Selling Preferred Shareholder and the number of Subject Preferred Shares proposed to be transferred, (ii) the name and address of the Proposed Preferred Purchaser, (iii) the proposed amount and form of consideration and terms and conditions of payment offered by such Proposed Preferred Purchaser and (iv) that the Proposed Preferred Purchaser has been informed of the tag along right provided for in this Section 4(f) and has agreed to purchase Preferred Shares owned by any Tag Along Preferred Shareholder in accordance with the terms hereof. The tag along right may be exercised by any Tag Along Preferred Shareholder by delivery of a written notice to the Proposed Preferred Purchaser and Selling Preferred Shareholder (the "Preferred Tag Along Notice") within 30 days following its receipt of the Preferred Sale Notice. The Preferred Tag Along Notice shall state the amount of Preferred Shares (the "Tag Along Preferred Shares") that such Tag Along Preferred Shareholder proposes to include in such transfer to the Proposed Preferred Purchaser. To the extent that a Tag Along Preferred Shareholder accepts such tag along offer, the number of Preferred Shares to be sold to the Proposed Preferred Purchaser by the Selling Preferred Shareholder shall be reduced to the extent necessary to comply with this Section 4(f). In the event that the Proposed Preferred Purchaser does not purchase all Tag Along Preferred Shares from the Tag Along Preferred Shareholders on the same terms and conditions as specified in the Preferred Sale Notice, then the Selling Preferred Shareholder shall not be permitted to sell any Subject Preferred Shares to the Proposed Preferred Purchaser in the proposed transfer. The closing of any purchase from the Tag Along Preferred Shareholders shall occur contemporaneously with the purchase and sale of the Subject Preferred Shares (as adjusted hereunder) or at such other time as such Tag Along Preferred Shareholders and the Proposed Preferred Purchaser shall agree. If the other Preferred Shareholders do not elect to purchase all Subject Preferred Shares, the Selling Preferred Shareholder shall, subject to the other provisions of this Section 4(f), be freed and discharged, except as herein stated, from all obligations under the terms of this Agreement other than to sell the remaining Subject Preferred Shares to the purchaser and at the price and upon the terms stated in the Preferred Offering Notice, but only if such sale shall be completed within a period of 90 days from the date of delivery of the Preferred Offering Notice to the other Preferred Shareholders. If the Selling Preferred Shareholder does not complete such sale within such 90 day period, all the provisions of this Agreement, including the provisions of this Section 4(f), shall apply to any future sale or offer for sale of such Preferred Shares owned by the Selling Preferred Shareholder. Section 5. Representations and Warranties of Shareholders. Each Shareholder hereby represents and warrants to the other Shareholders as follows: (a) As of the date hereof, such Shareholder is the record and beneficial owner of the 10 11 number of shares of Stock and Preferred Shares, as set forth opposite its name in the attached Exhibit 5(a). (b) Such Shareholder, if not a natural person, is duly formed, validly existing and in good standing under the laws of the jurisdiction of its formation. (c) Such Shareholder has full power and authority to execute, deliver, and perform this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by such Shareholder and constitutes a valid and legally binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms. (d) The execution, delivery, and performance by such Shareholder of this Agreement do not and will not (i) if not a natural person, contravene or violate any provision of its charter or other governing documents, as amended to the date hereof, (ii) conflict with or result in a violation of any provision of, or constitute (with or without the giving of notice or the passage of time or both) a default under, or give rise (with or without the giving of notice or the passage of time or both) to any right of termination, cancellation, or acceleration under, any bond, debenture, note, mortgage, indenture, lease, contract, agreement, or other instrument or obligation to which such Shareholder is a party or by which such Shareholder or any of its properties may be bound or (iii) violate any applicable law, rule or regulation binding upon such Shareholder. (e) No consent, approval, order, or authorization of, or declaration, filing, or registration with, any court or governmental agency or of any third party is required to be obtained or made by such Shareholder in connection with the execution, delivery, or performance by such Shareholder of this Agreement. Section 6. Survival of Provisions. All representations, warranties and covenants made by each party hereto in this Agreement or any other document contemplated hereby shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement or such other document, regardless of any investigation made by or on behalf of any such party. Section 7. Entire Agreement. This Agreement and the other documents contemplated hereunder contain the entire understanding of the parties hereto with respect to the subject matter hereof and supersede all prior agreements, understandings, negotiations, and discussions among the parties with respect to such subject matter, including, without limitation that certain Voting Agreement dated November 25, 1997, by and between Company, Energy PLC, EnCap LP, Carl Price and Don Wm. Reynolds, that certain Purchase and Sale Agreement dated November 25, 1997, by and among Company, Energy PLC, EnCap LP and Gecko Booty 1994 I Limited Partnership, and the Original Agreement. Neither Company nor any Shareholder shall be a party to any agreement regarding the voting or Disposition 11 12 of capital stock of Company, as such, unless Company and all such Shareholders are also parties to that agreement, except with the written consent of Company and all such Shareholders who are not parties to such an agreement. Section 8. Amendments. This Agreement may be amended, modified, supplemented, restated or discharged only by an instrument approved in writing by the members in each Shareholder Group owning at least two-thirds of the shares owned by such entire group. Section 9. Notices. All notices and other communications required under this Agreement shall (unless otherwise specifically provided herein) be in writing and be delivered personally, by recognized commercial courier or delivery service (which provides a receipt), by telecopier (with receipt acknowledged), or by registered or certified mail (postage prepaid), at the following addresses: If to a member of the Bargo Group, other than Sowell: c/o Bargo Energy Company 700 Louisiana, Suite 3700 Houston, Texas 77002 Attention: Tim J. Goff Fax No.: 713-236-9799 If to Sowell: James E. Sowell 3131 McKinney Avenue, Suite 200 Dallas, Texas 75204 If to B. Carl Price or Don Wm. Reynolds: c/o Bargo Energy Company 700 Louisiana, Suite 3700 Houston, Texas 77002 Attention: Carl Price Fax No.: 713-236-9799 12 13 If to EnCap: c/o EnCap Investments, L.C. 1100 Louisiana, Suite 3150 Houston, Texas 77002 Attention: D. Martin Phillips Fax No.: 713-659-6130 If to Kayne: Kayne Anderson Investment Management 1800 Ave. of the Stars, # 1425 Los Angeles, California 90067 Attention: Robert B. Sinnott Fax No.: 310-284-6490 If to BACI: Bank of America Capital Investors 100 North Tryon Street, 25th Floor Charlotte, North Carolina 28255 Attention: J. Travis Hain Fax No.: 704-386-6432 If to EOS: EOS Partners, L.P. 320 Park Avenue New York, New York 10022 Attention: Brian D. Young Fax No.: 212-832-5815 If to SGCP: SGC Partners II LLC c/o SG Capital Partners LLC 1221 Avenue of the Americas, 15th Floor New York, NY 10020 Attention: V. Frank Pottow Fax No.: 212-278-5454 and shall be considered delivered on the date of receipt. A Shareholder may specify as its proper 13 14 address any other post office address within the continental limits of the United States by giving notice to the other Shareholders, in the manner provided in this Section, at least ten (10) days prior to the effective date of such change of address. Any party hereto may designate a different address by notice to the other parties. Section 10. Termination. This Agreement shall terminate upon the earlier of (i) the written consent of each of the Shareholders, (ii) when the Shareholders collectively hold an aggregate of less than 20% (or when, with respect to a Shareholder Group, such Shareholder Group owns less than 5% (or when, with respect to a Shareholder, such Shareholder owns less than 0.5%) of the issued and outstanding shares of Common Stock (and this Agreement shall be terminated solely with respect to such Shareholder Group or Shareholder, as applicable, but shall remain in effect as to those Shareholder Groups owning 5% (and those Shareholders owning 0.5%) or more of the issued and outstanding shares of Common Stock)), or (iii) the closing of a public offering of the Common Stock, pursuant to an effective registration statement filed with the Securities and Exchange Commission, resulting in gross proceeds (before deduction of fees and commissions) to the Company of at least $100,000,000. Section 11. Power of Attorney. For the purpose of executing an Addendum Agreement, all the Shareholders hereby appoint Company as their agent and attorney to execute such Addendum Agreement on their behalf and expressly bind themselves to the Addendum Agreement by Company's execution of that Agreement without further action on their part. Section 12. No Waiver. The failure of any party hereto to insist upon strict performance of a covenant hereunder or of any obligation hereunder, irrespective of the length of time for which such failure continues, shall not be a waiver of such party's right to demand strict compliance in the future. No consent or waiver, express or implied, to or of any breach or default in the performance of any obligation hereunder shall constitute a consent or waiver to or of any other breach or default in the performance of the same or any other obligation hereunder. Section 13. Choice of Law. This Agreement shall be governed by the internal laws of the State of Texas, without regard to principles of conflicts of law. Section 14. Successors and Assigns. This Agreement shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. 14 15 Section 15. References and Construction. (a) The provisions of Sections 3 and 4 hereof shall not apply to transactions between members of the same Shareholder Group. The parties hereto consent to the pledge of shares pursuant to those certain Pledge Agreements (stock) by Resources, Energy PLC and EnCap LP, Price, TJG, BEC, Goff, Barrow, Sowell and Operating, respectively, in favor of Bank of America National Trust and Savings Association and agree that Sections 3 and 4 hereof shall not be applicable to such pledges or any foreclosures or resales thereunder. (b) All references in this Agreement to articles, sections, subsections and other subdivisions refer to corresponding articles, sections, subsections and other subdivisions of this Agreement unless expressly provided otherwise. (c) Titles appearing at the beginning of any of such subdivisions are for convenience only and shall not constitute part of such subdivisions and shall be disregarded in construing the language contained in such subdivisions. (d) The words "this Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. (e) Words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. (f) Unless the context otherwise requires or unless otherwise provided herein, the terms defined in this Agreement which refer to a particular agreement, instrument or document also refer to and include all renewals, extensions, modifications, amendments or restatements of such agreement, instrument or document, provided that nothing contained in this subsection shall be construed to authorize such renewal, extension, modification, amendment or restatement. (g) Examples shall not be construed to limit, expressly or by implication, the matter they illustrate. (h) The word "or" is not exclusive and the word "includes" and its derivatives means "includes, but is not limited to" and corresponding derivative expressions. (i) No consideration shall be given to the fact or presumption that one party had a greater or lesser hand in drafting this Agreement. (j) All references herein to "$" or "dollars" shall refer to U.S. Dollars. 15 16 Section 16. Legends. The certificate or certificates representing the Stock now owned or hereafter acquired by the Shareholders shall have conspicuously stamped, printed, or typed on the face or back thereof a legend substantially in the following form: "The shares represented hereby are subject to that certain Second Amended and Restated Shareholders' Agreement, dated as of May 14, 1999, by and among the Company, and certain stockholders of the Company. A copy of such shareholders' agreement and all applicable amendments thereto will be furnished by the Company to the holder hereof without charge upon written request to the Company at its principal place of business or registered office." Section 17. Specific Performance. Each of the parties hereto recognizes that any breach of the terms of this Agreement may give rise to irreparable harm for which money damages would not be an adequate remedy, and accordingly agree that, in addition to other remedies, any nonbreaching party shall be entitled to enforce the terms of this Agreement by a decree of specific performance without the necessity of proving the inadequacy as a remedy of money damages. Section 18. Counterparts. This Agreement may be executed in multiple counterparts, with each such counterpart constituting an original and all of such counterparts constituting but one and the same agreement. 16 17 IN WITNESS WHEREOF, this Second Amended and Restated Shareholder's Agreement has been executed as of the date above first written. BARGO ENERGY COMPANY By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- ENCAP EQUITY 1994 LIMITED PARTNERSHIP By: EnCap Investments L.C., General Partner By: ------------------------------------- D. Martin Phillips Managing Director ENERGY CAPITAL INVESTMENT COMPANY PLC By: ------------------------------------- Gary R. Petersen Director TJG INVESTMENTS, INC. By: ------------------------------------- Tim J. Goff President BARGO ENERGY COMPANY By: ------------------------------------- Tim J. Goff Manager 18 BARGO ENERGY RESOURCES, LTD. By: Bargo Operating Company, Inc., General Partner By: ------------------------------------- Tim J. Goff President BARGO OPERATING COMPANY, INC. By: ------------------------------------- Tim J. Goff President ----------------------------------------- Tim J. Goff ----------------------------------------- Thomas Barrow ----------------------------------------- James E. Sowell ----------------------------------------- B. Carl Price ----------------------------------------- Don Wm. Reynolds ENCAP ENERGY CAPITAL FUND III, L.P. By: EnCap Investments L.C., General Partner By: ------------------------------------- D. Martin Phillips Managing Director 19 ENCAP ENERGY CAPITAL FUND III-B, L.P. By: EnCap Investments L.C., General Partner By: ------------------------------------- D. Martin Phillips Managing Director BOCP ENERGY PARTNERS, L.P. By: EnCap Investments L.C., Manager By: ------------------------------------- D. Martin Phillips Managing Director EOS PARTNERS, L.P. By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- EOS PARTNERS SBIC, L.P. By: Eos SBIC General, L.P., its general partner By: Eos SBIC, Inc., its general partner By: ------------------------------ Name: ------------------------- Title: ------------------------ EOS PARTNERS SBIC II, L.P. By: Eos SBIC General II, L.P., its general partner By: Eos SBIC II, Inc., its general partner By: ------------------------------ Name: ------------------------- Title: ------------------------ 20 SGC PARTNERS II LLC By: ------------------------------------- V. Frank Pottow Managing Director BANCAMERICA CAPITAL INVESTORS SBIC I, L.P. By: BancAmerica Capital Management SBIC I, LLC, its general partner By: BancAmerica Capital Management I, L.P., its its sole member By: BACM I GP, LLC, its general partner By: --------------------------------- J. Travis Hain Managing Director KAYNE ANDERSON ENERGY FUND, L.P. By: --------------------------------------- Name: ---------------------------------- Title: --------------------------------- 21 EXHIBIT 5(a)
