EX-2.1 2 a12-6996_2ex2d1.htm EX-2.1

EXHIBIT 2.1

 

STOCK PURCHASE AGREEMENT

 

dated as of

 

March 7, 2012

 

among

 

CANO PETROLEUM, INC.,

 

CANO PETRO OF NEW MEXICO, INC.,

 

LADDER COMPANIES, INC.,

 

SQUARE ONE ENERGY, INC.,

 

TRI-FLOW, INC.,

 

W.O. ENERGY OF NEVADA, INC.,

 

WO ENERGY, INC.,

 

W.O. OPERATING COMPANY, LTD.,

 

and

 

W.O. PRODUCTION COMPANY, LTD.

 

as Debtors,

 

NBI Services, Inc.

 

as Buyer

 

CONFIDENTIAL

 



 

TABLE OF CONTENTS

 

 

 

PAGE

 

 

 

ARTICLE I DEFINITIONS

2

 

 

 

Section 1.01

Definitions

2

Section 1.02

Other Definitional and Interpretative Provisions

11

 

 

 

ARTICLE II PURCHASE AND SALE

12

 

 

 

Section 2.01

Purchase and Sale of Cano Shares

12

Section 2.02

Closing

13

Section 2.03

Closing Accounts Receivables

14

Section 2.04

Prepaid JOA Funds

15

Section 2.05

Suspense Funds

15

 

 

 

ARTICLE III REPRESENTATIONS AND WARRANTIES OF CANO

15

 

 

Section 3.01

Corporate Existence and Power

15

Section 3.02

Corporate Authorization

15

Section 3.03

Governmental Authorization

16

Section 3.04

Noncontravention

16

Section 3.05

Capitalization

16

Section 3.06

Subsidiaries

17

Section 3.07

SEC Filings and the Sarbanes-Oxley Act

18

Section 3.08

Financial Statements

18

Section 3.09

Absence of Certain Changes

19

Section 3.10

Material Contracts

19

Section 3.11

Litigation

21

Section 3.12

Compliance with Laws and Court Orders

21

Section 3.13

Properties

21

Section 3.14

Oil and Gas Interests

21

Section 3.15

Hedging

22

Section 3.16

Natural Gas Act

22

Section 3.17

Insurance Coverage

23

Section 3.18

Licenses and Permits

23

Section 3.19

Finders’ Fees

23

Section 3.20

Employees

23

Section 3.21

Employee Benefits Matters

23

Section 3.22

Environmental Matters

24

Section 3.23

Taxes

25

 

 

 

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER

25

 

 

Section 4.01

Corporate Existence and Power

25

Section 4.02

Authorization

26

Section 4.03

Governmental Authorization

26

 

i



 

Section 4.04

Noncontravention

26

Section 4.05

Litigation

26

Section 4.06

Financing

27

Section 4.07

Finders’ Fees

27

Section 4.08

Investor Status; Investigation

27

 

 

 

ARTICLE V COVENANTS OF CANO

27

 

 

Section 5.01

Conduct of the Business

27

Section 5.02

Additional Financial Information

30

Section 5.03

Assumption and Rejection of Executory Contracts and Leases

30

Section 5.04

Well Elections

32

Section 5.05

Access to Information

32

 

 

 

ARTICLE VI COVENANTS OF BUYER

33

 

 

Section 6.01

Health Coverage

33

Section 6.02

Tax Refunds

34

Section 6.03

Tax Returns

35

Section 6.04

Financing

35

 

 

 

ARTICLE VII COVENANTS OF BUYER AND CANO

35

 

 

Section 7.01

Commercially Reasonable Efforts; Further Assurances

35

Section 7.02

Bankruptcy Proceedings

36

Section 7.03

Certain Filings

37

Section 7.04

Public Announcements

37

Section 7.05

Notices of Certain Events

37

Section 7.06

Confidentiality

38

Section 7.07

Indemnification

38

Section 7.08

Audits and Other Tax Proceedings

39

Section 7.09

Environmental Costs

39

 

 

 

ARTICLE VIII CONDITIONS TO CLOSING

40

 

 

Section 8.01

Conditions to Obligations of Buyer and Cano

40

Section 8.02

Conditions to Obligation of Buyer

40

Section 8.03

Conditions to Obligation of Cano

41

 

 

 

ARTICLE IX TERMINATION

42

 

 

Section 9.01

Grounds for Termination

42

Section 9.02

Effect of Termination

43

Section 9.03

Break-Up Fee

44

 

 

 

ARTICLE X MISCELLANEOUS

45

 

 

Section 10.01

Notices

45

 

ii



 

Section 10.02

Survival

46

Section 10.03

Amendments and Waivers

46

Section 10.04

Expenses

47

Section 10.05

Successors and Assigns

47

Section 10.06

Governing Law

47

Section 10.07

Jurisdiction

47

Section 10.08

WAIVER OF JURY TRIAL

47

Section 10.09

Counterparts; Effectiveness; Third Party Beneficiaries

48

Section 10.10

Entire Agreement

48

Section 10.11

Severability

48

Section 10.12

Specific Performance

48

Section 10.13

Certain Acknowledgements and Limitations

48

Section 10.14

Disclosure Schedules

50

 

 

 

ARTICLE XI PURCHASE PRICE DEPOSIT

50

 

 

Section 11.01

Escrow Deposit

50

Section 11.02

Distribution of Escrow Amount

50

Section 11.03

Disbursement Directions

51

 

 

 

Exhibits

 

 

 

 

 

Exhibit A

Plan of Reorganization

 

Exhibit B

Disclosure Statement

 

Exhibit C

Form of Bid Procedures Order

 

Exhibit D

Form of Escrow Agreement

 

 

iii



 

STOCK PURCHASE AGREEMENT

 

STOCK PURCHASE AGREEMENT (this “Agreement”) dated as of March 7, 2012, among Cano Petroleum, Inc., a Delaware corporation (“Cano”), and each of Cano Petro of New Mexico, Inc., a Texas corporation, Ladder Companies, Inc., a Delaware corporation, Square One Energy, Inc., a Texas corporation, Tri-Flow, Inc., an Oklahoma corporation, W.O. Energy of Nevada, Inc., a Nevada corporation, WO Energy, Inc., a Texas corporation, W.O. Operating Company, Ltd., a Texas limited partnership, and W.O. Production Company, Ltd., a Texas limited partnership (each a “Cano Subsidiary” and, collectively, the “Cano Subsidiaries” and, together with Cano, the “Debtors”), NBI Services, Inc. or its assignee affiliate, an Oklahoma corporation (“Buyer”).  Debtors and Buyer are sometimes referred to collectively herein as the “Parties” and individually as a “Party.”

 

W I T N E S S E T H :

 

WHEREAS, Cano has concluded that, promptly after the date hereof, Debtors will file voluntary petitions for relief under Chapter 11 of the Bankruptcy Code (as defined below) in the  United States Bankruptcy Court for the Northern District of Texas, Dallas Division, and pursuant to Chapter 11 of the Bankruptcy Code, Debtors will request that the cases (collectively, the “Bankruptcy Cases”) be jointly administered for procedural purposes;

 

WHEREAS, as part of the Bankruptcy Cases, Debtors intend to file (i) a plan of reorganization for the Debtors in the form attached hereto as Exhibit A (as the same may be amended, modified or supplemented from time to time in accordance with the provisions hereof and thereof, the “Plan”), (ii) a disclosure statement for the Plan intended to meet the requirements of Section 1125(b) of the Bankruptcy Code in the form attached as Exhibit B (as the same may be amended, modified or supplemented from time to time in accordance with the provisions hereof, the Disclosure Statement”), (iii) a motion seeking approval of the Disclosure Statement and (iv) a motion seeking entry of the Bid Procedures Order (as defined below);

 

WHEREAS, subject to the entry of the Confirmation Order, Cano desires to cause the Reorganized Cano (as defined below) to issue and sell to Buyer, and Buyer desires to purchase from the Reorganized Cano, 1,000 shares of common stock, par value $0.01 per share, of the Reorganized Cano (the “New Cano Shares”) in accordance with the terms and subject to the conditions set forth herein, which New Cano Shares shall constitute, immediately following the Closing (as defined below), all of the issued and outstanding capital stock and other equity interests of the Reorganized Cano;

 

WHEREAS, simultaneously with the execution hereof, Debtors, the Senior Secured Lenders and the Junior Secured Lenders are entering into a plan support agreement (the “Plan Support Agreement”); and

 

WHEREAS, Cano has been soliciting bids to purchase either all or substantially all of Cano’s properties or the New Cano Shares and has determined that Buyer’s offer to purchase the New Cano Shares is the highest and best offer received to date for the New Cano Shares or all or substantially all of Cano’s properties and constitutes a fair and adequate purchase price.

 



 

NOW, THEREFORE, in consideration of the mutual promises, representations and warranties made herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

 

ARTICLE I
DEFINITIONS

 

Section 1.01                             Definitions.

 

(a)                            The following terms, as used herein, have the following meanings:

 

Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such other Person.  For such purposes, the term “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

Alternative Bidder” means any Third Party that has made a bona fide written proposal after the date hereof and prior to the Bid Deadline relating to an Alternative Transaction.

 

Alternative Transaction” means, other than the Transactions, the Plan or any transactions effected in the Ordinary Course of Business, any (i) sale, transfer or other disposition, directly or indirectly, of any material assets of any Debtor (except any such sale, transfer or other disposition (A) to the extent permitted by Section 5.01(b)(vi), (B) with respect to any Trust Assets or (C) solely between or among Debtors), (ii) issuance, sale, transfer or other disposition, in each case by any Debtor, of any class of equity securities, ownership interests or voting securities of any Debtor (except for any such issuance, sale, transfer or other disposition (A) by any Cano Subsidiary to any Debtor or (B) by Cano upon the exercise of stock options or the vesting of restricted shares outstanding as of the date of this Agreement), (iii) merger, consolidation, recapitalization, business combination or other similar transaction involving any Debtor (except for any such transaction solely between or among Debtors) or (iv) Chapter 11 plan of reorganization or other restructuring or reorganization for, or liquidation of, any Debtor.

 

Applicable Law” means, with respect to any Person, any federal, state or local law (statutory, common or otherwise), constitution, ordinance, code, rule, regulation, order, injunction or judgment adopted or promulgated by a Governmental Authority that is binding upon or applicable to such Person, as amended unless expressly specified otherwise.

 

Bankruptcy Code” means Title 11 of the United States Code, as amended.

 

Bankruptcy Court” means the United States Bankruptcy Court for the Northern District of Texas or any other court having jurisdiction over the Bankruptcy Cases from time to time.

 

Bankruptcy Rules” means the Federal Rules of Bankruptcy Procedure and the local rules of the Bankruptcy Court, in each case as amended, or any successor rules.

 

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Bid Deadline” has the meaning set forth in the Bid Procedures Order.

 

Bid Procedures Order” means an order of the Bankruptcy Court, substantially in the form attached hereto as Exhibit C, approving this Agreement and procedures for consummating an Alternative Transaction and the Break-Up Fee pursuant to Section 9.03, which order must be reasonably acceptable in form and substance to Buyer and Cano.

 

Board of Directors” means the board of directors of Cano or any committee of the board of directors of Cano acting pursuant to authority of such committee granted by such board of directors.

 

Business Day” means any day, excluding Saturdays, Sundays or “legal holidays” (as referenced in Bankruptcy Rule 9006(a)), on which commercial banks are open for business in Dallas, Texas.

 

Cano’s Knowledge” means the actual knowledge of any of the following individuals:  James R. Latimer III and John H. Homier after consultation with Eric Hyman.

 

Cash Deposits” means the total amount of any cash and negotiable instruments of Debtors that constitute deposits securing any performance bonds, surety bonds, letters of credit, guarantees, security deposits or similar assurances outstanding as of the Closing Date.

 

CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and any rules or regulations promulgated thereunder.

 

Claim” means a claim against any Debtors as defined in the Bankruptcy Code and including, but not limited to, administrative claims or expenses as defined by 11 U.S.C. § 503.

 

Closing Accounts Receivable” means all accounts receivable of the Debtors, determined in accordance with GAAP, immediately prior to the Closing.

 

Closing Cash Balance” means all cash and cash equivalents of the Debtors, determined in accordance with GAAP, immediately prior to the Closing, excluding all Withholding Taxes and all Cash Deposits.

 

Closing Date” means the date of the Closing.

 

COBRA” means COBRA as defined in Sections 601, et. seq. of ERISA and Section 4980B of the Code.

 

Committee” means the Official Committee of Unsecured Creditors appointed in the Bankruptcy Cases.

 

Confirmation Hearing” means the hearing held by the Bankruptcy Court to consider confirmation of the Plan.

 

Confirmation Order” means an order of the Bankruptcy Court confirming the Plan, which order must be reasonably acceptable in form and substance to Buyer and Cano.

 

3



 

Contract” means any contract, agreement, lease, license, indenture, note, bond, sale and purchase order, instrument or other commitment, whether oral or written (including any amendments or modifications thereto.

 

Cure Costs” means, with respect to any Desired 365 Contract, any and all amounts necessary to cure all defaults, if any, and to pay all losses that have resulted from defaults under such Desired 365 Contract.

 

Disclosure Schedule” means the letter dated the date hereof, executed by the Debtors and delivered to Buyer on the date hereof in connection with the execution and delivery of this Agreement, which letter is identified therein as the Disclosure Schedule for purposes of this Agreement.

 

Disclosure Statement Order” means an order of the Bankruptcy Court approving the Disclosure Statement, which order must be reasonably acceptable in form and substance to Buyer and Cano.

 

Environmental Laws” means any Applicable Law or any agreement with any Governmental Authority relating to human health and safety, pollutants, contaminants, wastes, chemicals, or toxic or other hazardous substances.

 

ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

ERISA Affiliate” of any entity means any other entity which, together with such entity, would be treated as a single employer under Section 414 of the Code.

 

Escrow Agreement” means the Escrow Agreement dated as of the date hereof among Cano, Buyer and the Escrow Agent, in the form attached hereto as Exhibit D.

 

Final Order” means an order or judgment of the Bankruptcy Court, or other court of competent jurisdiction with respect to the subject matter, (i) which has not been reversed, stayed, modified, amended, enjoined, set aside, annulled or suspended or (ii) with respect to which no stay shall have been issued in connection with any notice of appeal or petition for certiorari filed within any deadline provided by applicable statute or regulation.

 

Firm Financing Date” means the date on which Cano receives the Financing Commitment from Buyer pursuant to Section 6.04.

 

GAAP” means generally accepted accounting principles in the United States.

 

Governmental Authority” means any transnational, domestic or foreign federal, state or local, governmental authority, department, court, agency or official, including any political subdivision thereof, or any tribal authority.

 

Hazardous Substances” means any pollutant, contaminant, waste or chemical or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substance, waste or material or any substance, waste or material having any constituent elements displaying any of the foregoing characteristics, including petroleum, its derivatives, by-products and other Hydrocarbons, and any substance, waste or material regulated under any Environmental Law.

 

4



 

Hydrocarbons” means crude oil, natural gas, condensate, casinghead gas, drip gasoline,  natural gasoline, petroleum, natural gas liquids, products, liquids and other hydrocarbons and other minerals and materials of every kind and description.

 

Junior Secured Lenders” means the holders of indebtedness under the Subordinated Credit Agreement dated December 17, 2008 between Cano, the lenders thereto from time to time and UnionBanCal Equities, Inc., as administrative agent and as issuing lender.

 

Knowledge” means, except as to Cano: (i) in the case of any Person that is not an individual, the actual knowledge of such Person’s executive officers, without a duty of inquiry or investigation and (ii) in the case of any individual, the actual knowledge of such Person, without a duty of inquiry or investigation.

 

Lien” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest or encumbrance.  For the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any property or asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset.

 

Liquidating Trust” means the Liquidating Trust as defined in the Plan.

 

Liquidating Trust Agreement” means the Liquidating Trust Agreement in the form filed as part of the Plan supplement.

 

Liquidating Trustee” means the person appointed to serve as the trustee of the Liquidating Trust.

 

Material Adverse Effect” means a material adverse effect on (i) the ability of the Debtors (or the Reorganized Debtors after the Closing) to produce Hydrocarbons from the Oil and Gas Interests, taken as a whole, in the Ordinary Course of Business, (ii) the Debtors’ (or Reorganized Debtors’, after Closing) entitlement to receive revenues (net to the Debtors’ (or the Reorganized Debtors’) interest) from Hydrocarbons produced from the Oil and Gas Interests, as applicable or (iii) the ability of the Debtors to perform their respective obligations under the Transaction Documents or consummate the Transactions; provided that any such material adverse effect that results primarily from any of the following matters shall not be taken into account in determining whether a material adverse effect has occurred under clause (i) or clause (ii) of this definition:  (A) changes in financial markets generally, (B) changes in general economic conditions in the United States, (C) changes in the market price of oil and natural gas, (D) matters disclosed on, and facts and circumstances that gave rise to the matters disclosed on, Schedule 3.11 and (E) actions taken or omissions made after the date of this Agreement with the express written consent of Buyer.

 

1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations as promulgated thereunder.

 

1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

5



 

Non-Income Tax” means any Tax other than U.S. federal income tax and income tax imposed by any state or subdivision of the U.S., but including any property tax, franchise tax (including the Texas margin tax), severance tax, production tax or sales and use tax.

 

Oil and Gas Interests” means (i) direct and indirect interests in and rights with respect to oil, gas, mineral and related properties and assets of any kind or nature, direct or indirect, including working, leasehold and mineral interests and operating rights and royalties, overriding royalties, production payments, net profit interests and other non-working interests and non-operating interests; (ii) all interests in rights with respect to Hydrocarbons and other minerals or revenues therefrom, all Contracts in connection therewith and claims and rights thereto (including all Oil and Gas Agreements, unitization and pooling agreements and orders, division orders, transfer orders, mineral deeds, royalty deeds, oil and gas sales, exchange and processing contracts and agreements, and in each case, interests thereunder), surface interests, fee interests, reversionary interests, reservations, and concessions; (iii) all easements, rights of way, licenses, permits, leases, and other interests associated with, appurtenant to, or necessary for the operation of any of the foregoing; and (iv) all interests in equipment and machinery (including Wells, Well equipment and machinery), oil and gas production, gathering, transmission, treating, processing, and storage facilities (including tanks, tank batteries, pipelines, and gathering systems), pumps, water plants, electric plants, gasoline and gas processing plants, refineries, and other tangible personal property and fixtures associated with, appurtenant to, or necessary for the operation of any of the foregoing, in each case in which any Debtor has an ownership interest.