Shareholder Number of Shares Number of of Stock Preferred Shares - --------------------------------------------------------------------------------------- B. Carl Price 1,126,869 0 Don Wm. Reynolds 753,362 0 Energy Capital Investment Company PLC 4,241,598 0 EnCap Equity 1994 Limited Partnership 2,424,973 0 TJG Investments, Inc. 1,255,000 0 Bargo Energy Company 7,078,333 0 Tim J. Goff 8,406,667 0 Thomas Barrow 8,666,667 0 James E. Sowell 8,666,666 0 Bargo Operating Company 260,000 0 Bargo Energy Resources, Ltd. 4,694,859 0 EnCap Energy Capital Fund III-B, L.P. 4,222,999 481,904 BOCP Energy Partners, L.P. 1,366,277 155,911 EnCap Energy Capital Fund III, L.P. 5,583,755 637,185 Kayne Anderson Energy Fund, L.P. 8,763,162 1,000,000 BancAmerica Capital Investors SBIC I, L.P. 13,144,743 1,500,000 Eos Partners, L.P. 328,619 37,500 Eos Partners SBIC, L.P. 3,417,633 390,000 Eos Partners SBIC II, L.P. 635,329 72,500 SGC Partners II LLC 4,381,581 500,000
22 EXHIBIT A ADDENDUM AGREEMENT Addendum Agreement made this ____ day of ________, ____, by and between ____________________________________________ (the "New Shareholder") and Bargo Energy Company, a Texas corporation (the "Company"), and the other shareholders (the "Shareholders") of the Company, who are parties to that certain Second Amended and Restated Shareholders' Agreement dated May 14, 1999 (the "Agreement"), between the Company and the Shareholders. W I T N E S E T H: WHEREAS, the Company and the Shareholders entered into the Agreement to impose certain restrictions and obligations upon themselves and the shares of Common Stock, $0.01 par value, and Preferred Stock of the Company held by them (the "Shares"); WHEREAS, the New Shareholder is desirous of becoming a shareholder of the Company; and WHEREAS, the Company and the Shareholders have required in the Agreement that in certain circumstances certain persons being offered Shares must enter into an Addendum Agreement binding the New Shareholder to the Agreement to the same extent as if it was an original party thereto, so as to promote the mutual interests of the Company, the Shareholders and the New Shareholders by imposing the same restrictions and obligations on the New Shareholder and the shares of Common Stock and/or Preferred Stock, as applicable, to be acquired by it as were imposed upon the Shareholders under the Agreement; NOW, THEREFORE, in consideration of the mutual promises of the parties, and as a condition of the purchase of the shares of Common Stock in the Company, the New Shareholder acknowledges that it has read the Agreement. The New Shareholder shall be bound by, and shall have the benefit of, all the terms and conditions set out in the Agreement to the same extent as if it was a "Shareholder" as defined in the Agreement. This Addendum Agreement shall be attached to and become a part of the Agreement. New Shareholder By --------------------------- Address for notices under Section 9 of Agreement: --------------------------- --------------------------- --------------------------- 23 EXHIBIT B ARBITRATION In the event that a dispute or controversy as described in Section 4(a) or 4(f) should arise, such dispute or controversy shall be settled in arbitration in Houston, Texas and for this purpose each of the parties hereby expressly consents to such arbitration in such place. In the event the parties cannot mutually agree upon an arbitrator to settle their dispute or controversy, each party to the dispute shall select one arbitrator. In the event that there are only two parties to the dispute, the arbitrators selected by each party shall select a third arbitrator. The decision of said arbitrators shall be binding upon the parties for all purposes. If any party fails to select an arbitrator within 15 days after written demand from the other party or parties to do so, or if, in the event that there are only two parties to the dispute, the two arbitrators selected fail to select a third arbitrator within 15 days after the last of such selected arbitrators is appointed, such other arbitrator or arbitrators shall be selected pursuant to the then existing rules and regulations of the American Arbitration Association. Such arbitration shall be conducted in accordance with the then existing rules and regulations of the American Arbitration Association to the extent such rules and regulations are not inconsistent with this Agreement. The expense of each arbitrator shall be borne by the party selecting the arbitrator. The expense of any third arbitrator shall be borne equally by the two parties to the dispute or controversy. For purposes hereof, in the case of a dispute or controversy where the Offering Notice or Preferred Offering Notice, as applicable, was submitted by, or the transaction otherwise involves, more than one Selling Shareholder or Selling Preferred Shareholder, all such selling Shareholders shall collectively constitute a single party. Likewise, where the transaction involves more than one purchasing Shareholder, all such purchasing Shareholders shall constitute a single party. EX-10.1 5 STOCK PURCHASE AGREEMENT DATED MAY 14, 1999 1 - -------------------------------------------------------------------------------- STOCK PURCHASE AGREEMENT by and among Bargo Energy Company and Energy Capital Investment Company PLC, EnCap Energy Capital Fund III-B, L.P., BOCP Energy Partners, L.P., EnCap Energy Capital Fund III, L.P., Kayne Anderson Energy Fund, L.P., BancAmerica Capital Investors SBIC I, L.P., Eos Partners, L.P., Eos Partners SBIC, L.P., Eos Partners SBIC II, L.P., and SGC Partners II LLC May 14, 1999 - -------------------------------------------------------------------------------- 2 STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of May 14, 1999 by and among Energy Capital Investment Company PLC, an English investment company ("Energy PLC"), EnCap Energy Capital Fund III-B, L.P., a Texas limited partnership ("EnCap III-B"), BOCP Energy Partners, L.P., a Texas limited partnership ("BOCP"), EnCap Energy Capital Fund III, L.P., a Texas limited partnership ("EnCap III"), Kayne Anderson Energy Fund, L.P., a Delaware limited partnership ("Kayne"), BancAmerica Capital Investors SBIC I, L.P., a limited partnership ("BACI"), Eos Partners, L.P., a Delaware limited partnership ("Eos Partners"), Eos Partners SBIC, L.P., a Delaware limited partnership ("Eos SBIC"), Eos Partners SBIC II, L.P., a Delaware limited partnership ("Eos SBIC II" and together with Eos Partners and Eos SBIC, collectively referred to as "EOS"), and SGC Partners II LLC, a Delaware limited liability company ("SGCP") (each individually, a "Buyer," and collectively, the "Buyers") and Bargo Energy Company, a Texas corporation. WHEREAS, the Company (defined below) desires to issue to Buyers, and Buyers desire to purchase, certain shares of the Company's Cumulative Redeemable Preferred Stock, Series B, par value $.01 per share (the "Preferred Stock"), and certain shares of the Company's Common Stock, par value $.01 per share (the "Common Stock"); NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the Company and Buyers hereby agree as follows: ARTICLE I. TERMS OF THE TRANSACTION 1.1 Agreement to Issue Shares. At the Closing, and on the terms and subject to the conditions set forth in this Agreement, the Company shall sell and deliver to each Buyer, and each Buyer (severally) shall purchase and accept from the Company as set forth beside its name on Schedule 1.1, the number of shares of Preferred Stock and the number of shares of Common Stock (as issued to all Buyers, collectively, the "Shares"). 1.2 Purchase Price and Payment. In consideration of the sale of the Shares, each Buyer shall pay to the Company at the Closing the purchase price set forth beside its name on Schedule 1.1, the aggregate of which shall be the "Purchase Price." Each Buyer shall pay its portion of the Purchase Price to the Company in immediately available funds by confirmed wire transfer to a bank account 1 3 to be designated by the Company (such designation to occur no later than the third business day prior to the Closing Date) or in the form of a certified or bank cashier's check payable to the order of the Company. ARTICLE II. CLOSING The closing of the transactions contemplated hereby (the "Closing") shall take place (i) at the offices of Thompson & Knight, P.C., 1700 Chase Tower, 600 Travis, Houston, TX 77002 at 10:00 a.m., local time, on May 14, 1999, or (ii) at such other time or place or on such other date as the parties hereto shall agree. The date on which the Closing is required to take place is herein referred to as the "Closing Date." All Closing transactions shall be deemed to have occurred simultaneously. ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Buyers that: 3.1 Corporate Organization. The Company is a corporation duly organized, validly existing, and in good standing under the laws of Texas and has all requisite corporate power and corporate authority to own, lease, and operate its properties and to carry on its business as now being conducted. No actions or proceedings to dissolve the Company are pending or, to the best knowledge of the Company, threatened. 3.2 Qualification. The Company is duly qualified or licensed to do business as a foreign corporation and is in good standing in each of the jurisdictions set forth on Schedule 3.2, which are all the jurisdictions in which it owns, leases, or operates property or in which such qualification or licensing is required for the conduct of its business. 3.3 Charter and Bylaws. The Company has made available to Buyers accurate and complete copies of (i) the charter and bylaws of each of the Company and the Subsidiaries as currently in effect, (ii) the stock records of each of the Company and the Subsidiaries, and (iii) the minutes of all meetings of the respective Boards of Directors of the Company and the Subsidiaries, any committees of such Boards, and the shareholders of the Company and the Subsidiaries (and all consents in lieu of such meetings). Such records, minutes, and consents accurately reflect the stock ownership of the Company and the Subsidiaries and all actions taken by such Boards of Directors, 2 4 committees, and shareholders. Neither the Company nor any Subsidiary is in violation of any provision of its charter or bylaws, other than violations which, individually or in the aggregate, do not and will not have a Material Adverse Effect on the Company. 3.4 Capitalization of the Company. The authorized capital stock of the Company consists of (i) 120,000,000 shares of Common Stock, of which, as of the date hereof, 48,357,786 shares are outstanding and no shares are held in the Company's treasury, and (ii) 5,000,000 shares of preferred stock, par value $.01 per share, of which, as of the date hereof, no shares are outstanding and no such shares are held in the Company's treasury. All outstanding shares of capital stock of the Company have been validly issued and are fully paid and nonassessable, and no shares of capital stock of the Company are subject to, nor have any been issued in violation of, preemptive or similar rights. All issuances, sales, and repurchases by the Company of shares of its capital stock have been effected in compliance with all Applicable Laws, including without limitation applicable federal and state securities laws. The Preferred Stock constitutes (and at the Closing will constitute) all the outstanding shares of preferred stock of the Company. As of the date hereof, an aggregate of 660,000 shares of Common Stock of the Company are reserved for issuance and are issuable upon the exercise of outstanding stock options granted under the Company's stock option plans; furthermore, an aggregate of 275,000 shares of Common Stock of the Company are reserved for issuance and are issuable upon the exercise of outstanding warrants (subject to certain anti-dilution provisions applicable thereto). Except as disclosed above in this Section and in connection with the transactions contemplated by this Agreement, there are (and as of the Closing Date there will be) outstanding (i) no shares of capital stock or other voting securities of the Company, (ii) no securities of the Company convertible into or exchangeable for shares of capital stock or other voting securities of the Company, (iii) no options or other rights to acquire from the Company, and no obligation of the Company to issue or sell, any shares of capital stock or other voting securities of the Company or any securities of the Company convertible into or exchangeable for such capital stock or voting securities, and (iv) no equity equivalents, interests in the ownership or earnings, or other similar rights of or with respect to the Company. Other than regarding the Shares or as disclosed on Schedule 3.4, there are (and as of the Closing Date there will be) no outstanding obligations of the Company or any Subsidiary to repurchase, redeem, or otherwise acquire any of the foregoing shares, securities, options, equity equivalents, interests, or rights. 3.5 Authority Relative to This Agreement. The Company has full corporate power and corporate authority to execute, deliver, and perform this Agreement and the Ancillary Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution, delivery, and performance by the Company of this Agreement and the Ancillary Documents to which it is a party, and the consummation by it of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action of the Company. This Agreement has been duly executed and delivered by the Company and constitutes, and each 3 5 Ancillary Document executed or to be executed by the Company has been, or when executed will be, duly executed and delivered by the Company and constitute, or when executed and delivered will constitute, valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except that such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and (ii) equitable principles which may limit the availability of certain equitable remedies (such as specific performance) in certain instances. 3.6 Noncontravention. The execution, delivery, and performance by the Company of this Agreement and the Ancillary Documents to which it is a party and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or result in a violation of any provision of the charter or bylaws or other governing instruments of the Company or any Subsidiary, (ii) conflict with or result in a violation of any provision of, or constitute (with or without the giving of notice or the passage of time or both) a default under, or give rise (with or without the giving of notice or the passage of time or both) to any right of termination, cancellation, or acceleration under, or require any consent, approval, authorization or waiver of, or notice to, any party to, any bond, debenture, note, mortgage, indenture, lease, contract, agreement, or other instrument or obligation to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or any of their respective properties may be bound or any Permit held by the Company or any Subsidiary, (iii) result in the creation or imposition of any Encumbrance upon the properties of the Company or any Subsidiary, or (iv) assuming compliance with the matters referred to in Section 3.7, violate any Applicable Law binding upon the Company or any Subsidiary, except, in the case of clauses (ii), (iii) and (iv) above, for any such conflicts, violations, defaults, terminations, cancellations, accelerations, or Encumbrances which would not, individually or in the aggregate, have a Material Adverse Effect on the Company, and except, in the case of clause (ii) above, for (A) such consents, approvals, authorizations, and waivers that have been obtained and are unconditional and in full force and effect and such notices that have been duly given and (B) such consents, approvals, authorizations, waivers, and notices that are disclosed on Schedule 3.6 or otherwise expressly contemplated by the Ancillary Documents. 3.7 Governmental Approvals. No consent, approval, order, or authorization of, or declaration, filing, or registration with, any Governmental Entity is required to be obtained or made by the Company or any Subsidiary in connection with the execution, delivery, or performance by the Company of this Agreement and the Ancillary Documents to which it is a party or the consummation by it of the transactions contemplated hereby or thereby, other than as set forth on Schedule 3.7. 4 6 3.8 Subsidiaries. (a) The Company does not own, directly or indirectly, any capital stock of, or other equity interest in, any corporation or have any direct or indirect equity or ownership interest in any other person, other than the Subsidiaries. Schedule 3.8 lists each Subsidiary, the jurisdiction of incorporation of each Subsidiary, and the authorized and outstanding capital stock of each Subsidiary. Each Subsidiary is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. As detailed on Schedule 3.8, each Subsidiary is duly qualified or licensed to do business as a foreign corporation and is in good standing in each of the jurisdictions in which it owns, leases, or operates property or in which such qualification or licensing is required for the conduct of its business. Each Subsidiary has all requisite corporate power and corporate authority to own, lease, and operate its properties and to carry on its business as now being conducted. No actions or proceedings to dissolve any Subsidiary are pending, or to the knowledge of the Company, threatened. (b) Except as otherwise indicated on Schedule 3.8, all the outstanding capital stock or other equity interests of each Subsidiary are owned directly or indirectly by the Company, free and clear of all Encumbrances. All outstanding shares of capital stock of each Subsidiary have been validly issued and are fully paid and nonassessable. No shares of capital stock or other equity interests of any Subsidiary are subject to, nor have any been issued in violation of, preemptive or similar rights. (c) Except as set forth on Schedule 3.8, there are (and as of the Closing Date there will be) outstanding (i) no shares of capital stock or other voting securities of any Subsidiary, (ii) no securities of the Company or any Subsidiary convertible into or exchangeable for shares of capital stock or other voting securities of any Subsidiary, (iii) no options or other rights to acquire from the Company or any Subsidiary, and no obligation of the Company or any Subsidiary to issue or sell, any shares of capital stock or other voting securities of any Subsidiary or any securities convertible into or exchangeable for such capital stock or voting securities, and (iv) no equity equivalents, interests in the ownership or earnings, or other similar rights of or with respect to any Subsidiary. There are (and as of the Closing Date there will be) no outstanding obligations of the Company or any Subsidiary to repurchase, redeem, or otherwise acquire any of the foregoing shares, securities, options, equity equivalents, interests, or rights. 3.9 Shares. The Shares to be issued by the Company at the Closing have been duly authorized for such issuance. When issued and delivered by the Company in accordance with the provisions of this Agreement, the Shares will be validly issued, fully paid, and nonassessable. The issuance of the Shares pursuant to this Agreement is not subject to any preemptive or similar rights. When issued, the shares of Common Stock listed on Schedule 1.1 will in the aggregate represent 40% of the issued and outstanding shares of capital stock of the Company, on a fully-diluted basis reflecting all shares issuable upon the exercise of all outstanding rights to acquire shares of the Company's capital stock (including after giving effect to the transactions contemplated hereby). 5 7 3.10 SEC Filings. Except as previously disclosed to Buyers, the Company is current in its obligations to file all periodic reports and proxy statements with the Securities and Exchange Commission required to be filed under the Exchange Act. Except as previously disclosed to Buyers, the Company's Annual Report on Form-10KSB for the fiscal year ended December 31, 1998, Report on Form 8-K filed on February 26, 1999, Information Statement on Schedule 14C filed on March 9, 1999 and Report on Form 8-K/A filed on May 3, 1999 (collectively, the "SEC Documents") are all of the documents the Company was required to file with the Securities and Exchange Commission since January 1, 1999. As of their respective dates, the SEC Documents complied as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the Securities and Exchange Commission thereunder applicable to such SEC Documents. The SEC Documents do not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of circumstances then existing. The audited consolidated financial statements and unaudited consolidated interim financial statements, if any, of the Company included in the SEC Documents comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the Securities and Exchange Commission with respect thereto; present fairly in all material respects, in conformity with GAAP applied on a consistent basis, the consolidated financial position of the Company as of the dates thereof and its consolidated results of operations and changes in financial position for the periods then ended (subject to normal year-end adjustments in the case of any unaudited interim financial statements and the fact that certain information and notes have been condensed or omitted in accordance with the Exchange Act and the rules promulgated thereunder); and are in all material respects in accordance with the books of account and records of the Company and the Subsidiaries. There are no material liabilities of the Company or any Subsidiary (contingent or otherwise), other than as disclosed in the SEC Documents and the financial statements included therein. 3.11 Absence of Certain Changes. Except as disclosed in the SEC Documents or on Schedule 3.11, since January 1, 1999: (i) there has not been any change, development, or effect, individually or in the aggregate, that has had, or might reasonably be expected to have, a Material Adverse Effect on the Company or a Subsidiary; (ii) the businesses of the Company and the Subsidiaries have been conducted only in the ordinary course consistent with past practice; (iii) neither the Company nor any Subsidiary has incurred any material liability, engaged in any material transaction, or entered into any material agreement outside the ordinary course of business consistent with past practice; (iv) neither the Company nor any Subsidiary has suffered any material loss, damage, destruction, or other casualty to any of its assets (whether or not covered by insurance); and (v) neither the Company nor any Subsidiary has taken any of the actions set forth in Section 5.2 except as permitted thereunder. 6 8 3.12 Tax Matters. Except as disclosed on Schedule 3.12: (a) except in each case as could not be reasonably expected to have a Material Adverse Effect, all Tax Returns have been or will be timely filed by the Company and the Subsidiaries when due in accordance with all applicable laws; all Taxes shown on such Tax Returns have been or will be timely paid when due; such Tax Returns have been properly completed in compliance with all applicable laws and regulations and completely and accurately reflect the facts regarding the income, expenses, properties, business and operations required to be shown thereon; such Tax Returns are not subject to penalties under Section 6662 of the Code (or any corresponding provision of state, local or foreign tax law); (b) the Company and the Subsidiaries have paid all Taxes required to be paid by them in all material respects (whether or not shown on a Tax Return) or for which they could be liable (provided that it shall not be considered a breach of this representation if it is ultimately determined that additional Tax payments are due but such assessment is based on an adjustment to a return or position, if such party has a reasonable basis for the position taken with respect to such Taxes), whether to taxing authorities or to other persons under Tax allocation agreements or otherwise, and the charges, accruals, and reserves for Taxes due, or accrued but not yet due, relating to their income, properties, transactions or operations as reflected on their books (including, without limitation, the balance sheet included in the Company's Form 10-KSB for the fiscal year ended December 31, 1998) are adequate to cover such Taxes; (c) there are no agreements or consents currently in effect for the extension or waiver of the time (i) to file any Tax Return or (ii) for assessment or collection of any Taxes relating to the income, properties or operations of the Company or the Subsidiaries, nor has the Company or a Subsidiary been requested to enter into any such agreement or consent; and (d) there are no liens for Taxes (other than for current Taxes not yet due and payable) upon the assets of the Company or the Subsidiaries. 3.13 Compliance With Laws. Except as disclosed on Schedule 3.13, the Company and the Subsidiaries have complied in all material respects with all Applicable Laws (including without limitation Applicable Laws relating to securities, properties, business products and services, manufacturing processes, advertising and sales practices, employment practices, terms and conditions of employment, wages and hours, safety, occupational safety, health, environmental protection, product safety, and civil rights). Neither the Company nor any Subsidiary has received any written notice, which has not been dismissed or otherwise disposed of, that the Company or any Subsidiary has not so complied. Neither the Company nor any Subsidiary is charged or, to the best knowledge of the Company, threatened with, or, to the best knowledge of the Company, under investigation with respect to, any violation of any Applicable Law relating to any aspect of the business of the Company or any Subsidiary. 7 9 3.14 Legal Proceedings. There are no Proceedings pending or, to the best knowledge of the Company, threatened against or involving the Company or any Subsidiary (or any of their respective directors or officers in connection with the business or affairs of the Company or any Subsidiary) or any properties or rights of the Company or any Subsidiary, except (i) as disclosed on Schedule 3.14, (ii) for any Proceedings that pertain to routine claims by persons other than Governmental Entities that are fully covered by insurance (subject to applicable insurance deductibles), (iii) for minor product or service warranty claims arising in the usual and ordinary course of business which in the aggregate may be satisfied at nominal cost to the Company, and (iv) for Proceedings which, individually or in the aggregate, if prosecuted to judgment, would not have a Material Adverse Effect on the Company. Except as disclosed on Schedule 3.14, any and all potential liability of the Company and the Subsidiaries under such Proceedings is adequately covered (except for standard deductible amounts) by the existing insurance maintained by the Company and the Subsidiaries. Neither the Company nor any Subsidiary is subject to any judgment, order, writ, injunction, or decree of any Governmental Entity which has had or is reasonably likely to have a Material Adverse Effect on the Company. There are no Proceedings pending or, to the best knowledge of the Company, threatened seeking to restrain, prohibit, or obtain damages or other relief in connection with this Agreement or the transactions contemplated hereby. 3.15 Permits. The Company and the Subsidiaries hold all Permits necessary or required for the conduct of the business of the Company and the Subsidiaries as currently conducted, except where the failure to hold such Permits could not reasonably be expected to have a Material Adverse Effect. Each of such Permits is in full force and effect, the Company or such Subsidiary is in compliance with all its obligations with respect thereto, and, to the best knowledge of the Company, no event has occurred which permits, or with or without the giving of notice or the passage of time or both would permit, the revocation or termination of any thereof. Except as disclosed on Schedule 3.15, no notice has been issued by any Governmental Entity and no Proceeding is pending or, to the best knowledge of the Company, threatened with respect to any alleged failure by the Company or a Subsidiary to have any Permit the absence of which would have a Material Adverse Effect on the Company. 3.16 Agreements. (a) Set forth on Schedule 3.16 is a list of all the following agreements, arrangements, and understandings (written or oral, formal or informal) (collectively, for purposes of this Section, "agreements") to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or any of their respective properties is otherwise bound: (i) collective bargaining agreements and similar agreements with employees as a group; 8 10 (ii) employee benefit agreements, trusts, plans, funds, or other arrangements of any nature, including those referred to in Section 5.2(e)(i); (iii) agreements with any current or former shareholder, director, officer, employee, consultant, or advisor or any affiliate of any such person; (iv) agreements between or among the Company and any of the Subsidiaries; (v) indentures, mortgages, security agreements, notes, loan or credit agreements, or other agreements relating to the borrowing of money by the Company or any Subsidiary or to the direct or indirect guarantee or assumption by the Company or any Subsidiary of any obligation of others, including any agreement (other than trade payables incurred in the ordinary course of business) that has the economic effect although not the legal form of any of the foregoing; (vi) agreements relating to the acquisition or disposition of assets, other than those entered into in the ordinary course of business consistent with past practice; (vii) agreements relating to the acquisition or disposition of any interest in any business enterprise; (viii) agreements containing any covenant limiting the freedom of the Company or any Subsidiary to engage in any line of business or compete with any other person in any geographic area or during any period of time; (ix) joint venture agreements; (x) contracts and other agreements under which the Company or any Subsidiary agrees to indemnify any party; and (xi) other agreements, whether or not made in the ordinary course of business, that are material to the business, assets, results of operations, condition (financial or otherwise), or prospects of the Company and the Subsidiaries considered as a whole. (b) The Company has made available to Buyers accurate and complete copies of the agreements listed on Schedule 3.16. Each of such agreements is a valid and binding agreement of the Company and the Subsidiaries (to the extent each is a party thereto) and (to the best knowledge of the Company) the other party or parties thereto, enforceable against the Company and the Subsidiaries (to the extent each is a party thereto) and (to the best knowledge of the Company) such other party or parties in accordance with its terms. Neither the Company nor any Subsidiary is in 9 11 breach of or in default under, nor has any event occurred which (with or without the giving of notice or the passage of time or both) would constitute a default by the Company or any Subsidiary under, any of such agreements, and neither the Company nor any Subsidiary has received any notice from, or given any notice to, any other party indicating that the Company or any Subsidiary is in breach of or in default under any of such agreements, except in each case which could not be reasonably expected to have a Material Adverse Effect. To the best knowledge of the Company, no other party to any of such agreements is in breach of or in default under such agreements, nor has any assertion been made by the Company or any Subsidiary of any such breach or default. (c) Neither the Company nor any Subsidiary has received notice of any plan or intention of any other party to any material agreement to exercise any right of offset with respect to, or any right to cancel or terminate, any material agreement. Neither the Company nor any Subsidiary currently contemplates, or has reason to believe any other person currently contemplates, any amendment or change to any agreement, which amendment or change could have a Material Adverse Effect on the Company. 