 

Oil and Gas Lease” means any Contract pursuant to which Debtors lease, have rights of ingress, egress, easement or passage, or otherwise have rights in or access to surface or subsurface real property and/or the Hydrocarbons or other minerals located thereon or thereunder for the purpose or use of exploration, drilling, production, gathering or transportation of Hydrocarbons.

 

Ordinary Course of Business” means the ordinary course of business of the Debtors, consistent in all material respects with past custom and practice of the Debtors from July 1, 2010 until the Petition Date.  Without limiting the effect of the foregoing, the term “Ordinary Course of Business” as used herein shall be no broader than the term “ordinary course of business” as used in Section 363 of the Bankruptcy Code.

 

Organizational Documents” means, with respect to any Person, the certificate or articles of incorporation, bylaws, certificate of formation or organization, partnership agreement, operating agreement, limited liability company agreement or any other similar organizational documents of such Person.

 

Permits” means all material governmental (whether federal, state or local) permits, licenses, franchises, certificates, approvals or other similar authorizations.

 

Permitted Liens” means:

 

(i)                                     easements, restrictive covenants, servitudes, permits, surface leases and other rights with respect to surface operations, and rights-of-way on, over or in respect of any of the Oil and Gas Interests that, singularly or in the aggregate, do not materially

 

6



 

interfere with the ownership or operation of the affected Oil and Gas Interests for the production of Hydrocarbons and which are of a nature that would be reasonably acceptable to a prudent owner or operator of oil and gas properties;

 

(ii)                                  all rights reserved to or vested in any Governmental Authority to control or regulate the Oil and Gas Interests and all obligations and duties under all Applicable Laws or under any Permit issued by any Governmental Authority;

 

(iii)                               the terms, conditions, restrictions, exceptions, reservations, limitations and other matters contained in the leases, Contracts, instruments and documents which create or reserve to Debtors their interests in any of the Oil and Gas Interests disclosed on Schedule 3.10(a) that, singularly or in the aggregate, do not materially interfere with the operation of such Oil and Gas Interests for the production of Hydrocarbons and which are of a nature that would be reasonably acceptable to a prudent owner or operator of oil and gas properties;

 

(iv)                              Liens for taxes or other governmental fees not yet due and payable or being contested in good faith;

 

(v)                                 mechanic’s, materialmen’s, carrier’s, supplier’s, vendor’s, repairer’s or other similar statutory Liens arising in the ordinary course of business securing amounts that are not delinquent or are being contested in good faith;

 

(vi)                              utility easements, restrictive covenants, zoning, entitlement, building, subdivision, environmental and other similar restrictions that, singularly or in the aggregate, do not materially interfere with the operation of the Oil and Gas Interests for the production of Hydrocarbons and which are of a nature that would be reasonably acceptable to a prudent owner or operator of oil and gas properties;

 

(vii)                           Liens created by Buyer or any of its successors or assigns;

 

(viii)                        inchoate liens or security interests created pursuant to Section 9.343 of the Uniform Commercial Code of the State of Texas and similar statutory provisions in jurisdictions other than Texas where the Oil and Gas Interests are located, provided that payments of obligations upon which such liens may arise will be caused to be paid as set forth in the Plan on the effective date thereof;

 

(ix)                              all lessors’ royalties, overriding royalties, net profits interests, carried interests, and reversionary interests, and all other Liens, rights to take in kind and any other burden or right, provided for in any Oil and Gas Lease or in any other Contract or instrument disclosed on Schedule 3.10(a);

 

(x)                                 any liens, rights to take in kind and any other burden contained in or created pursuant to any Oil and Gas Lease or in any other Contract or instrument disclosed on Schedule 3.10(a);

 

(xi)                              any Liens disclosed on Schedule 3.11 or Schedule 3.13;

 

7



 

(xii)                           mortgages given by surface owners of the Oil and Gas Interests to secure indebtedness to third parties;

 

(xiii)                        Liens arising under workers’ compensation, unemployment insurance, social security, retirement and similar legislation; and

 

(xiv)                       any other Liens that do not, individually or in the aggregate, exceed $50,000 or materially interfere with the ownership or operation of the Oil and Gas Interests subject thereto or affected thereby for the production of Hydrocarbons (as currently operated) and that would be acceptable by a prudent owner or operator of oil and gas properties.

 

Notwithstanding the foregoing or anything to the contrary in Section 10.14 or in the Disclosure Schedules or introduction thereto, Permitted Liens shall not include any matters referenced in the Disclosure Schedules except to the extent expressly set forth in a Disclosure Schedule (or portion thereof) specified in this definition.

 

Permitted Post-Closing Liens” means, in the case of any Debtor, any Liens described in the definition of Permitted Liens, except to the extent the liabilities which any such Lien secures are discharged pursuant to the Plan or assigned to or assumed by the Liquidating Trust.

 

Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a Governmental Authority.

 

Petition Date” means the date upon which the Debtors commence the Bankruptcy Cases.

 

Pre-Closing Tax Period” means any Tax period ending on or before the Closing Date.

 

Proceeding” means any action, claim, demand, audit, hearing, complaint, investigation, litigation, or suit commenced, brought, conducted, or heard by or before any Governmental Authority.

 

Reorganized Cano” means Cano as of and after the Closing.

 

Reorganized Cano Subsidiaries” means the Cano Subsidiaries as of and after the Closing.

 

Reorganized Debtor” means any Debtor as of and after the Closing.

 

Representatives” means, with respect to any Person, the officers, directors, employees, members, managers, partners, investment bankers, attorneys, accountants, consultants or other advisors, agents or representatives of such Person, when acting in such capacity on behalf of such Person; provided in the case of the Debtors, the term Representatives shall not include any officer or director of any Debtor other than the Chief Restructuring Officer of Cano and directors of Cano.

 

SEC” means the Securities and Exchange Commission.

 

8



 

Senior Secured Lenders” means the holders of indebtedness under (i) the Amended and Restated Credit Agreement dated December 17, 2008 among Cano, the lenders thereto from time to time, and Union Bank of California, N.A., as administrative agent and (ii) commodity swap transactions and interest rate swap transactions between the Debtors and Natixis and/or Natixis Financial Products, Inc.

 

Straddle Tax Period” means any Tax period beginning on or before and ending after the Closing Date.

 

Subsidiary” means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at any time directly or indirectly owned by such Person.

 

Tax” means (i) any tax, governmental fee or other like assessment or charge of any kind whatsoever (including withholding on amounts paid to or by any Person), together with any interest, penalty, addition to tax or additional amount imposed by any Governmental Authority (a “Taxing Authority”) responsible for the imposition of any such tax (domestic or foreign), and any liability for any of the foregoing as transferee, (ii) in the case of Cano or any of its Subsidiaries, liability for the payment of any amount of the type described in clause (i) as a result of being or having been before the Closing Date a member of an affiliated, consolidated, combined or unitary group, or a party to any agreement or arrangement, as a result of which liability of Cano or any of its Subsidiaries to a Taxing Authority is determined or taken into account with reference to the activities of any other Person, and (iii) liability of Cano or any of its Subsidiaries for the payment of any amount of the type described in (i) or (ii) as a result of any existing express or implied agreement or arrangement (including an indemnification agreement or arrangement).

 

Tax Refund” means any refund, credit, or offset of Taxes, including, but not limited to, any refund, credit, or offset of Taxes attributable to (i) any severance, production or other Taxes imposed upon or measured by the production of Hydrocarbons or the receipt of proceeds therefrom and (ii) the exemption from any state production Taxes for horizontally drilled wells.

 

Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

 

Third Party” means any Person other than a Party or its Affiliates.

 

365 Contracts” means all Contracts that may be assumed by one or more Debtors pursuant to Section 365 of the Bankruptcy Code.

 

Transaction Documents” means this Agreement, the Plan, the Confirmation Order, the Disclosure Statement, the Plan Support Agreement, the Escrow Agreement, the Liquidating Trust Agreement, any other agreement between or among Buyer and any Debtors that expressly states that it constitutes a Transaction Document for purposes of this Agreement, and all other agreements, documents and instruments entered into as of or after the date hereof and at or prior to Closing in connection with the transactions contemplated hereby.

 

9



 

Transactions” means the transactions contemplated by this Agreement and the other Transaction Documents, including the purchase and sale of New Cano Shares for the Purchase Consideration in accordance with this Agreement and the other Transaction Documents.

 

Trust Liabilities” means those liabilities and obligations set forth on Schedule 2.02, and all liabilities and obligations relating to the Trust Assets from and after the time such Trust Assets are conveyed, transferred, assigned and delivered to the Liquidating Trust.

 

Well” means a well for the purpose of discovering or producing Hydrocarbons or disposing of fluids produced in connection with the production of Hydrocarbons.

 

Withholding Taxes” means all applicable federal, state or local income taxes and applicable employment (social security, unemployment insurance and Medicare) and other withholding obligations, in each case withheld from employees of Debtors prior to Closing.