3.17 ERISA. Other than a group health plan and a 401(k) plan, there is no "employee benefit plan", as defined in Section 3(3) of ERISA, (i) which is subject to any provision of ERISA, (ii) which is, or is required to be, maintained, administered, or contributed to by the Company or any affiliate of the Company, and (iii) which covers any employee or former employee of the Company or any affiliate of the Company or under which the Company or any affiliate of the Company has any liability. For purposes of this Section only, an "affiliate" of any person means any other person which, together with such person, would be treated as a single employer under Section 414 of the Code. 3.18 Environmental Matters. (a) Except as disclosed on Schedule 3.18: (i) the properties, operations, and activities of the Company and the Subsidiaries comply with all Applicable Environmental Laws (as defined below), except for noncompliance that could not reasonably be expected to have a Material Adverse Effect; (ii) the Company and the Subsidiaries and the properties, operations, and activities of the Company and the Subsidiaries are not subject to any existing, pending, or, to the best knowledge of the Company, threatened Proceeding under, or to any remedial obligations under, any Applicable Environmental Laws that could reasonably be expected to have a Material Adverse Effect; 10 12 (iii) all Permits, if any, required to be obtained by the Company or any Subsidiary under any Applicable Environmental Laws in connection with any aspect of the business of the Company or the Subsidiaries, including without limitation those relating to the treatment, storage, disposal, or release of a hazardous material (as defined below), have been duly obtained and are in full force and effect, and the Company and the Subsidiaries are in compliance with the material terms and conditions of all such Permits; (iv) the Company and the Subsidiaries have satisfied and are currently in compliance with all financial responsibility requirements applicable to their respective operations and imposed by any Governmental Entity under any Applicable Environmental Laws, and the Company and the Subsidiaries have not received any notice of noncompliance with any such financial responsibility requirements; (v) to the best knowledge of the Company, there are no physical or environmental conditions existing on any property owned or leased by the Company or any Subsidiary or resulting from the Company's or any Subsidiary's operations or activities, past or present, at any location, that would give rise to any on-site or off-site remedial obligations under any Applicable Environmental Laws, other than normal and ordinary remedial work associated with plugging and abandoning of oil and gas facilities; (vi) to the best knowledge of the Company, since the effective date of the relative requirements of Applicable Environmental Laws, all hazardous materials generated by the Company or any Subsidiary or used in connection with their respective properties, operations, or activities have been transported only by carriers authorized under Applicable Environmental Laws to transport such materials, and have been disposed of only at treatment, storage, and disposal facilities authorized under Applicable Environmental Laws to treat, store, or dispose of such materials, and, to the best knowledge of the Company, such carriers and facilities, at the time of such transportation or disposal, were operating in compliance with such authorizations and were not the subject of any existing, pending, or threatened Proceeding in connection with any Applicable Environmental Laws; (vii) since the effective date of the relative requirements of Applicable Environmental Laws, there has been no exposure of any person or property to hazardous materials, nor has there been any release of hazardous materials into the environment in violation of any Applicable Environmental Laws, by the Company or any Subsidiary or in connection with their respective properties, operations, or activities that could reasonably be expected to give rise to any claim for damages or compensation that could reasonably be expected to have a Material Adverse Effect; and 11 13 (viii) the Company and the Subsidiaries shall make available to Buyers all internal and external environmental audits and studies and all correspondence on substantial environmental matters in the possession of the Company and the Subsidiaries relating to any of the current or former properties, operations, or activities of the Company and the Subsidiaries, provided that the Company and the Subsidiaries shall not be required to make available any such audits, studies, or correspondence that may be subject to the attorney-client privilege or similar privilege. (b) For purposes of this Agreement, "Applicable Environmental Laws" means any and all Applicable Laws pertaining to health, safety, or the environment in effect (currently or hereafter) in any and all jurisdictions in which the Company or the Subsidiaries have conducted operations or activities or owned or leased property, including, without limitation, the Clean Air Act, as amended, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Rivers and Harbors Act of 1899, as amended, the Federal Water Pollution Control Act, as amended, the Occupational Safety and Health Act of 1970, as amended, the Resource Conservation and Recovery Act of 1976, as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended, the Texas Water Code, the Texas Solid Waste Disposal Act, and other environmental conservation or protection laws. For purposes of this Agreement, the term "hazardous material" means any substance which is listed or defined as a hazardous substance, hazardous constituent, or solid waste pursuant to any Applicable Environmental Laws. (c) The representations and warranties contained in this Section would continue to be true and correct following disclosure to the applicable Governmental Entities of all relevant facts, conditions, and circumstances known to the Company, if any, pertaining to the properties, operations, and activities of the Company and the Subsidiaries. 3.19 Oil and Gas Properties. (a) Each of the Company and the Subsidiaries has good and marketable title to all of its material oil and gas properties and assets, free and clear of all liens other than as disclosed in Schedule 3.19; provided, that no representation or warranty is made with respect to any oil, gas or mineral property or interest to which no proved oil or gas reserves are properly attributed. All proceeds from the sale of each the Company's and the Subsidiaries' share of the hydrocarbons being produced from its oil and gas properties are currently being paid in full to such party by the purchasers thereof on a timely basis and none of such proceeds are currently being held in suspense by such purchaser or any other party. 12 14 (b) The Company has delivered to Buyers a copy of the reserve report (the "Reserve Report") dated as of January 1, 1999, prepared by T.J. Smith and Company, Inc., independent reserve engineers (the "Reserve Engineers"), relating to the oil and gas reserves of the Company and the Subsidiaries. The factual information underlying the estimates of the reserves of the Company and the Subsidiaries, which was supplied by the Company to the Reserve Engineers for the purpose of preparing the Reserve Report, including, without limitation, production, volumes, sales prices for production, contractual pricing provisions under oil or gas sales or marketing contracts under hedging arrangements, costs of operations and development, and working interest and net revenue information relating to the Company's and the Subsidiaries' ownership interests in properties, was true and correct in all material respects on the date of such Reserve Report; the estimates of future capital expenditures and other future exploration and development costs supplied to the Reserve Engineers were prepared in good faith and with a reasonable basis; the information provided to the Reserve Engineers for purposes of preparing the Reserve Report was prepared in accordance with customary industry practices; the Reserve Engineers were, as of the date of the Reserve Report prepared by it, and are, as of the date hereof, independent petroleum engineers with respect to the Company and the Subsidiaries; other than normal production of the reserves and intervening oil and gas price fluctuations, the Company is not as of the date hereof and as of the Closing Date will not be, aware of any facts or circumstances that would result in a materially adverse change in the reserves in the aggregate, or the aggregate present value of future net cash flows therefrom, as described in the Reserve Report; estimates of such reserves and the present value of the future net cash flows therefrom in the Reserve Report comply in all material respects to the applicable requirements of Regulation S-X and Industry Guide 2 under the Securities Act. 3.20 Nature of Company Assets. The assets of the Company and of the Subsidiaries consist solely of (i) reserves of oil, rights to reserves of oil and associated exploration and production assets with a fair market value not exceeding $500 million and (ii) other assets with a fair market value not exceeding $15 million. For purposes of this Section 3.20, the term "associated exploration and production assets" shall have the meaning ascribed thereto in Section 802.3 of the Rules promulgated pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976. 3.21 Marketing of Production. Except for contracts listed on Schedule 3.21 (with respect to all of which contracts the Company represents that it or its affiliates are receiving a price for all production sold thereunder which is computed in accordance with the terms of the relevant contract and are not having deliveries curtailed substantially below the subject property's delivery capacity), there exist no material agreements for the sale of production from the leasehold and other interests in oil, gas and other mineral properties owned, or otherwise held in the name of, the Company or its affiliates (collectively, the "Oil and Gas Properties") (including without limitation, calls on, or other rights to purchase, production, whether or not the same are currently being exercised) other than (i) agreements or arrangements pertaining to the sale of production at a price equal to or greater than a price that is the market price from time to time existing in the areas where the Oil and Gas 13 15 Properties subject to such agreement or arrangement are located, and (ii) agreements or arrangements that are cancelable on 90 days notice or less without penalty or detriment. 3.22 Material Personal Property. All pipelines, wells, gas processing plants, platforms and other material improvements, fixtures and equipment owned in whole or in part by the Company or any of its affiliates that are necessary to conduct normal operations are being maintained in a state adequate to conduct normal operations, and with respect to such of the foregoing which are operated by the Company or any of its affiliates, in a manner consistent with the Company's or its affiliates' past practices. 3.23 Intellectual Property. The Company and its affiliates either own or have valid licenses or other rights to use all patents, copyrights, trademarks, software, databases, geological data, geophysical data, engineering data, maps, interpretations and other technical information used in their businesses as presently conducted, subject to the limitations contained in the agreements governing the use of the same, which limitations are customary for companies engaged in the business of the exploration and production of oil, gas, condensate and other hydrocarbons, with such exceptions as would not result in a Material Adverse Effect on the Company. There are no limitations contained in the agreements of the type described in the immediately preceding sentence which, upon consummation of the transactions contemplated by this Agreement, will alter or impair any such rights, breach any such agreement with any third party vendor, or require payments of additional sums thereunder, except any such limitations that would not have a Material Adverse Effect on the Company. The Company and its affiliates are in compliance in all material respects with such licenses and agreements and there are no pending or, to the best knowledge of the Company, threatened Proceedings challenging or questioning the validity or effectiveness of any license or agreement relating to such property or the right of the Company or any affiliate to use, copy, modify or distribute the same. 3.24 Brokerage Fees. Neither the Company nor any of its affiliates has retained any financial advisor, broker, agent, or finder or paid or agreed to pay any financial advisor, broker, agent, or finder on account of this Agreement or any transaction contemplated hereby. The Company shall indemnify and hold harmless Buyers from and against any and all losses, claims, damages, and liabilities (including legal and other expenses reasonably incurred in connection with investigating or defending any claims or actions) with respect to any finder's fee, brokerage commission, or similar payment in connection with any transaction contemplated hereby asserted by any person on the basis of any act or statement made or alleged to have been made by the Company or any of its affiliates. 3.25 Disclosure. No representation or warranty made by the Company in this Agreement, and no statement of the Company contained in any document, certificate, or other writing furnished or to be furnished by the Company pursuant hereto or in connection herewith, contains or will 14 16 contain, at the time of delivery, any untrue statement of a material fact or omits or will omit, at the time of delivery, to state any material fact necessary in order to make the statements contained therein, in light of the circumstances under which they are made, not misleading. The Company knows of no matter (other than matters of a general economic character, including commodity prices, not relating solely to the Company or any Subsidiary in any specific manner) which has not been disclosed to Buyers pursuant to this Agreement which has or is reasonably likely to have a Material Adverse Effect on the Company. The Company has delivered or made available to Buyers accurate and complete copies of all agreements, documents, and other writings referred to or listed in this Article III or any Schedule hereto. 3.26 Representations and Warranties on Closing Date. The representations and warranties made in this Article III will be true and correct in all material respects on and as of the Closing Date with the same force and effect as if such representations and warranties had been made on and as of the Closing Date, except that any such representations and warranties which expressly relate only to an earlier date shall be true and correct on the Closing Date as of such earlier date. ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYERS Each Buyer, only with respect to itself, represents and warrants to the Company that: 4.1 Organization and Formation. Each corporate Buyer is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and corporate authority to own, lease, and operate its properties and to carry on its business as now being conducted. Each partnership Buyer is duly formed and is in good standing (as applicable) under the laws of the jurisdiction of its formation. No actions or proceedings to dissolve any Buyer are pending or, to the best knowledge of Buyers, threatened. 4.2 Authority Relative to This Agreement. Each Buyer has full power and authority to execute, deliver, and perform this Agreement and the Ancillary Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution, delivery, and performance by Buyers of this Agreement and the Ancillary Documents to which they are parties, and the consummation by them of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate or partnership action, as applicable, of Buyers. This Agreement has been duly executed and delivered by Buyers and constitutes, and each Ancillary Document executed or to be executed by Buyers has been, or when executed will be, duly executed and delivered by each Buyer and constitute, or when executed and delivered will constitute, valid and legally binding obligations of each Buyer, enforceable against each Buyer in accordance with 15 17 their respective terms, except that such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and (ii) equitable principles which may limit the availability of certain equitable remedies (such as specific performance) in certain instances. 4.3 Noncontravention. The execution, delivery, and performance by Buyers of this Agreement and the Ancillary Documents to which they are parties and the consummation by them of the transactions contemplated hereby and thereby do not and will not (i) conflict with or result in a violation of any provision of the charter or bylaws (or other governing documents), as applicable, of Buyers, (ii) conflict with or result in a violation of any provision of, or constitute (with or without the giving of notice or the passage of time or both) a default under, or give rise (with or without the giving of notice or the passage of time or both) to any right of termination, cancellation, or acceleration under, or require any consent, approval, authorization, or waiver of any party to, any bond, debenture, note, mortgage, indenture, lease, contract, agreement, or other instrument or obligation to which any Buyer is a party or by which any Buyer or any of its properties may be bound or any Permit held by a Buyer, (iii) result in the creation or imposition of any Encumbrance upon the properties of Buyers, or (iv) violate any Applicable Law binding upon Buyers, except, in the case of clauses (ii), (iii), and (iv) above, for any such conflicts, violations, defaults, terminations, cancellations, accelerations, or Encumbrances which would not, individually or in the aggregate, have a Material Adverse Effect on such Buyer or on the ability of such Buyer to consummate the transactions contemplated hereby. 4.4 Governmental Approvals. No consent, approval, order, or authorization of, or declaration, filing, or registration with, any Governmental Entity is required to be obtained or made by any Buyer in connection with the execution, delivery, or performance by Buyers of this Agreement and the Ancillary Documents to which they are parties or the consummation by them of the transactions contemplated hereby or thereby, other than as set forth on Schedule 4.4 or in the Small Business Sideletter (defined in Section 6.17 hereof). 4.5 Financing. Each Buyer has, and at the Closing will have, such funds as are necessary for the consummation by it of the transactions contemplated hereby. 4.6 Disclosure of Information. Buyers represent that they have had an opportunity to ask questions of and receive answers from the Company regarding the Company and its business, assets, results of operation, and financial condition and the terms and conditions of the issuance of the Shares. Each Buyer further represents that it has access to all filings duly made by the Company with the Securities and Exchange Commission since January 1, 1998. The foregoing, however, shall not limit or modify the representations and warranties of the Company in Article III, shall not limit the rights of Buyers prior to and in anticipation of any issuance of the Shares pursuant hereto, and shall not limit the disclosure requirements of applicable federal and state securities laws. 16 18 4.7 Investment Experience. Each Buyer acknowledges that it can bear the economic risk of its investment in the Shares, and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in the Shares. 4.8 Restricted Securities. Each Buyer understands that the Shares will not have been registered pursuant to the Securities Act or any applicable state securities laws, that the Shares will be characterized as "restricted securities" under federal securities laws, and that under such laws and applicable regulations the Shares cannot be sold or otherwise disposed of without registration under the Securities Act or an exemption therefrom. In this connection, each Buyer represents that it is familiar with Rule 144 promulgated under the Securities Act, as currently in effect, and understands the resale limitations imposed thereby and by the Securities Act. Appropriate stop transfer instructions may be issued to the transfer agent for securities of the Company (or a notation may be made in the appropriate records of the Company) in connection with the Shares. 4.9 Legend. It is agreed and understood by Buyers that the certificates representing the Shares shall each conspicuously set forth on the face or back thereof, in addition to any legends required by Applicable Law or other agreement, a legend in substantially the following form: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. SUCH SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS THEY ARE FIRST REGISTERED PURSUANT TO THAT ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE CORPORATION RECEIVES A WRITTEN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL ARE SATISFACTORY TO THE CORPORATION, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED. 4.10 Accredited Investor; Investment Intent. Each Buyer is an accredited investor as defined in Regulation D under the Securities Act. Each Buyer is acquiring its portion of the Shares for its own account for investment and not with a view to, or for sale or other disposition in connection with, any distribution of all or any part thereof, except in compliance with applicable federal and state securities laws. 4.11 Legal Proceedings. There are no Proceedings pending or, to the best knowledge of Buyers, threatened seeking to restrain, prohibit, or obtain damages or other relief in connection with this Agreement or the transactions contemplated hereby. 4.12 Brokerage Fees. No Buyer nor any of Buyers' affiliates has retained any financial advisor, broker, agent, or finder or paid or agreed to pay any financial advisor, broker, agent, or finder on account of this Agreement or any transaction contemplated hereby. Buyers shall indemnify 17 19 and hold harmless the Company from and against any and all losses, claims, damages, and liabilities (including legal and other expenses reasonably incurred in connection with investigating or defending any claims or actions) with respect to any finder's fee, brokerage commission, or similar payment in connection with any transaction contemplated hereby asserted by any person on the basis of any act or statement made or alleged to have been made by Buyers or any of their affiliates. 4.13 Disclosure. No representation or warranty made by Buyers in this Agreement, and no statement of Buyers contained in any document, certificate, or other writing furnished or to be furnished by Buyers pursuant hereto or in connection herewith, contains or will contain, at the time of delivery, any untrue statement of a material fact or omits, or will omit, at the time of delivery, to state any material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they are made, not misleading. 4.14 Representations and Warranties on Closing Date. The representations and warranties made in this Article IV will be true and correct in all material respects on and as of the Closing Date with the same force and effect as if such representations and warranties had been made on and as of the Closing Date, except that any such representations and warranties which expressly relate only to an earlier date shall be true and correct on the Closing Date as of such earlier date. ARTICLE V. CONDUCT OF COMPANY PENDING CLOSING The Company hereby covenants and agrees with Buyers as follows: 5.1 Conduct and Preservation of Business. Except as expressly provided in this Agreement, during the period from the date hereof to the Closing, the Company and the Subsidiaries (i) shall each conduct its operations according to its ordinary course of business consistent with past practice and in compliance with all Applicable Laws; (ii) shall each use its reasonable best efforts to preserve, maintain, and protect its properties; and (iii) shall each use its reasonable best efforts to preserve intact its business organization, to keep available the services of its officers and employees, and to maintain existing relationships with licensors, licensees, suppliers, contractors, distributors, customers, and others having business relationships with it. 5.2 Restrictions on Certain Actions. Without limiting the generality of the foregoing, and except as otherwise expressly provided in this Agreement, prior to the Closing, neither the Company nor any Subsidiary shall, without the prior written consent of Buyer: (a) amend its charter or bylaws; 18 20 (b) (i) issue, sell, or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase, or otherwise) any shares of its capital stock of any class or any other securities or equity equivalents; or (ii) amend in any respect any of the terms of any such securities outstanding as of the date hereof; (c) (i) split, combine, or reclassify any shares of its capital stock; (ii) declare, set aside, or pay any dividend or other distribution (whether in cash, stock, or property or any combination thereof) in respect of its capital stock; (iii) repurchase, redeem, or otherwise acquire any of its securities or any securities of any Subsidiary; or (iv) adopt a plan of complete or partial liquidation or resolutions providing for or authorizing a liquidation, dissolution, merger, consolidation, conversion, restructuring, recapitalization, or other reorganization of the Company or any Subsidiary; (d) (i) except in the ordinary course of business consistent with past practice, create, incur, guarantee, or assume any indebtedness for borrowed money or otherwise become liable or responsible for the obligations of any other person; (ii) make any loans, advances, or capital contributions to, or investments in, any other person (other than to wholly owned Subsidiaries); (iii) pledge or otherwise encumber shares of capital stock of the Company or any Subsidiary; or (iv) except in the ordinary course of business consistent with past practice, mortgage or pledge any of its assets, tangible or intangible, or create or suffer to exist any lien thereupon; provided, however, that in no event shall the Company and the Subsidiaries (A) incur incremental indebtedness in excess of $100,000 in the aggregate or (B) incur incremental indebtedness which is not prepayable at any time without penalty or premium; (e) (i) enter into, adopt, or (except as may be required by law) amend or terminate any bonus, profit sharing, compensation, severance, termination, stock option, stock appreciation right, restricted stock, performance unit, stock equivalent, stock purchase, pension, retirement, deferred compensation, employment, severance, or other employee benefit agreement, trust, plan, fund, or other arrangement for the benefit or welfare of any director, officer, or employee; (ii) except for normal increases in the ordinary course of business consistent with past practice that, in the aggregate, do not result in a material increase in benefits or compensation expense to the Company, increase in any manner the compensation or fringe benefits of any director, officer, or employee; or (iii) pay to any director, officer, or employee any benefit not required by any employee benefit agreement, trust, plan, fund, or other arrangement as in effect on the date hereof; (f) acquire, sell, lease, transfer, or otherwise dispose of, directly or indirectly, any assets outside the ordinary course of business consistent with past practice or any assets that in the aggregate are material to the Company and the Subsidiaries considered as a whole; 19 21 (g) acquire (by merger, consolidation, or acquisition of stock or assets or otherwise) any corporation, partnership, or other business organization or division thereof; (h) make any capital expenditure or expenditures which, individually, is in excess of $100,000 or, in the aggregate, are in excess of $250,000 (i) amend any Tax Return or make any Tax election or settle or compromise any federal, state, local, or foreign Tax liability material to the Company and the Subsidiaries considered as a whole; (j) pay, discharge, or satisfy any claims, liabilities, or obligations (whether accrued, absolute, contingent, unliquidated, or otherwise, and whether asserted or unasserted), other than the payment, discharge, or satisfaction in the ordinary course of business consistent with past practice, or in accordance with their terms, of liabilities reflected or reserved against in the Financial Statements or incurred since January 1, 1999 in the ordinary course of business consistent with past practice; provided, however, that in no event shall the Company or any Subsidiary repay any long-term indebtedness except to the extent required by the terms thereof; (k) enter into any lease, contract, agreement, commitment, arrangement, or transaction outside the ordinary course of business consistent with past practice; (l) amend, modify, or change in any material respect any existing lease, contract, or agreement, other than in the ordinary course of business consistent with past practice; (m) waive, release, grant, or transfer any rights of value, other than in the ordinary course of business consistent with past practice; (n) change any of the accounting principles or practices used by it, except for any change required by reason of a concurrent change in generally accepted accounting principles and notice of which is given in writing by the Company to Buyers; (o) take any action which would or might make any of the representations or warranties of the Company contained in this Agreement untrue or inaccurate as of any time from the date of this Agreement to the Closing or would or might result in any of the conditions set forth in this Agreement not being satisfied; or (p) authorize or propose, or agree in writing or otherwise to take, any of the actions described in this Section. 20 22 ARTICLE VI. ADDITIONAL AGREEMENTS 6.1 Access to Information; Confidentiality. (a) Between the date hereof and the Closing, the Company: (i) shall give Buyers and their authorized representatives reasonable access to all employees, all plants, offices, warehouses, and other facilities, and all books and records, including work papers and other materials prepared by the Company's independent public accountants, of the Company and the Subsidiaries, (ii) shall permit Buyers and their authorized representatives to make inspections as they may reasonably require, and (iii) shall cause the Company's officers and those of the Subsidiaries to furnish Buyers and their authorized representatives with such financial and operating data and other information with respect to the Company and the Subsidiaries as Buyers may from time to time reasonably request; provided, however, that no investigation pursuant to this Section shall affect any representation or warranty of the Company contained in this Agreement or in any agreement, instrument, or document delivered pursuant hereto or in connection herewith; and provided further that the Company shall have the right to have a representative present at all times of any such inspections, interviews, and examinations conducted at or on the offices or other facilities or properties of the Company or its affiliates or representatives. From time to time following the Closing the Company shall, after receiving not less than two (2) business days' notice from a Buyer, allow such Buyer and its authorized representatives (i) access to all books and records, including work papers and other materials prepared by the Company's independent public accountants, of the Company and the Subsidiaries, (ii) to make inspections of the facilities and assets of the Company and the Subsidiaries, and (iii) to receive other financial and operating data and other information with respect to the Company and the Subsidiaries as such Buyer may from time to time reasonably request. The Company shall have no obligations to a Buyer under the immediately preceding sentence in the event that such Buyer has sold at least fifty percent (50%) of the shares of Common Stock purchased by such Buyer on the Closing Date. (b) Buyers agree that all Confidential Information (as defined below) shall be kept confidential by Buyers and shall not be disclosed by Buyers in any manner whatsoever; provided, however, that (i) any of such Confidential Information may be disclosed to such directors, officers, employees, and authorized representatives (including without limitation attorneys, accountants, consultants, bankers, and financial advisors) of Buyers (collectively, for purposes of this Section, "Buyer Representatives") as need to know such information for the purpose of evaluating the transactions contemplated hereby, (ii) any disclosure of Confidential Information may be made to the extent to which the Company consents in writing, and (iii) Confidential Information may be disclosed by a Buyer or any Buyer Representative to the extent that a Buyer or Buyer Representative is legally compelled to do so, provided that, prior to making such disclosure, such Buyer or Buyer 21 23 Representative, as the case may be, advises and consults with the Company regarding such disclosure and provided further that such Buyer or Buyer Representative, as the case may be, discloses only that portion of the Confidential Information as is legally required. Buyers agree that none of the Confidential Information will be used for any purpose other than in connection with the transactions contemplated hereby. The term "Confidential Information," as used herein, means all information (irrespective of the form of communication) obtained by or on behalf of Buyers from the Company or their representatives pursuant to this Section and all similar information obtained from the Company or their representatives by or on behalf of Buyers prior to the date of this Agreement, other than information which (i) was or becomes generally available to the public other than as a result of disclosure by Buyers or any Buyer Representative, (ii) was or becomes available to Buyers on a nonconfidential basis from a person other than the Company or its representatives prior to disclosure to Buyers by the Company or its representatives, or (iii) was or becomes available to Buyers from a source other than the Company and its representatives, provided that such source is not known by Buyers to be bound by a confidentiality agreement with the Company. 