 

(a)           Each of the following terms is defined in the Section set forth opposite such term:

 

Term

 

Section

 

 

 

Agreement

 

Preamble

Bankruptcy Cases

 

Recitals

Break-Up Fee

 

9.03(a)

Buyer

 

Preamble

Cano

 

Preamble

Cano Reserve Report

 

3.14(a)

Cano SEC Documents

 

3.07(a)

Cano Securities

 

3.05(a)

Cano Subsidiary

 

Preamble

Cano Subsidiaries

 

Preamble

Capital Expenditures

 

2.01(b)

Chosen Courts

 

10.07

Closing

 

2.02

Closing Accounts Receivables Statement

 

2.03(a)

Closing Date Tank Oil

 

2.01(b)

Collected Accounts Receivables

 

2.03(c)

Confidentiality Agreement

 

5.05

Debtors

 

Preamble

Desired 365 Contracts

 

5.03(b)

Disclosure Statement

 

Recitals

Employee Plans

 

3.21(a)

End Date

 

9.01(b)

Environmental Costs

 

7.09(a)

Environmental Escrow Funds

 

7.09(b)

Escrow Agent

 

11.01

Escrow Amount

 

11.01

Escrow Termination Date

 

7.09(b)

FERC

 

3.16

 

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Term

 

Section

 

 

 

Financing

 

6.04

Financing Commitment

 

6.04

Initial Rejected Contracts

 

5.03(f)

Joint Direction

 

11.03

New Cano Shares

 

Recitals

NGA

 

3.16

No Longer Desired 365 Contracts

 

5.03(f)

Oil and Gas Agreements

 

3.10(a)(vii)

Party

 

Preamble

Parties

 

Preamble

Plan

 

Recitals

Plan Support Agreement

 

Recitals

Post-Signing Financial Statements

 

5.02(a)

Prepaid JOA Funds

 

2.04

Purchase Price

 

2.01

Rejection Amount

 

5.03(a)

Remaining Accounts Receivable

 

2.03(d)

Repair Efforts

 

7.09(a)

Returns

 

3.23(a)

Subsidiary Securities

 

3.06(a)

Suspense Funds

 

2.05

Tax Proceeding

 

7.08

Taxing Authority

 

1.01

365 Notice Date

 

5.03(a)

365 Schedule

 

5.03(a)

Transferred Employee

 

6.01(a)

Trust Assets

 

2.02(b)

 

 

Section 1.02          Other Definitional and Interpretative Provisions.  The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  The headings and captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.  References to Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified.  All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein.  Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein and defined herein, shall have the meaning as defined in this Agreement.  Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular.  Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import.  “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form.  References to any Person include the successors and permitted assigns of that Person.  References from or through any

 

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date mean, unless otherwise specified, from and including or through and including, respectively.  References to “law”, “laws” or to a particular statute or law shall be deemed also to include any and all Applicable Law.  The word “or” will have the inclusive meaning represented by the phrase “and/or.”  The phrase “and/or” when used in a conjunctive phrase, shall mean any one or more of the Persons specified in or the existence or occurrence of any one or more of the events, conditions or circumstances set forth in that phrase; provided, however, that when used to describe the obligation of one or more Persons to do any act, it shall mean that the obligation is the obligation of each of the Persons but that it may be satisfied by performance by any one or more of them.  “Shall” and “will” have equal force and effect.  The Parties and their counsel have reviewed the provisions of this Agreement and have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.  All references to immediately available funds or dollar amounts contained in this Agreement shall mean United States dollars.  THE PARTIES AGREE THAT THE BOLD AND/OR CAPITALIZED LETTERS IN THIS AGREEMENT CONSTITUTE CONSPICUOUS LEGENDS.

 

ARTICLE II
PURCHASE AND SALE

 

Section 2.01          Purchase and Sale of Cano Shares.  Upon the terms and subject to the conditions of this Agreement, Cano will cause the Reorganized Cano to issue and sell to Buyer, and Buyer will purchase from the Reorganized Cano, all of the New Cano Shares at the Closing, free and clear of all Liens and Claims other than Permitted Post-Closing Liens.  At the Closing, Buyer shall pay to the Liquidating Trust (or its designee as directed in the Plan), as consideration for the New Cano Shares, $47,500,000, payable in cash (the “Purchase Price”); provided that such amount:

 

(a)        is subject to adjustment pursuant to Section 5.03(f) and Section 7.09; and

 

(b)        shall be adjusted upward by (i) all capital expenditures, including drilling costs, reworking costs, shut-in royalties and all other capital expenditures (collectively, for purposes of this Section 2.01, “Capital Expenditures”) incurred and paid by Debtors in connection with the development, exploration or operation of the Oil and Gas Interests during the period commencing at 7:00 a.m. Central Time on the date hereof, and ending at 7:00 a.m. Central Time on the Closing Date to the extent that the Capital Expenditures are incurred as permitted under Section 5.01(b)(iv) and (ii) the value of all Hydrocarbons in the tanks and pipeline gathering systems of the Debtors at 7:00 a.m. Central Time on the Closing Date (except tank fill that is neither merchantable nor marketable) that is collectable by the customary mode of collection in the normal course of business (“Closing Date Tank Oil”) to be calculated as follows:  the value (net of Non-Income Taxes) shall be the product of (A) the volume of marketable Closing Date Tank Oil (attributable to Debtors’ Interest) measured in barrels or portions thereof at the Closing Date as shown by gauging reports prepared by the Debtors as of the Closing Date (absent any manifest errors), multiplied by (B) the price per barrel the Debtors receive under the applicable contracts for sale of Hydrocarbons in place, (C) but reduced by the amount of unpaid operating expenses incurred to produce such Closing Date

 

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Tank Oil; provided that the Reorganized Debtors shall have the obligation to pay any Capital Expenditures by Cano or any of its Subsidiaries in accordance with Section 5.01(b)(iv) from and after the date hereof that have not been paid prior to the Closing Date.

 

The Purchase Price, as adjusted, shall be paid as provided in Section 2.02.

 

Section 2.02          Closing.  The closing (the “Closing”) of the purchase and sale of the New Cano Shares hereunder shall take place at the offices of Thompson & Knight LLP located at One Arts Plaza, 1722 Routh Street, Suite 1500, Dallas, Texas, on the first Business Day of the month following the satisfaction or waiver by the requisite Parties of the conditions to Closing set forth in Article VIII (other than those conditions that by their nature cannot be satisfied until the time of Closing, but subject to the satisfaction or waiver by the requisite Parties of those conditions), or at such other time or place as Buyer and Cano may agree in writing.  At and as of the Closing:

 

(a)        Pursuant to Sections 1141(b) and (c) of the Bankruptcy Code and the Plan, all right, title and interest of each Debtor in and to all assets, Contracts, leases, properties and businesses, and books, records, title, and distribution data, including pay decks, as the same shall exist as of the Closing Date of every kind, type or designation, whether tangible or intangible, known or unknown, real, personal or mixed, wherever located (including all Claims and Causes of Action (as defined in the Plan) against any Person to the extent not released and discharged pursuant to the Plan, other than the Trust Assets shall vest in the Reorganized Debtors, free and clear of all Claims and Liens other than Permitted Post-Closing Liens; and each Reorganized Debtor, Buyer and its Subsidiaries and their respective Representatives shall be fully released and discharged with respect to any and all such Claims and Liens, other than Permitted Post-Closing Liens, as of the Closing.  After the Closing, the Reorganized Debtors shall be authorized to operate their businesses and to use, acquire and dispose of property and take any and all other actions without supervision or approval by the Bankruptcy Court and free of any restrictions of the Bankruptcy Code or the Bankruptcy Rules.  After Closing, the Reorganized Debtors shall assume, perform and pay when due liabilities under, or related to, the ownership or operation of the Vested Assets (as defined in the Plan), including, without limitation, (i) paying when due all Non-Income Tax liabilities of the Debtors not due and payable prior to Closing, provided that such Non-Income Tax liabilities for the 2012 year shall be prorated as of the Closing Date in the manner provided in Section 6.02(b) (and the Liquidating Trust shall be responsible for such Taxes to the extent allocable to the portion of the 2012 taxable year ending on the Closing Date) and (ii) remitting to the appropriate Governmental Authority any and all Withholding Taxes within the time period required by applicable law, and the Liquidating Trust shall not be responsible for any such liabilities;

 

(b)        Pursuant to the Plan and the Liquidating Trust Agreement, all of the Closing Cash Balance and all of the assets, Claims and liabilities set forth on Schedule 2.02 (the Closing Cash Balance and all of the assets set forth on Schedule 2.02 from and after the time such assets are conveyed, transferred, assigned and delivered to the Liquidating Trust referred to collectively herein as the “Trust Assets”) shall vest in the Liquidating Trust (and the Debtors shall execute such instruments as may be necessary to evidence the transfer and assignment to the Liquidating Trust of the Trust Assets), and the Trust Liabilities shall vest in, and be the sole responsibilities of, the Liquidating Trust;

 

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(c)        Reorganized Cano shall issue the New Cano Shares to Buyer, and shall deliver to Buyer certificates for the New Cano Shares, which, immediately following the Closing, shall constitute all the issued and outstanding capital stock and other equity interests of the Reorganized Cano.  Certificates evidencing the New Cano Shares will bear the following legend:  “These securities have not been registered under the Securities Act of 1933, as amended, or any state securities law.  These securities may not be sold, offered for sale, pledged or hypothecated in the absence of a registration statement in effect with respect to the securities under the Securities Act and any such state securities laws or the issuer has received documentation reasonably satisfactory to it that such transaction does not require registration under such Act and state securities laws.”; and

 

(d)           Unless otherwise provided in the Plan, Buyer shall deliver the Purchase Price by wire transfer of immediately available funds, to an account of the Liquidating Trustee designated by the Liquidating Trustee, by notice to Buyer, delivered no later than two (2) Business Days prior to the Closing Date (or if not so designated, then by certified or official bank check payable in immediately available funds to the order of the Liquidating Trustee in such amount), for distribution in accordance with the Plan.

 

Section 2.03          Closing Accounts Receivables.

 

(a)        On the Closing Date, the Debtors shall deliver to Buyer a statement setting forth (i) the names of the obligor and amount of each Closing Accounts Receivable, and (ii) the aggregate amount of all the Closing Accounts Receivables (as such statement may be modified or supplemented within thirty (30) days after the Closing Date by written notice of the Liquidating Trust to Buyer, the “Closing Accounts Receivables Statement”).

 

(b)        From and after the Closing until the date that is 120 calendar days after the Closing Date, Buyer shall use its good faith efforts to collect, or to cause Buyer to collect, the Closing Accounts Receivables; provided that Buyer must obtain the prior written consent of the Liquidating Trust (which consent may be withheld by the Liquidating Trust in its sole and absolute discretion) to settle any Closing Accounts Receivable for an amount less than the applicable amount set forth on the Closing Accounts Receivables Statement.  Buyer and any Person acting on their behalf shall not be liable for any act or omission taken, or omitted to be taken, related to, or in connection with, the collection of the Closing Accounts Receivables, other than acts or omissions resulting from such Person’s willful misconduct, gross negligence or fraud.

 

(c)        Buyer shall promptly pay the amount of any and all Closing Accounts Receivables collected (the “Collected Accounts Receivables”) to the Liquidating Trust with remittance submitted on a weekly basis.

 

(d)        On the date that is 120 calendar days after the Closing Date, Buyer shall (i) deliver to the Liquidating Trust a statement setting forth (A) the names of the obligor and amount of each Closing Accounts Receivable that remains uncollected (collectively, the “Remaining Accounts Receivable”) and (B) the aggregate amount of all the Remaining Accounts Receivable; and (ii) convey, transfer, assign and deliver to the Liquidating Trust all the Remaining Accounts Receivable, without warranty of any kind.

 

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(e)        No adjustment to the Purchase Price shall be made with respect to the Collected Accounts Receivables or the Remaining Accounts Receivable.

 

Section 2.04          Prepaid JOA Funds.  To the extent that as of the Closing, any Debtor holds funds received by Debtors (in their capacity as operator with respect to the Operated Properties) as prepayments for items under operating agreements for which a payable has not been incurred as of the Closing Date (solely to the extent related to Assumed Contracts (as defined in the Plan)) (“Prepaid JOA Funds”), (a) no adjustment to the Purchase Consideration shall be made with respect to such prepaid JOA Funds or any funds received by Debtors that would constitute Prepaid JOA Funds if such funds were related to Assumed Contracts and (b) at and as of the Closing, all of the Prepaid JOA Funds shall vest in the Reorganized Debtors pursuant to Section 2.02(a), and the Reorganized Debtors shall from and after such time be responsible for the application of such Prepaid JOA Funds under the applicable operating or other agreement pursuant to which such Prepaid JOA Funds were collected.

 

Section 2.05          Suspense Funds.  To the extent that as of the Closing, any Debtor holds funds received by Debtors (in their capacity as operator with respect to the Operated Properties) in “suspense” (excluding any joint interest billings received by Debtors, in their capacity as operator with respect to the Operated Properties, on or prior to the Petition Date that any Debtor holds as of the Closing) (solely to the extent related to Assumed Contracts, “Suspense Funds”) (a) no adjustment to the Purchase Consideration shall be made with respect to such Suspense Funds or any funds received by Debtors that would constitute Suspense Funds if such funds were related to Assumed Contracts and (b) at and as of the Closing all of the Suspense Funds shall vest in the Reorganized Debtors pursuant to Section 2.02(a), and the Reorganized Debtors shall from and after such time be responsible for the application of such Suspense Funds under the applicable operating or other agreement governing the application of such Suspense Funds.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CANO

 

Cano represents and warrants to Buyer, as of the date hereof and as of the Closing Date, that:

 

Section 3.01          Corporate Existence and Power.  Except as set forth on Schedule 3.01, Cano is a corporation validly existing and in good standing under the laws of Delaware and has full power and authority to carry on its business as now conducted.  Each Cano Subsidiary is a corporation or limited partnership validly existing and in good standing under the laws of its jurisdiction of organization and has full power and authority to carry on its business as now conducted.  Each Debtor is duly qualified to do business and in good standing in each jurisdiction set forth opposite the name of such Debtor on Schedule 3.01.  Prior to the date hereof, Cano has delivered to Buyer true and complete copies of the Organizational Documents for each Debtor, in each case as currently in effect.

 

Section 3.02          Corporate Authorization.  Subject to the entry of the Bid Procedures Order, the Disclosure Statement Order and the Confirmation Order, the execution, delivery and performance by each Debtor of this Agreement and the other Transaction Documents to which it is a party and the consummation of the Transactions are within the corporate or partnership

 

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powers of such Debtor and have been duly authorized by all necessary corporate or partnership action on the part of each Debtor.  Subject to the entry of the Bid Procedures Order, this Agreement and each other Transaction Document, dated as of the date hereof to which any Debtor is a party (assuming in each case due authorization, execution and delivery thereof by the other parties thereto) constitutes a valid and binding agreement of each Debtor party hereto or thereto, enforceable against each such Debtor in accordance with its terms, provided no stay exists with respect to the Bid Procedures Order.  Subject to the entry of the Bid Procedures Order, all other Transaction Documents executed and delivered by any Debtor party thereto (assuming in each case due authorization, execution and delivery thereof by the other parties thereto) shall, when executed by each such Debtor, constitute valid and binding agreements of each Debtor party thereto, enforceable against each such Debtor in accordance with their terms, provided no stay exists with respect to the Bid Procedures Order.

 

Section 3.03          Governmental Authorization.  The execution, delivery and performance by each Debtor of this Agreement and each other Transaction Document to which it is or will be a party and the consummation by each Debtor of the Transactions require no action by or in respect of, or filing with or notification to, any Governmental Authority other than (a) the filing of motions of approval for, and the approval by the Bankruptcy Court of, the Disclosure Statement Order, the Bid Procedures Order and the Confirmation Order and (b) compliance with the applicable requirements of the 1933 Act, the 1934 Act and any other applicable state or federal securities laws.

 

Section 3.04          Noncontravention.  The execution, delivery and performance by each Debtor of this Agreement and the other Transaction Documents to which it is or will be a party and the consummation of the Transactions do not and will not (a) contravene, conflict with, or result in any violation or breach of any provision of the Organizational Documents of any Debtor, (b) assuming compliance with the matters referred to in Section 3.03, contravene, conflict with or result in a violation or breach of any provision of any Applicable Law, (c) after giving effect to the entry of the Bid Procedures Order, Disclosure Statement Order and Confirmation Order, assuming compliance with the matters referred to in Section 3.03 and except as set forth on Schedule 3.04, require any material consent or other action by any Person under, constitute a material default, or an event that, with or without notice or lapse of time or both, would constitute a material default, under, or cause or permit the termination, cancellation, acceleration or other change of any material right or obligation or the loss of any material benefit to which any Debtor is entitled under any provision of any Contract binding upon any Debtor or by which any of their respective assets may be bound or any Permit affecting, or relating in any way to, any Debtor or its assets other than approvals, consents, filings and notifications as to which the failure to obtain, make or give have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; or (d) result in the creation or imposition of any Lien on any asset of any Debtor, other than Permitted Liens or Liens that may arise or be deemed to arise as a result of the Transactions.

 

Section 3.05          Capitalization.

 

(a)        Except as set forth on Schedule 3.05 and for changes after the date of this Agreement resulting from the exercise of stock options and the vesting or forfeiture of restricted shares outstanding as of the date of this Agreement, on the date hereof and at all

 

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times prior to the effectiveness of the Plan and the Closing hereunder, there is not and shall not be any outstanding (i) shares of capital stock or other voting securities of or ownership interests in Cano, (ii) securities of Cano convertible into or exchangeable for shares of capital stock or other voting securities of or ownership interests in any Debtor, (iii) warrants, calls, options or other rights to acquire from Cano, or other obligation of Cano to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of any Debtor or (iv) restricted shares, stock appreciation rights, performance units, contingent value rights, “phantom” stock or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any capital stock of or voting securities of Cano (the items in clauses (i) through (iv) being referred to collectively as the “Cano Securities”).

 

(b)        Upon effectiveness of the Plan and the Closing hereunder, there shall not be issued, reserved for issuance or outstanding any (i) shares of capital stock or other voting securities of or ownership interests in the Reorganized Cano, other than the New Cano Shares issued to Buyer at the Closing, (ii) securities of the Reorganized Cano convertible into or exchangeable for shares of capital stock or other voting securities of or ownership interests in any Debtor, (iii) warrants, calls, options or other rights to acquire from the Reorganized Cano, or other obligation of the Reorganized Cano to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Reorganized Cano or any Reorganized Cano Subsidiary or (iv) restricted shares, stock appreciation rights, performance units, contingent value rights, “phantom” stock or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any capital stock of or voting securities of the Reorganized Cano.

 

Section 3.06          Subsidiaries.

 

(a)        Each Cano Subsidiary, its jurisdiction of organization and all shares of capital stock or other voting securities of or ownership interests in each such Cano Subsidiary (the “Subsidiary Securities”) as of the date hereof are set forth on Schedule 3.06(a).  The Cano Subsidiaries are the only Subsidiaries of Cano as of the date hereof.

 

(b)        Upon the effective date of the Plan and the Closing hereunder, (i) the Reorganized Cano Subsidiaries will be the only Subsidiaries of Cano and (ii) the outstanding shares of capital stock or other voting securities of, or ownership interests in, each Reorganized Cano Subsidiary is set forth on Schedule 3.06(b) (the “Reorganized Subsidiary Securities”).