6.2 Mandatory Redemption. At the time, if any, that Tim Goff ceases to serve (for a period of 30 consecutive days or more) as the Chief Executive Officer of the Company while any shares of Preferred Stock are held by a Buyer, there shall be a mandatory redemption of the outstanding shares of Preferred Stock held by all Buyers, in accordance with Section 6(a) (or a successor thereto) of the Certificate of Designations establishing the Preferred Stock. 6.3 Third Party Consents. The Company shall use its reasonable best efforts to obtain all consents, approvals, orders, authorizations, and waivers of, and to effect all declarations, filings, and registrations with, all third parties (including Governmental Entities) that are necessary, required, or deemed by Buyers to be desirable to enable the Company to issue the Shares to Buyers as contemplated by this Agreement and to otherwise consummate the transactions contemplated hereby. All costs and expenses of obtaining or effecting any and all of the consents, approvals, orders, authorizations, waivers, declarations, filings, and registrations referred to in this Section shall be borne by the Company. 6.4 Reasonable Best Efforts. Each party hereto agrees that it will not voluntarily undertake any course of action inconsistent with the provisions or intent of this Agreement and will use its reasonable best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things reasonably necessary, proper, or advisable under Applicable Laws to consummate the transactions contemplated by this Agreement, including, without limitation, (i) cooperation in determining whether any consents, approvals, orders, authorizations, waivers, declarations, filings, or registrations of or with any Governmental Entity or third party are required in connection with the consummation of the transactions contemplated hereby; (ii) reasonable best efforts to obtain any such consents, approvals, orders, authorizations, and waivers and to effect any such declarations, filings, and registrations; (iii) reasonable best efforts to cause to be lifted or rescinded any injunction or restraining order or other order adversely affecting the ability of the parties to consummate the transactions contemplated hereby; (iv) reasonable best efforts to defend, and cooperation in 22 24 defending, all lawsuits or other legal proceedings challenging this Agreement or the consummation of the transactions contemplated hereby; and (v) the execution of any additional instruments necessary to consummate the transactions contemplated hereby. 6.5 Registration Rights Agreement. The Company and Buyers shall enter into an amended and restated registration rights agreement (the "Registration Agreement") at (and subject to the occurrence of) the Closing pursuant to which the Company shall agree to register under the Securities Act securities owned by Buyers. The Registration Agreement shall be in substantially the form set forth as Exhibit 6.5. 6.6 Shareholders' Agreement. The Company and Buyers shall enter into an amended and restated shareholders' agreement (the "Shareholders' Agreement") at (and subject to the occurrence of) the Closing, substantially in the form set forth as Exhibit 6.6. 6.7 Option Plan. The Company shall adopt an option plan (the "Option Plan") at (and subject to the occurrence of) the Closing, providing for option grants thereunder to each individual listed on Schedule 6.7(a). The Option Plan shall be in substantially the form set forth as Exhibit 6.7(b). The Company shall submit the Option Plan to its shareholders for approval at its next annual meeting of shareholders. 6.8 Public Announcements. Except as may be required by Applicable Law or this Section 6.8, no Buyer, on the one hand, or the Company, on the other, shall issue any press release or otherwise make any public statement with respect to this Agreement or the transactions contemplated hereby without the prior written consent of the other parties (which consent shall not be unreasonably withheld). Any such press release or public statement required by Applicable Law shall only be made after reasonable notice to the other parties. Upon execution of this Agreement, the Company shall make a press release in the form of Exhibit 6.8 and promptly file a report on Form 8-K with the Securities and Exchange Commission. 6.9 Notice of Litigation. Until the Closing, (i) Buyers, upon learning of the same, shall promptly notify the Company of any Proceeding which is commenced or threatened against a Buyer and which affects this Agreement or the transactions contemplated hereby and (ii) the Company, upon learning of the same, shall promptly notify Buyers of any Proceeding which is commenced or threatened against the Company and which affects this Agreement or the transactions contemplated hereby and any Proceeding which is commenced or threatened against the Company or any Subsidiary and which would have been listed on Schedule 3.14 if such Proceeding had arisen prior to the date hereof. 6.10 Notification of Certain Matters. The Company shall give prompt notice to Buyers of: (i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which would be likely to cause any representation or warranty contained in Article III to be untrue or inaccurate at or prior to the Closing, (ii) any failure of the Company to comply with or satisfy any covenant, 23 25 condition, or agreement to be complied with or satisfied by the Company hereunder, and (iii) any notice or other communication from any person alleging that the consent or approval of such person is or may be required in connection with the transactions contemplated by this Agreement (other than those consents and approvals indicated as required on Schedule 3.6). Buyers shall give prompt notice to the Company of: (i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which would be likely to cause any representation or warranty contained in Article IV to be untrue or inaccurate at or prior to the Closing, and (ii) any failure of Buyers to comply with or satisfy any covenant, condition, or agreement to be complied with or satisfied by such person hereunder. The delivery of any notice pursuant to this Section shall not be deemed to: (i) modify the representations or warranties hereunder of the party delivering such notice, (ii) modify the conditions set forth in Articles VII and VIII, or (iii) limit or otherwise affect the remedies available hereunder to the party receiving such notice. 6.11 Amendment of Schedules. Each party hereto agrees that, with respect to the representations and warranties of such party contained in this Agreement, such party shall have the continuing obligation until the Closing to supplement or amend promptly the Schedules hereto with respect to any matter hereafter arising or discovered which, if existing or known at the date of this Agreement, would have been required to be set forth or described in the Schedules. For all purposes of this Agreement, including without limitation for purposes of determining whether the conditions set forth in Sections 7.1 and 8.1 have been fulfilled, the Schedules hereto shall be deemed to include only that information contained therein on the date of this Agreement and shall be deemed to exclude all information contained in any supplement or amendment thereto. 6.12 Fees and Expenses. (a) The Company shall, promptly after receiving a billing statement regarding same but no earlier than at the closing, pay all reasonable fees and expenses (including without limitation for legal counsel and accounting fees) of Buyers as incurred in connection with the negotiation and preparation of this Agreement and the Ancillary Documents and in connection with the transactions contemplated hereby and thereby. (b) The Company shall be responsible for the payment of all of the Company's fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby. (c) In addition to the foregoing, at (and conditioned upon) the Closing, the Company shall pay in cash to Buyers a financing fee of One Million Five Hundred Thousand Dollars ($1,500,000), which shall be allocated among the Buyers pro rata in accordance with the number of shares of Preferred Stock purchased hereunder. 6.13 Transfer Taxes. All sales, transfer, filing, recordation, registration, stamp, and similar Taxes and fees arising from or associated with the sale and transfer of the Shares as contemplated hereunder, whether levied on Buyers or the Company, shall be borne by the Company and the 24 26 Company shall file all necessary documentation with respect to, and make all payments of, such Taxes and fees on a timely basis. 6.14 Certificate of Designations. No later than the Closing, the Company shall file with the Texas Secretary of State a Certificate of Designations in the form of Exhibit 6.14. 6.15 Bylaw Amendment. No later than the Closing, the Company shall duly adopt an amendment to its Bylaws regarding requisite approval of Directors, in the form of Exhibit 6.15. 6.16 Noncompetition Agreement. The Company and Tim J. Goff shall enter into a Confidentiality and Non-Compete Agreement (the "Non-Compete Agreement") at (and subject to the occurrence of) the Closing, substantially in the form set forth as Exhibit 6.16. 6.17 Certain Regulatory Matters. (a) Each Buyer agrees to cooperate with the Company in all reasonable respects in complying with the terms and provisions of the letter agreement between the Company and EOS, BACI and SGCP, a copy of which is attached hereto as Exhibit 6.17, regarding small business matters (the "Small Business Sideletter"), including without limitation, voting to approve amending the Company's Articles of Incorporation, the Company's by-laws or this Agreement in a manner reasonably acceptable to the Buyers or any "Regulated Holder" (as defined in the Small Business Sideletter) entitled to make such request pursuant to the Small Business Sideletter in order to remedy a "Regulatory Problem" (as defined in the Small Business Sideletter). Anything contained in this Section 6.17 to the contrary notwithstanding, no Buyer shall be required under this Section 6.17 to take any action that would adversely affect in any material respect such Buyer's rights under this Agreement, the Ancillary Documents, or otherwise as a shareholder of the Company. (b) The Company and each Buyer agree not to amend or waive the voting or other provisions of the Company's Articles of Incorporation, the Company's by-laws or this Agreement if such amendment or waiver would cause any "Regulated Holder" to have a "Regulatory Problem" (as such terms are defined in the Small Business Sideletter). Each of EOS, BACI and SGCP agrees to notify the Company as to whether or not it would have any such Regulatory Problem promptly after such party has notice of such amendment or waiver. 6.18 Survival of Covenants. Except for any covenant or agreement which by its terms expressly terminates as of a specific date or event, the covenants and agreements of the parties hereto contained in this Agreement shall survive the Closing without contractual limitation. 25 27 ARTICLE VII. CONDITIONS TO OBLIGATIONS OF THE COMPANY The obligations of the Company to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment on or prior to the Closing Date of each of the following conditions: 7.1 Representations and Warranties True. All the representations and warranties of Buyers contained in this Agreement, and in any agreement, instrument, or document delivered pursuant hereto or in connection herewith on or prior to the Closing Date, shall be true and correct in all material respects as of the date made and (having been deemed to have been made again on and as of the Closing Date in the same language) shall be true and correct in all material respects on and as of the Closing Date, except as affected by transactions permitted by this Agreement and except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty shall have been true and correct in all material respects as of such specified date. 7.2 Covenants and Agreements Performed. Buyers shall have performed and complied with in all material respects all covenants and agreements required by this Agreement to be performed or complied with by them on or prior to the Closing Date. 7.3 Certificate. The Company shall have received a certificate executed by each Buyer dated the Closing Date, representing and certifying, in such detail as the Company may reasonably request, that the conditions set forth in Sections 7.1 and 7.2 have been fulfilled and that such Buyer is not in breach of any provision of this Agreement. 7.4 Legal Proceedings. No Proceeding shall, on the Closing Date, be pending or threatened seeking to restrain, prohibit, or obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby. ARTICLE VIII. CONDITIONS TO OBLIGATIONS OF BUYERS The obligations of Buyers to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment on or prior to the Closing Date of each of the following conditions: 8.1 Representations and Warranties True. All the representations and warranties of the Company contained in this Agreement, and in any agreement, instrument, or document delivered pursuant hereto or in connection herewith on or prior to the Closing Date, shall be true and correct 26 28 in all material respects as of the date made and (having been deemed to have been made again on and as of the Closing Date in the same language) shall be true and correct in all material respects on and as of the Closing Date, except as affected by transactions permitted by this Agreement and except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty shall have been true and correct in all material respects as of such specified date. 8.2 Covenants and Agreements Performed. The Company shall have performed and complied with in all material respects all covenants and agreements required by this Agreement to be performed or complied with by it on or prior to the Closing Date. 8.3 Certificate. Buyers shall have received a certificate executed on behalf of the Company by the chief executive officer and by the chief financial officer of the Company, dated the Closing Date, representing and certifying, in such detail as Buyers may reasonably request, that the conditions set forth in Sections 8.1 and 8.2 have been fulfilled and that the Company is not in breach of any provision of this Agreement. 8.4 Opinion of Counsel. Buyers shall have received an opinion of Butler & Binion, L.L.P., legal counsel to the Company, dated the Closing Date, substantially in the form of Exhibit 8.4. In rendering such opinion, such counsel may rely as to factual matters upon certificates or other documents furnished by directors and officers of the Company and by government officials and upon such other documents and data as such counsel deems appropriate as a basis for such opinion. 