 

(c)        Upon the effective date of the Plan and the Closing hereunder, all of the Reorganized Subsidiary Securities (i) will be owned directly or indirectly by the Reorganized Cano, free and clear of any Lien and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other voting securities or ownership interests), other than Permitted Liens, Liens set forth in such Reorganized Cano Subsidiary’s Organizational Documents, Liens set forth on Schedule 3.06(c) and restrictions on transfer under applicable securities laws, and (ii) will have been duly authorized, validly issued, fully paid and nonassessable.  Upon the effective date of the Plan and the Closing hereunder, there is not and shall not be issued, reserved for issuance or

 

17



 

outstanding any (A) shares of capital stock or other voting securities of or ownership interests in any Reorganized Cano Subsidiary, other than the Reorganized Subsidiary Securities, (B) securities of any Reorganized Cano Subsidiary that are convertible into, or exchangeable for, shares of capital stock or other voting securities of, or ownership interests in, Cano, the Reorganized Cano, any Cano Subsidiary or any Reorganized Cano Subsidiary, (C) warrants, calls, options or other rights to acquire from any Reorganized Cano Subsidiary, or other obligations of any Reorganized Cano Subsidiary to issue, any capital stock or other voting securities of, or ownership interests in, or any securities convertible into, or exchangeable for, any capital stock or other voting securities of, or ownership interests in, Cano, the Reorganized Cano, any Cano Subsidiary or any Reorganized Cano Subsidiary or (D) restricted shares, stock appreciation rights, performance units, contingent value rights, “phantom” stock or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any capital stock or other voting securities of, or ownership interests in, any Reorganized Cano Subsidiary.  Upon effectiveness of the Plan and the Closing hereunder, except for the Reorganized Subsidiary Securities and as set forth on Schedule 3.06(c), the Reorganized Cano will not own, directly or indirectly, any capital stock or other voting securities of, or ownership interests in, any Person.

 

Section 3.07          SEC Filings and the Sarbanes-Oxley Act.

 

(a)       To Cano’s Knowledge, except as set forth on Schedule 3.07, from February 10, 2011 to the date hereof, Cano has filed with or furnished to the SEC all reports, schedules, forms, statements, prospectuses, registration statements and other documents required to be filed with the SEC by Cano (such reports, schedules, forms, statements, prospectuses, registration statements and other documents actually filed during such period, collectively, together with any exhibits and schedules thereto and other information incorporated therein, the “Cano SEC Documents”), all of which Cano SEC Documents are publicly available on the SEC’s EDGAR system.

 

(b)        To Cano’s Knowledge, except as set forth on Schedule 3.07, as of its filing date (or, if amended or superseded by a subsequent filing, as of the date of such subsequent filing), each Cano SEC Document complied as to form in all material respects with the applicable requirements of the 1933 Act and the 1934 Act, as the case may be.

 

(c)        To Cano’s Knowledge, as of its filing date (or, if amended or superseded by a subsequent filing, as of the date of such filing), each Cano SEC Document filed pursuant to the 1934 Act did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

 

(d)        To Cano’s Knowledge, there are no outstanding loans or other extensions of credit made by any Debtor to any executive officer (as defined in Rule 3b-7 under the 1934 Act) or director of Cano.

 

Section 3.08          Financial Statements.  Each of the audited consolidated financial statements and unaudited consolidated interim financial statements of Cano (including any related notes and schedules) included (or incorporated by reference) in its Annual Report on

 

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Form 10-K for the fiscal year ended June 30, 2011 and its Quarterly Report on Form 10-Q for its fiscal quarter ended September 30, 2011 have been prepared from, and are in accordance with, the books and records of Cano and its consolidated Subsidiaries, comply in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto (except as set forth on Schedule 3.08), have been prepared in accordance with GAAP applied on a consistent basis (except as may be indicated in the notes thereto and subject, in the case of quarterly financial statements, to normal and recurring year-end adjustments) and fairly present in all material respects, in conformity with GAAP applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of Cano and its Subsidiaries as of the date thereof and the consolidated results of operations and cash flows (and changes in financial position, if any) of Cano and its Subsidiaries for the periods presented therein (subject to normal year-end adjustments and the absence of financial footnotes in the case of any unaudited interim financial statements).

 

Section 3.09          Absence of Certain Changes.  From September 30, 2011 to the date of this Agreement, except (a) as otherwise set forth on Schedule 3.09, (b) for actions taken since the Petition Date in accordance with the Bankruptcy Code or orders of the Bankruptcy Court or (c)  for events, occurrences, developments or state of circumstances or facts arising or occurring in connection with or as a result of the commencement and/or continuation of the Bankruptcy Cases, (i) the Debtors have conducted their business in all material respects in the Ordinary Course of Business and (ii) there has not been any event, occurrence, development or state of circumstances or facts that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 3.10          Material Contracts.

 

(a)        Schedule 3.10(a) identifies, as of the date of this Agreement, to Cano’s Knowledge the following Contracts to which any Debtor is a party or by which any Debtor is bound (whether as an original party, by succession or assignment or otherwise):

 

(i)            any lease of office space or other real property (other than Oil and Gas Leases);

 

(ii)           any Oil and Gas Lease;

 

(iii)          any Contract for the sale, exchange or other disposition of Hydrocarbons produced from the Oil and Gas Interests, and any other Contract granting any third party the right or option to purchase Hydrocarbons produced from the Oil and Gas Interests (other than any right of lessors under the Oil and Gas Leases, and any rights of Parties under operating agreements described on Schedule 3.10(a), to take Hydrocarbons in-kind), in each case that has a term of more than sixty (60) days and cannot be cancelled or terminated or that requires more than sixty (60) days prior written notice to cancel or terminate;

 

(iv)          any operating agreement to which any Debtor’s interests in any of the Oil and Gas Interests is subject;

 

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(v)           any Contract providing for an “earnout,” “back-in” working interest, or other contingent payment or interest;

 

(vi)          any Contract for drilling or well workover services or other well services agreement, in each case that has a term of more than sixty (60) days and cannot be cancelled or terminated or that requires more than sixty (60) days prior written notice to cancel or terminate;

 

(vii)         any development Contract, farm-in Contract, farm-out Contract, area of mutual interest Contract or similar Contract (clauses (ii) through (vii) collectively, the “Oil and Gas Agreements”);

 

(viii)        any partnership, joint venture or other similar agreement or arrangement;

 

(ix)          any Contract relating to indebtedness for borrowed money (whether incurred, assumed, guaranteed or secured by any asset of any Debtor);

 

(x)           any Contract to Cano’s Knowledge containing any preferential purchase rights, rights of purchase, right of first offer, right of first refusal or other similar rights affecting the Oil and Gas Interests that would require waivers or consent, as necessary, to carry out the Transactions contemplated by this Agreement;

 

(xi)          any Contract that restricts in any material respect the ability of any Debtor or any Affiliate of any Debtor (including Buyer or any of its Subsidiaries after the Closing) to own, operate, obtain, explore for or develop Oil and Gas Interests in a particular geographic area or otherwise to compete in any line of business or with any Person or in any geographic area;

 

(xii)         any employment or consulting agreement or other Contract with any employee or individual consultant;

 

(xiii)        any Contract with any Affiliate of Cano (other than operating agreements listed in Schedule 3.10(a) to which two or more Debtors and no other Affiliate of Cano are parties);

 

(xiv)        any other Contract that requires either (A) annual payments by any Debtor of $250,000 or more or (B) aggregate payments by any Debtor of $1,000,000 or more; or

 

(xv)         any other Contract that requires either (A) annual payments to any Debtor of $250,000 or more or (B) aggregate payments to any Debtor or $1,000,000 or more.

 

(b)        To Cano’s Knowledge, except as set forth on Schedule 3.10(b) and except for any 365 Contracts that are not Desired 365 Contracts, subject to entry of the Confirmation Order and payment of all Cure Costs, as of the date of this Agreement each Contract set forth on Schedule 3.10(a) is in full force and effect, and no Debtor party to any such Contract or any

 

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other party thereto is in default or breach under the terms of any such Contract, and no event or circumstance has occurred that, with notice or lapse of time or both, would constitute any event of default thereunder except to the extent such breaches or defaults have not had or would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(c)        Schedule 3.10(c) sets forth, as of the date of this Agreement, all 365 Contracts that have been assumed by any Debtor.

 

Section 3.11          Litigation.  Except as set forth in Schedule 3.11, as of the date of this Agreement, other than the Bankruptcy Cases and Proceedings pending in the Bankruptcy Cases, there is no Proceeding pending against or, to Cano’s Knowledge, threatened against or affecting any Debtor or any present or former officer, director or employee of any Debtor that (a) if determined or resolved adversely in accordance with the plaintiff’s demands would reasonably be expected to have, individually or in the aggregate, a liability in excess of $100,000 after taking into account any applicable coverage under the Debtors’ insurance policies and fidelity bonds, (b) in any manner challenges or seeks to prevent, enjoin, alter or materially delay the Transactions or (c) affects the execution, delivery or performance by any Debtor of this Agreement or any other Transaction Document to which any Debtor is or will be a party.

 

Section 3.12          Compliance with Laws and Court Orders.  Except as set forth on Schedule 3.12, to Cano’s Knowledge, as of the date of this Agreement each Debtor is in compliance in all material respects with and is not under investigation with respect to and has not been threatened to be charged with or given notice of any violation in any material respect of any Applicable Law.  There is no judgment, decree, injunction, rule or order of any arbitrator or Governmental Authority outstanding against any Debtor that (a) has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (b) in any manner seeks to prevent, enjoin, alter or materially delay the Transactions or (c) affects the execution, delivery or performance by any Debtor of this Agreement or any other Transaction Document to which any Debtor is or will be a party.  This Section 3.12 is not, and shall not be deemed to be, any representation or warranty with respect to employee benefit matters, which are covered exclusively in Section 3.21, or Environmental Laws, which are covered exclusively in Section 3.22 or Taxes, which are covered exclusively in Section 3.23.

 

Section 3.13          Properties.  Other than with respect to the Oil and Gas Interests, and except as set forth in Schedule 3.13, no Debtor has received notice of any adverse claim to its title to, or leasehold interests in, any of its property (whether real, personal, tangible or intangible), and, to Cano’s Knowledge, such title and leasehold interest is free and clear of Liens other than Permitted Liens.

 

Section 3.14          Oil and Gas Interests.

 

(a)        Cano has furnished to Buyer prior to the date hereof the report estimating the Debtors’ proved oil and gas reserves as of June 30, 2011, as prepared and audited by Haas Petroleum Engineering Services, Inc. (the “Cano Reserve Report”).  To Cano’s Knowledge, the factual, non-interpretive data on which the Cano Reserve Report was based for purposes of estimating the oil and gas reserves set forth in the Cano Reserve Report (and in any supplement thereto or update thereof) was accurate in all material respects as of the date of the Cano

 

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Reserve Report, except to the extent of any differences between any percentage net revenue interest or working interest set forth on the Cano Reserve Report and the corresponding percentage set forth on Schedule 3.14(a).  To Cano’s Knowledge, the Cano Reserve Report conforms to the guidelines with respect thereto of the SEC.  Except for changes (including changes in Hydrocarbon prices) generally affecting the oil and gas industry and normal depletion by production, there has been no material change in respect of the matters addressed in the Cano Reserve Report, except to the extent of any differences between any percentage net revenue interest or working interest set forth on the Cano Reserve Report and the corresponding percentage set forth on Schedule 3.14(a).  The representations and warranties contained in this Section 3.14(a) shall not be construed to be representations or warranties with respect to the accuracy of any estimates, forecasts or conclusions contained in any document.

 

(b)        Except as set forth on Schedule 3.14(b), to Cano’s Knowledge, the proceeds from the sale of Hydrocarbons produced from the Operated Properties are being received by the Debtors and are not being held in suspense for any reason.

 

(c)        No Debtor has received any material advance, take-or-pay or other similar payments that entitle purchasers of production to receive deliveries of Hydrocarbons without paying therefor, and, on a net, company-wide basis, the Debtors’ properties are neither underproduced nor overproduced, in either case, to any material extent, under gas balancing or similar arrangements.

 

(d)        No claim, notice or order from any Governmental Authority or other Person has been received by any Debtor due to Hydrocarbon production from the Oil and Gas Interests in excess of allowable production established pursuant to Applicable Law that would result in any material curtailment of production from the Oil and Gas Interests after the Closing Date.

 

(e)        To Cano’s Knowledge, except as described in Schedule 3.14(e), none of the material Oil and Gas Interests is subject to any preferential purchase or similar right which would become operative as a result of the Transactions.

 

(f)        Except as set forth in Schedule 3.14(f), the Oil and Gas Interests are not subject to any tax partnership agreement or provisions requiring a partnership income tax return to be filed under Subchapter K of Chapter 1 of Subtitle A of the Code.

 

Section 3.15          Hedging.  No Debtor is bound by any futures, hedge, swap, collar, put, call, floor, cap, option or other Contract that is intended to benefit from, relate to or reduce or eliminate the risk of fluctuations in the price of commodities, including Hydrocarbons, or securities.

 

Section 3.16          Natural Gas Act.  None of the facilities or operations of any gas gathering system constituting a part of the properties of any Debtor are certificated by the Federal Energy Regulatory Commission (the “FERC”) under Section 7(c) of the Natural Gas Act (the “NGA”) or, to Cano’s Knowledge, are now subject to FERC jurisdiction under the NGA; and none of the properties are providing service pursuant to Section 311 of the National Gas Policy Act of 1978.

 

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Section 3.17          Insurance Coverage.  Cano has furnished or made available to the Buyer a list of, and true and complete copies of, all insurance policies and fidelity bonds relating to any Debtor, the business of the Debtors and/or the officers and employees of any Debtor.  To Cano’s Knowledge, as of the date of this Agreement, there is no claim by any Debtor pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds or in respect of which such underwriters have reserved their rights.  All premiums payable under all such policies and bonds have been timely paid and, to Cano’s Knowledge, the Debtors have otherwise complied materially with the terms and conditions of all such policies and bonds.  Schedule 3.17 sets forth a list of all material insurance policies and fidelity bonds of the Debtors as of the date of this Agreement.

 

Section 3.18          Licenses and Permits.

 

(a)        All Permits necessary with regard to the ownership or operation of the Oil and Gas Interests have been obtained and maintained in effect.

 

(b)        This Section 3.18 is not, and shall not be deemed to be, any representation or warranty with respect to employee benefit matters, which are covered exclusively in Section 3.21, or Environmental Law, which are covered exclusively in Section 3.22, or Taxes, which are covered exclusively in Section 3.23.

 

Section 3.19          Finders’ Fees.  Except for Canaccord Genuity, Inc. and Global Hunter Securities, LLC, whose fees and expenses will be paid by Cano or the Liquidating Trust, there is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of Cano who is or will be entitled to any fee or commission based on any arrangement or agreement made by or on behalf of Cano in connection with the Transactions.

 

Section 3.20          EmployeesSchedule 3.20 sets forth a true and complete list as of the date of this Agreement of the names, titles, annual salaries and other compensation of all directors and employees of any Debtor and the wage rates for non salaried employees of any Debtor (by classification).

 

Section 3.21          Employee Benefits Matters.

 

(a)        Schedule 3.21 contains a correct and complete list identifying each material “employee benefit plan,” as defined in Section 3(3) of ERISA, each employment, severance or similar contract, plan, arrangement or policy and each other plan or arrangement (written or oral) providing for compensation, bonuses, profit-sharing, stock option or other stock-related rights or other forms of incentive or deferred compensation, vacation benefits, insurance (including any self-insured arrangements), health or medical benefits, employee assistance program, disability or sick leave benefits, workers’ compensation, supplemental unemployment benefits, severance benefits and post-employment or retirement benefits (including compensation, pension, health, medical or life insurance benefits) which is maintained, administered or contributed to by Cano or any of its ERISA Affiliates and covers any employee or former employee of Debtors, or with respect to which Cano or any of its ERISA Affiliates has any liability.  Copies of such plans (and, if applicable, related trust or

 

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funding agreements or insurance policies) and all amendments thereto and written interpretations thereof have been made available to Buyer, together with the most recent Internal Revenue Service determination or opinion letter, if applicable, with respect to each such plan and the most recent annual report (Form 5500 including, if applicable, Schedule B thereto) and tax return (Form 990) prepared in connection with any such plan or trust.  Any such plans shall be hereafter referred to collectively herein as the “Employee Plans.”

 

(b)        To Cano’s Knowledge, each Employee Plan has been maintained in substantial compliance with its terms and with the requirements prescribed by any and all statutes, orders, rules and regulations, including ERISA and the Code, which are applicable to such Employee Plan.  To Cano’s Knowledge, neither Cano nor any ERISA Affiliate nor any predecessor thereof, sponsors, maintains, contributes to any Employee Plan subject to Title IV of ERISA.

 

(c)        There is no current or projected liability in respect of post-employment or post-retirement health or medical or life insurance benefits for retired, former or current employees of the business of the Debtors, except as required to avoid excise tax under Section 4980B of the Code.

 

(d)        Except as set forth on Schedule 3.21, no employee of any Debtor will become entitled to any bonus, retirement, severance, job security or similar benefit, or the enhancement of any such benefit, as a result of the Transactions.

 

(e)        There is no action, suit, investigation, audit or proceeding pending against or, to Cano’s Knowledge, involving or threatened against, any Employee Plan before any arbitrator or any Governmental Authority.

 

Section 3.22          Environmental Matters.  Except as set forth in Schedule 3.22, as of the date of this Agreement:

 

(a)        To Cano’s Knowledge, no notice, notification, demand, request for information, citation, summons, directive, decree, injunction or order has been received that has not been resolved, responded to or complied with, no complaint has been filed, no penalty has been assessed and no investigation, action, claim, suit, proceeding or review is pending or, to Cano’s Knowledge, threatened by any Governmental Authority or other Person against or affecting any Debtor and relating to or arising out of any Environmental Law.

 

(b)        To Cano’s Knowledge, no polychlorinated biphenyls, radioactive material, lead, asbestos-containing material, incinerator, sump, surface impoundment, lagoon, landfill, septic, wastewater treatment or other disposal system or underground storage tank (active or inactive) constructed or installed by Cano is present at, on or under any property owned, leased or operated by any Debtor as of the date of this Agreement in a condition or manner in violation of any Environmental Law.

 

(c)        To Cano’s Knowledge, (i) no property owned, leased or operated by any Debtor and (ii) no property to which any Debtor has, directly or indirectly, transported or arranged for the transportation of any Hazardous Substances, is listed or proposed for listing, on the National Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined in

 

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CERCLA) or on any similar federal, state, local or foreign list of sites requiring investigation or cleanup.