8.5 Legal Proceedings. No Proceeding shall, on the Closing Date, be pending or threatened seeking to restrain, prohibit, or obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby. 8.6 Consents. (a) There shall have been obtained any and all material permits, consents, and approvals of Governmental Entities that reasonably may be deemed necessary so that the consummation of the transactions contemplated hereby will be in compliance with Applicable Law, the failure to comply with which would have a Material Adverse Effect on the Company. (b) All consents and approvals of private persons, (i) the granting of which is necessary for the consummation of the transactions contemplated hereby and (ii) the non-receipt of which would have a Material Adverse Effect on the Company, shall have been obtained. 8.7 No Material Adverse Change. Since the date of this Agreement, there shall not have been any material adverse change in the business, assets, results of operations, condition (financial or otherwise), or prospects of the Company and the Subsidiaries considered as a whole. 27 29 8.8 Due Diligence. The due diligence conducted by Buyers and their representatives in connection with the proposed transactions contemplated hereby shall not have caused Buyers or their representatives to become aware of any facts relating to the business, assets, results of operations, condition (financial or otherwise), or prospects of the Company or any Subsidiary which, in the good faith judgment of Buyers, make it inadvisable for Buyers to proceed with the consummation of the transactions contemplated hereby. 8.9 Other Documents. Buyers shall have received the certificates, instruments, and documents listed below: (a) In accordance with the denominations designated in Schedule 1.1, stock certificates in definitive form and duly executed on behalf of the Company, representing the portion of the Shares registered in the name of each Buyer. (b) A copy of the resolutions of the Board of Directors of the Company authorizing the execution, delivery, and performance by the Company of this Agreement, certified by the secretary or an assistant secretary of the Company. (c) Certificates from the Secretary of State of Texas and the Comptroller of Public Accounts of the State of Texas, each dated not more than ten days prior to the Closing Date, as to the legal existence and good standing, respectively, of the Company and the Subsidiaries under the laws of such state. (d) Certificates from the Secretaries of State of the states listed on Schedule 3.2, as to the due qualification or licensing of the Company and the Subsidiaries, as applicable, to do business in such states, dated not more than ten days prior to the Closing Date. (e) An original Shareholders' Agreement, Registration Agreement and Non- Compete Agreement, each duly signed by an authorized officer of the Company and all other parties thereto. (f) A file-stamped copy of the Certificate of Designations required by Section 6.14 hereof and showing acceptance by the Texas Secretary of State. (g) Such other certificates, instruments, and documents as may be reasonably requested by Buyers to carry out the intent and purposes of this Agreement. 8.10 Conversion of Outstanding Preferred Stock. Any and all shares of preferred stock of the Company outstanding on the date hereof shall have been fully converted into Common Stock in accordance with the existing terms of such preferred stock on the date hereof. 28 30 ARTICLE IX. TERMINATION, AMENDMENT, AND WAIVER 9.1 Termination. This Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Closing in the following manner: (a) by mutual written consent of the Company and Buyers; or (b) by either the Company or Buyers, if: (i) the Closing shall not have occurred on or before May 15, 1999 unless such failure to close shall be due to a breach of this Agreement by the party seeking to terminate this Agreement pursuant to this clause (i); or (ii) there shall be any statute, rule, or regulation that makes consummation of the transactions contemplated hereby illegal or otherwise prohibited or a Governmental Entity shall have issued an order, decree, or ruling or taken any other action permanently restraining, enjoining, or otherwise prohibiting the consummation of the transactions contemplated hereby, and such order, decree, ruling, or other action shall have become final and nonappealable; or (c) by the Company, if (i) any of the representations and warranties of Buyers contained in this Agreement shall not be true and correct in any respect which is material to Buyers or the ability of Buyers to consummate the transactions contemplated hereby, or (ii) Buyers shall have failed to fulfill in any material respect any of their obligations under this Agreement, and, in the case of each of clauses (i) and (ii), such misrepresentation, breach of warranty, or failure (provided it can be cured) has not been cured within ten days after written notice thereof from the Company to Buyers; or (d) by Buyers, if (i) any of the representations and warranties of the Company contained in this Agreement shall not be true and correct in any respect which is material to the Company and the Subsidiaries considered as a whole or the ability of the Company to consummate the transactions contemplated hereby, (ii) the Company shall have failed to fulfill in any material respect any of its obligations under this Agreement, and, in the case of each of clauses (i) and (ii), such misrepresentation, breach of warranty, or failure (provided it can be cured) has not been cured within ten days after written notice thereof from Buyers to the Company, or (iii) the due diligence conducted by Buyers and their representatives in connection with the proposed transactions contemplated hereby shall have caused Buyers or their representatives to become aware of any facts relating to the business, assets, results of operations, condition (financial or otherwise), or prospects of the Company 29 31 or any Subsidiary which, in the good faith judgment of Buyers, make it inadvisable for Buyers to proceed with the consummation of the transactions contemplated hereby. 9.2 Effect of Termination. In the event of the termination of this Agreement pursuant to Section 9.1 by the Company, on the one hand, or Buyer, on the other, written notice thereof shall forthwith be given to the other party specifying the provision hereof pursuant to which such termination is made, and this Agreement shall become void and have no effect, except that the agreements contained in this Section and in Sections 6.1(b), 6.8, 6.12, 11.1, 11.5, and 11.14 and in Article XI shall survive the termination hereof. Nothing contained in this Section shall relieve any party from liability for damages actually incurred as a result of any breach of this Agreement. 9.3 Amendment. This Agreement may not be amended except by an instrument in writing signed by or on behalf of all the parties hereto. 9.4 Waiver. The Company, on the one hand, or Buyers, on the other, may: (i) waive any inaccuracies in the representations and warranties of the other contained herein or in any document, certificate, or writing delivered pursuant hereto, or (ii) waive compliance by the other with any of the other's agreements or fulfillment of any conditions to its own obligations contained herein. Any agreement on the part of a party hereto to any such waiver shall be valid only if set forth in an instrument in writing signed by or on behalf of such party. No failure or delay by a party hereto in exercising any right, power, or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power, or privilege. 9.5 Remedies Not Exclusive. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. The rights and remedies of any party based upon, arising out of, or otherwise in respect of any inaccuracy in or breach of any representation, warranty, covenant, or agreement contained in this Agreement shall in no way be limited by the fact that the act, omission, occurrence, or other state of facts upon which any claim of any such inaccuracy or breach is based may also be the subject matter of any other representation, warranty, covenant, or agreement contained in this Agreement (or in any other agreement between the parties) as to which there is no inaccuracy or breach. ARTICLE X. COMMON STOCK CLAW-BACK In the event that, and only if, the Company, prior to the second anniversary of the Closing Date, fully redeems all shares of Preferred Stock issued to Buyers pursuant to this Agreement (the "Preferred Redemption"), then the Company shall simultaneously purchase, and each Buyer shall sell, assign and transfer, one-eighth (12.5%) of the total shares of Common Stock originally issued 30 32 to such Buyer pursuant to this Agreement plus any Other Securities, subject to adjustment as provided herein, for a total purchase price of $100 (the "Redemption Price"). On the date of the Preferred Redemption, each Buyer shall surrender a certificate or certificates for such shares to the Company and shall thereupon be entitled to receive payment of its pro rata share of the Redemption Price. If the Company effects a split or combination of the Common Stock, including a dividend payable in shares of Common Stock, the number of shares of Common Stock subject to purchase in connection with the Preferred Redemption shall be proportionately adjusted. ARTICLE XI. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION 11.1 Survival. The representations and warranties of the parties hereto contained in this Agreement or in any certificate, instrument, or document delivered pursuant hereto shall survive the Closing without contractual limitation, regardless of any investigation made by or on behalf of any party. 11.2 Indemnification by Company. Subject to the terms and conditions of this Article XI, the Company shall indemnify, defend, and hold harmless Buyers from and against any and all claims, actions, causes of action, demands, assessments, losses, damages, liabilities, judgments, settlements, penalties, costs, and expenses (including reasonable attorneys' fees and expenses), of any nature whatsoever (collectively, "Damages"), asserted against, resulting to, imposed upon, or incurred by Buyers, directly or indirectly, by reason of or resulting from any breach by the Company of any of its representations, warranties, covenants, or agreements contained in this Agreement or in any certificate, instrument, or document delivered pursuant hereto. 11.3 Indemnification by Buyers. Subject to the terms and conditions of this Article XI, each Buyer (severally and not jointly) shall indemnify, defend, and hold harmless the Company from and against any and all Damages asserted against, resulting to, imposed upon, or incurred by the Company, directly or indirectly, by reason of or resulting from any breach by such Buyer of any of its representations, warranties, covenants, or agreements contained in this Agreement or in any certificate, instrument, or document delivered pursuant hereto. 11.4 Procedure for Indemnification. Promptly after receipt by an indemnified party under Section 11.2 or 11.3 of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party under such Section, give written notice to the indemnifying party of the commencement thereof, but the failure so to notify the indemnifying party shall not relieve it of any liability that it may have to any indemnified party except to the extent the indemnifying party demonstrates that the defense of such action is prejudiced thereby. In case any such action shall be brought against an indemnified party and it shall give 31 33 written notice to the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it may wish, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party. If the indemnifying party elects to assume the defense of such action, the indemnified party shall have the right to employ separate counsel at its own expense and to participate in the defense thereof. If the indemnifying party elects not to assume (or fails to assume) the defense of such action, the indemnified party shall be entitled to assume the defense of such action with counsel of its own choice, at the expense of the indemnifying party. If the action is asserted against both the indemnifying party and the indemnified party and there is a conflict of interests which renders it inappropriate for the same counsel to represent both the indemnifying party and the indemnified party, the indemnifying party shall be responsible for paying for separate counsel for the indemnified party; provided, however, that if there is more than one indemnified party, the indemnifying party shall not be responsible for paying for more than one separate firm of attorneys to represent the indemnified parties, regardless of the number of indemnified parties. If the indemnifying party elects to assume the defense of such action, (a) no compromise or settlement thereof may be effected by the indemnifying party without the indemnified party's written consent (which shall not be unreasonably withheld) unless the sole relief provided is monetary damages that are paid in full by the indemnifying party and (b) the indemnifying party shall have no liability with respect to any compromise or settlement thereof effected without its written consent (which shall not be unreasonably withheld). 11.5 Indemnification Despite Negligence. IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED PURSUANT TO THIS ARTICLE XI SHALL BE INDEMNIFIED AND HELD HARMLESS FROM AND AGAINST ALL DAMAGES AS TO WHICH INDEMNITY IS PROVIDED FOR UNDER THIS ARTICLE XI NOTWITHSTANDING THAT ANY SUCH DAMAGES ARISE OUT OF OR RESULT FROM THE ORDINARY, STRICT, SOLE, OR CONTRIBUTORY NEGLIGENCE OF SUCH PERSON AND REGARDLESS OF WHETHER ANY OTHER PERSON (INCLUDING THE OTHER PARTIES TO THIS AGREEMENT) IS OR IS NOT ALSO NEGLIGENT. ARTICLE XII. MISCELLANEOUS 12.1 Notices. All notices, requests, demands, and other communications required or permitted to be given or made hereunder by any party hereto shall be in writing and shall be deemed to have been duly given or made if (i) delivered personally, (ii) transmitted by first class registered or certified mail, postage prepaid, return receipt requested, (iii) sent by prepaid overnight courier service, or (iv) sent by telecopy or facsimile transmission, answer back requested, to the parties at the following addresses (or at such other addresses as shall be specified by the parties by like notice): 32 34 If to Energy PLC, EnCap III-B, BOCP or Fund III: c/o EnCap Investments, L.C. 1100 Louisiana, Suite 3150 Houston, Texas 77002 Attention: D. Martin Phillips Fax No.: 713-659-6130 with a copy to: Thompson & Knight, P.C. 1700 Chase Tower, 600 Travis Houston, TX 77002 Attention: Michael K. Pierce, Esq. Telefax: 713-217-2828 If to Kayne: Kayne Anderson Investment Management 1800 Ave. of the Stars, # 1425 Los Angeles, California 90067 Attention: Robert B. Sinnott Fax No.: 310-284-6490 If to BACI: Bank of America Capital Investors 100 North Tryon Street, 25th Floor Charlotte, North Carolina 28255 Attention: J. Travis Hain Fax No.: 704-386-6432 If to EOS: EOS Partners, L.P. 320 Park Avenue New York, New York 10022 Attention: Brian D. Young Fax No.: 212-832-5815 33 35 If to SGCP: SGC Partners II LLC c/o SG Capital Partners, LLC 1221 Avenue of the Americas, 15th Floor New York, NY 10020 Attention: V. Frank Pottow Fax No.: 212-278-5454 If to the Company: Bargo Energy Company 700 Louisiana, Suite 3700 Houston, Texas 77002 Attention: Tim J. Goff and Lee Seekely Telefax: (713) 236-9799 with, a copy to: Butler & Binion, L.L.P. 1000 Louisiana, Suite 1600 Houston, TX 77002 Attention: George G. Young, Esq. Telefax: 713-237-3202 Such notices, requests, demands, and other communications shall be effective (i) if delivered personally or sent by courier service, upon actual receipt by the intended recipient, (ii) if mailed, upon the earlier of five days after deposit in the mail or the date of delivery as shown by the return receipt therefor, or (iii) if sent by telecopy or facsimile transmission, when the answer back is received. 12.2 Entire Agreement. This Agreement, together with the Schedules, Exhibits, Annexes, and other writings referred to herein or delivered pursuant hereto, constitute the entire agreement between the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof. 12.3 Binding Effect; Assignment; No Third Party Benefit. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors, and permitted assigns. Except as otherwise expressly provided in this Agreement, neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties, except that a Buyer 34 36 may assign to any affiliate of such Buyer any of such Buyer's rights, interests, or obligations hereunder, upon notice to the other party or parties, provided that (i) no such assignment shall relieve such Buyer of its obligations hereunder and (ii) the transferee makes the representations in Sections 4.6 through 4.11 hereof. Except as provided in Article XI, nothing in this Agreement, express or implied, is intended to or shall confer upon any person other than the parties hereto, and their respective heirs, legal representatives, successors, and permitted assigns, any rights, benefits, or remedies of any nature whatsoever under or by reason of this Agreement. 12.4 Severability. If any provision of this Agreement is held to be unenforceable, this Agreement shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects this Agreement shall remain in full force and effect; provided, however, that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be enforceable to the maximum extent permitted by Applicable Law. 12.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. 12.6 Further Assurances. From time to time following the Closing, at the request of any party hereto and without further consideration, the other party or parties hereto shall execute and deliver to such requesting party such instruments and documents and take such other action (but without incurring any material financial obligation) as such requesting party may reasonably request in order to consummate more fully and effectively the transactions contemplated hereby. 12.7 Descriptive Headings. The descriptive headings herein are inserted for convenience of reference only, do not constitute a part of this Agreement, and shall not affect in any manner the meaning or interpretation of this Agreement. 12.8 Gender. Pronouns in masculine, feminine, and neuter genders shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. 12.9 References. All references in this Agreement to Articles, Sections, and other subdivisions refer to the Articles, Sections, and other subdivisions of this Agreement unless expressly provided otherwise. The words "this Agreement", "herein", "hereof", "hereby", "hereunder", and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. Whenever the words "include", "includes", and "including" are used in this Agreement, such words shall be deemed to be followed by the words "without limitation". Each reference herein to a Schedule, Exhibit, or Annex refers to the item identified separately in writing by the parties hereto as the described Schedule, Exhibit, or Annex to this 35 37 Agreement. All Schedules, Exhibits, and Annexes are hereby incorporated in and made a part of this Agreement as if set forth in full herein. 12.10 Counterparts. This Agreement may be executed by the parties hereto in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same agreement. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all, the parties hereto. 12.11 Injunctive Relief. The parties hereto acknowledge and agree that irreparable damage would occur in the event any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement, and shall be entitled to enforce specifically the provisions of this Agreement, in any court of the United States or any state thereof having jurisdiction, in addition to any other remedy to which the parties may be entitled under this Agreement or at law or in equity. 12.12 Schedules (Disclosure). Each of the Schedules to this Agreement shall be deemed to include and incorporate all disclosures made on the other Schedules to this Agreement. It is understood and agreed that the specification of any dollar amount in the representations and warranties contained in this Agreement or the inclusion of any specific item in the Schedules is not intended to imply that such amounts or higher or lower amounts, or the items so included or other items, are or are not material, and no party shall use the fact of the setting of such amounts or the fact of the inclusion of any such item in the Schedules in any dispute or controversy between the parties as to whether any obligation, item, or matter not described herein or included in a Schedule is or is not material for purposes of this Agreement. 12.13 Schedules (Construction). In the event of any inconsistency between the statements in the body of this Agreement and those in the Schedules (other than an exception expressly set forth as such in the Schedules in relation to a specifically identified representation or warranty), those in this Agreement shall control. 12.14 Consent to Jurisdiction; Waiver of Jury Trial. (a) The parties hereto hereby irrevocably submit to the jurisdiction of the courts of the State of Texas and the federal courts of the United States of America located in Houston, Texas, and appropriate appellate courts therefrom, over any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby, and each party hereby irrevocably agrees that all claims in respect of such dispute or proceeding may be heard and determined in such courts. The parties hereby irrevocably waive, to the fullest extent permitted by Applicable Law, any objection which they may now or hereafter have to the laying of venue of any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the parties hereto agrees 36 38 that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. This consent to jurisdiction is being given solely for purposes of this Agreement and is not intended to, and shall not, confer consent to jurisdiction with respect to any other dispute in which a party to this Agreement may become involved. (b) Each of the parties hereto hereby consents to process being served by any party to this Agreement in any suit, action, or proceeding of the nature specified in subsection (a) above by the mailing of a copy thereof in the manner specified by the provisions of Section 11.1. (c) FURTHERMORE, ALL PARTIES HERETO WAIVE ANY AND ALL RIGHTS TO HAVE A JURY RESOLVE OR OTHERWISE PRESIDE, IN WHOLE OR IN PART, OVER ANY DISPUTE OR PROCEEDING INVOLVING ANY OF THE PARTIES HERETO AND REGARDING (I) THIS AGREEMENT, (II) THE DOCUMENTS REQUIRED HEREBY, OR (III) ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 12.15 Liability of Buyers. The liability of each Buyer with respect to the agreements, covenants, representations and warranties of Buyers contained in this Agreement or in any certificate, instrument, or document delivered pursuant hereto shall be to the extent such agreements, covenants, representations or warranties applies to himself, herself, or itself and not with respect to any other Buyer. 12.16 Consent to Certain Stock Issuances. By its execution hereof, each Buyer hereby consents to the issuance of Common Stock upon exercise of warrants and options to purchase Common Stock outstanding as of the date hereof and upon exercise of options to purchase Common Stock granted as set forth on Schedule 6.7(a) hereof. ARTICLE XIII. DEFINITIONS 13.1 Certain Defined Terms. As used in this Agreement, each of the following terms has the meaning given it below: "affiliate" means, with respect to any person, any other person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such person. For the purposes of this definition, "control" when used with respect to any person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities, by contract, or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. 37 39 "Ancillary Documents" means each agreement, instrument, and document (other than this Agreement) executed or to be executed in connection with the transactions contemplated by this Agreement. "Applicable Law" means any statute, law, rule, or regulation or any judgment, order, writ, injunction, or decree of any Governmental Entity to which a specified person or property is subject. "Code" means the Internal Revenue Code of 1986, as amended. "Company" means Bargo Energy Company, a Texas corporation, and, unless the context otherwise requires, includes the Company's predecessor, Future Petroleum Corporation, a Utah corporation. "Encumbrances" means liens, charges, pledges, options, mortgages, deeds of trust, security interests, claims, restrictions (whether on voting, sale, transfer, disposition, or otherwise), easements, and other encumbrances of every type and description, whether imposed by law, agreement, understanding, or otherwise. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "GAAP" means generally accepted accounting principles in the United States of America from time to time. "Governmental Entity" means any court or tribunal in any jurisdiction (domestic or foreign) or any federal, state, municipal, or other governmental body, agency, authority, department, commission, board, bureau, or instrumentality (domestic or foreign), as well as the New York Stock Exchange, The Nasdaq Stock Market, and any exchange upon which the Common Stock is listed from time to time. "Material Adverse Effect" means any change, development, or effect (individually or in the aggregate) which is, or is reasonably likely to be, materially adverse (i) to the business, assets, results of operations or condition (financial or otherwise) of a party, or (ii) to the ability of a party to perform on a timely basis any material obligation under this Agreement or any agreement, instrument, or document entered into or delivered in connection herewith. "Other Securities" means any stock (other than Common Stock), bond, note or other securities issued to a holder of Common Stock (on account of Common Stock issued 38 40 pursuant to this Agreement) pursuant to any merger, consolidation, reorganization, recapitalization, dividend or other distribution. "Permits" means licenses, permits, franchises, consents, approvals, variances, exemptions, and other authorizations of or from Governmental Entities. "person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, enterprise, unincorporated organization, or Governmental Entity. "Proceedings" means all proceedings, actions, claims, suits, investigations, and inquiries by or before any arbitrator or Governmental Entity. "reasonable best efforts" means a party's reasonable best efforts in accordance with reasonable commercial practice and without the incurrence of unreasonable expense. "Securities Act" means the Securities Act of 1933, as amended. "Subsidiary" means any corporation more than 50% of whose outstanding voting securities, or any general partnership, joint venture, or similar entity more than 50% of whose total equity interests, is owned, directly or indirectly, by the Company, or any limited partnership of which the Company or any Subsidiary is a general partner. "Taxes" means any income taxes or similar assessments or any sales, excise, occupation, use, ad valorem, property, production, severance, transportation, employment, payroll, franchise, or other tax imposed by any United States federal, state, or local (or any foreign or provincial) taxing authority, including any interest, penalties, or additions attributable thereto. "Tax Return" means any return or report, including any related or supporting information, with respect to Taxes. "to the best knowledge" of a specified person (or similar references to a person's knowledge) means all information to be attributed to such person actually or constructively known to (a) such person in the case of an individual or (b) in the case of a corporation or other entity, an executive officer or employee who devoted substantive attention to matters of such nature during the ordinary course of his employment by such person. A person has "constructive knowledge" of those matters which the individual involved could reasonably be expected to have as a result of undertaking an investigation of such a scope and extent as a reasonably prudent man would undertake concerning the particular subject matter. 39 41 IN WITNESS WHEREOF, the parties have executed this Agreement, or caused this Agreement to be executed by their duly authorized representatives, all as of the day and year first above written. THE COMPANY: BARGO ENERGY COMPANY By: -------------------------------------- Name: --------------------------------- Title: -------------------------------- BUYERS: ENERGY CAPITAL INVESTMENT COMPANY PLC By: -------------------------------------- Gary R. Petersen Director ENCAP ENERGY CAPITAL FUND III, L.P. By: EnCap Investments L.C., General Partner By: -------------------------------------- D. Martin Phillips Managing Director ENCAP ENERGY CAPITAL FUND III-B, L.P. By: EnCap Investments L.C., General Partner By: -------------------------------------- D. Martin Phillips Managing Director 42 BOCP ENERGY PARTNERS, L.P. By: EnCap Investments L.C., Manager By: -------------------------------------- D. Martin Phillips Managing Director EOS PARTNERS, L.P. By: -------------------------------------- Name: --------------------------------- Title: -------------------------------- EOS PARTNERS SBIC, L.P. By: Eos SBIC General, L.P., its general partner By: Eos SBIC, Inc., its general partner By: ------------------------------- Name: -------------------------- Title: ------------------------- EOS PARTNERS SBIC II, L.P. By: Eos SBIC General II, L.P., its general partner By: Eos SBIC II, Inc., its general partner By: ------------------------------- Name: -------------------------- Title: ------------------------- SGC PARTNERS II LLC By: -------------------------------------- V. Frank Pottow Managing Director 43 BANCAMERICA CAPITAL INVESTORS SBIC I, L.P. By: BancAmerica Capital Management SBIC I, LLC, its general partner By: BancAmerica Capital Management I, L.P., its its sole member By: BACM I GP, LLC, its general partner By: -------------------------------- J. Travis Hain Managing Director KAYNE ANDERSON ENERGY FUND, L.P. By: -------------------------------------- Name: --------------------------------- Title: -------------------------------- 44 Schedule 1.1 Investors
- -------------------------------------------------------------- -------------------- -------------------- Shares of Shares of Purchase - -------------------------------------------------------------- -------------------- -------------------- Name Preferred Stock Common Stock Price - -------------------------------------------------------------- -------------------- -------------------- EnCap Energy Capital Fund III L. P. 637,185 5,583,755 $ 6,371,850 - -------------------------------------------------------------- -------------------- -------------------- EnCap Energy Capital Fund III-B L. P. 481,904 4,222,999 4,819,040 - -------------------------------------------------------------- -------------------- -------------------- BOCP Energy Partners, L. P. 155,911 1,366,277 1,559,110 - -------------------------------------------------------------- -------------------- -------------------- Energy Capital Investment Co. PLC 225,000 1,971,712 2,250,000 - -------------------------------------------------------------- -------------------- -------------------- Kayne Anderson Energy, L. P. 1,000,000 8,763,162 10,000,000 - -------------------------------------------------------------- -------------------- -------------------- BancAmerica Capital Investors SBIC I, L.P. 1,500,000 13,144,743 15,000,000 - -------------------------------------------------------------- -------------------- -------------------- Eos Partners SBIC, L. P. 390,000 3,417,633 3,900,000 - -------------------------------------------------------------- -------------------- -------------------- Eos Partners SBIC II, L. P. 72,500 635,329 725,000 - -------------------------------------------------------------- -------------------- -------------------- Eos Partners L. P. 37,500 328,619 375,000 - -------------------------------------------------------------- -------------------- -------------------- SG Capital Partners II LLC 500,000 4,381,581 5,000,000 - -------------------------------------------------------------- -------------------- -------------------- Total 5,000,000 43,815,810 $ 50,000,000 - -------------------------------------------------------------- -------------------- --------------------
-----END PRIVACY-ENHANCED MESSAGE-----