 

(d)        To Cano’s Knowledge, each Debtor is in compliance (i) with all Environmental Laws in all material respects; and (ii) with all Permits relating to or required by Environmental Law in all material respects.

 

(e)        To Cano’s Knowledge, there has been no environmental investigation, study, audit, test, review or other analysis conducted in relation to any Debtor or the current or prior business of any Debtor or any property or facility now or previously owned, leased or operated by any Debtor which has not been delivered or made available to Buyer at least ten (10) days prior to the date hereof.

 

Buyer shall not have any rights under this Agreement or any other Transaction Document to which it is a party, with respect to the representation or warranty of Cano set forth under this Section 3.22 except in the event of an intentional, knowing breach of the representation and warranty of Debtors contained in this Section 3.22.

 

Section 3.23          Taxes.

 

(a)        Except as set forth on Schedule 3.23(a), to Cano’s Knowledge (i) all Tax returns, statements, reports and forms (including estimated tax or information returns and reports) required to be filed with any Taxing Authority with respect to any Pre-Closing Tax Period by or on behalf of any Debtor (collectively, the “Returns”), have, to the extent required by Applicable Law to be filed, been filed when due in accordance with Applicable Law, (ii) as of the time of filing, the Returns were true and complete in all material respects; and (iii) each Debtor has paid (or has had paid on its behalf) or has withheld and remitted to the appropriate Taxing Authority all Taxes due and payable.

 

(b)        Except as set forth on Schedule 3.23(b), there is no claim, audit, action, suit, proceeding or investigation now pending or, to Cano’s Knowledge, threatened against or with respect to any Debtor in respect of any Tax.

 

(c)        Except as set forth on Schedule 3.23(c), to Cano’s Knowledge, no Tax Authority has asserted that any Debtor is or may be liable for Tax in a jurisdiction in which such entity does not file Returns.

 

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer jointly and severally represent and warrant to Cano, as of the date hereof and as of the Closing Date, that:

 

Section 4.01          Corporate Existence and Power.  Buyer is a corporation validly existing and in good standing under the laws of Oklahoma and has full corporate power and authority to carry on its business as now conducted.  Buyer has heretofore made available to Cano true and complete copies of the Organizational Documents of Buyer as currently in effect.

 

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Section 4.02          Authorization.  The execution, delivery and performance by Buyer of this Agreement and the other Transaction Documents to which it is or will be a party and the consummation of the Transactions are within the corporate powers of Buyer and have been duly authorized by all necessary action on the part of Buyer.  Each of this Agreement and the other Transaction Documents, dated as of the date hereof, to which Buyer is a party have been duly executed and delivered on behalf of Buyer and (assuming in each case due authorization, execution and delivery thereof by the other parties thereto) constitutes a valid and binding agreement of Buyer, enforceable against Buyer in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity).  All other Transaction Documents executed and delivered by Buyer shall, when executed and delivered by Buyer (assuming in each case due authorization, execution and delivery thereof by the other parties thereto) constitute valid and binding agreements of Buyer, enforceable against Buyer in accordance with their terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity).

 

Section 4.03          Governmental Authorization.  The execution, delivery and performance by Buyer of this Agreement and the other Transaction Documents to which it is or will be a party and the consummation by Buyer of the Transactions require no action by or in respect of, or filing with or notification to, any Governmental Authority other than (a) the entry by the Bankruptcy Court of the Disclosure Statement Order, the Bid Procedures Order and the Confirmation Order and (b) compliance with the applicable requirements of the 1934 Act and any other applicable state or federal securities laws.

 

Section 4.04          Noncontravention.  The execution, delivery and performance by Buyer of this Agreement and the other Transaction Documents to which it is or will be a party and the consummation by Buyer of the Transactions do not and will not (a) contravene, conflict with, or result in any violation or breach of any provision of its Organizational Documents, (b) assuming compliance with the matters referred to in Section 4.03, contravene, conflict with or result in a violation or breach of any provision of any Applicable Law or (c) assuming compliance with the matters referred to in Section 4.03, require any consent or other action by any Person under, constitute a default, or an event that, with or without notice or lapse of time or both, would constitute a default, under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which Buyer or any of its Subsidiaries is entitled under any provision of any Contract binding upon Buyer or any of its Subsidiaries or by which their respective assets may be bound or any Permit affecting, or relating in any way to, Buyer or the assets or business of Buyer.

 

Section 4.05          Litigation.  As of the date hereof, there is no Proceeding (or any basis therefor) pending against, or, to the Knowledge of Buyer, threatened against or affecting Buyer, any of its Subsidiaries, any present or former officer, director or employee of Buyer or any of its Subsidiaries or any other Person for whom Buyer or any of its Subsidiaries may be liable or any of their respective properties, that, (a) in any manner challenges or seeks to prevent, enjoin, alter or materially delay the Transactions or (b) affects the execution and delivery by Buyer of this Agreement and the other Transaction Documents to which it is or will be a party.

 

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Section 4.06          Financing.  If Buyer receives the Financing Commitment, Buyer will have sufficient cash, committed and available lines of credit or other sources of committed and available funds to enable Buyer to perform all of their respective obligations under this Agreement and the other Transaction Documents to which Buyer is or will be a party, including to pay the Purchase Price.  Buyer is not aware of any facts or circumstances that create a reasonable basis to believe that it will be unable to obtain the financing contemplated by the Financing.

 

Section 4.07          Finders’ Fees.  There is no investment banker, broker, finder or other intermediary which has been or will be retained by or authorized to act on behalf of Buyer who might be entitled to any fee, commission or other compensation in connection with the Transactions.

 

Section 4.08          Investor Status; Investigation.

 

(a)        The New Cano Shares are being acquired by Buyer for investment purposes only, for Buyer’s own account and not with a view to, or for resale in connection with, any distribution thereof within the meaning of the 1933 Act.

 

(b)        Buyer is an “accredited investor” as defined in Regulation D promulgated under the 1933 Act.  Buyer acknowledges that the New Cano Shares have not been registered under the 1933 Act or any state or foreign securities laws and that the New Cano Shares may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of unless such transfer, sale, assignment, pledge, hypothecation or other disposition is pursuant to the terms of an effective registration statement under the 1933 Act and is registered under any applicable state or foreign securities laws or pursuant to an exemption from registration under the 1933 Act and any applicable state or foreign securities laws.

 

(c)        Buyer has such expertise, knowledge and sophistication in financial and business matters generally that it is capable of evaluating, and has evaluated, the merits and economic risks of its investment in the Reorganized Cano.

 

(d)        Buyer has had the opportunity to examine all aspects of Cano and/or the Reorganized Cano, as applicable, that Buyer has deemed relevant and has had access to all information requested by Buyer with respect to Cano and/or the Reorganized Cano, as applicable, in order to make an evaluation thereof.  In connection with the Transactions, Buyer has had the opportunity to ask such questions of and receive answers from the Representatives of Cano and obtain such additional information about Cano and/or the Reorganized Cano, as applicable, as Buyer deems necessary for an evaluation thereof.  Notwithstanding the foregoing, Buyer is entitled to and does rely upon the representations and warranties of Cano contained in Article III, in entering into this Transaction.

 

ARTICLE V
COVENANTS OF CANO

 

Section 5.01          Conduct of the Business.  From the date hereof until the Closing or, if earlier, the termination of this Agreement, except (v) as required by this Agreement or any other Transaction Documents, (w) as required by any lease, Contract, or instrument listed on any

 

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Schedule hereto, (x) as required by any Applicable Law or any Governmental Authority (including by order or directive of the Bankruptcy Court or fiduciary duty of the Debtors) or any requirements or limitations resulting from the Bankruptcy Cases, (y) to the extent related solely to Trust Assets and/or Trust Liabilities, or (z) as otherwise consented to in writing by Buyer:

 

(a)        Cano shall, and shall cause each of its Subsidiaries to, conduct the business of the Debtors in the Ordinary Course of Business and use all commercially reasonable efforts to (i) preserve intact its present business organization, (ii) maintain in effect all Permits as may be necessary for the Reorganized Cano to own and, with respect to Operated Properties, operate (in the Ordinary Course of Business) the Oil and Gas Interests following the Closing and (iii) comply in all material respects with all Applicable Laws; and

 

(b)        Cano shall not, and shall not permit any of its Subsidiaries to:

 

(i)            amend, waive or otherwise modify any of its Organizational Documents (whether by merger, consolidation or otherwise);

 

(ii)           (A) 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 or other equity securities, other than dividends by any of its wholly-owned Subsidiaries to Cano or (B) redeem, repurchase or otherwise acquire or offer to redeem, repurchase, or otherwise acquire any Cano Securities or any Subsidiary Securities;

 

(iii)          (A) issue, deliver or sell, or authorize the issuance, delivery or sale of, any shares of capital stock or other equity securities or (B) amend, waive or otherwise modify any term of any Cano Security or any Cano Subsidiary Security (in each case, whether by merger, consolidation or otherwise);

 

(iv)          except with respect to those matters identified on Schedule 5.01 (which expenditures shall be deemed permitted under this Section 5.01(b)(iv)), incur or make, commit to incur or make, any capital or operating expenditures, other than (A) capital expenditures not exceeding $250,000 in the aggregate (net to Debtors’ interest) during any calendar month, except when required by an emergency when there shall have been insufficient time to obtain advance consent (provided, that Cano will promptly notify Buyer of any such emergency expenditures) and (B) operating expenditures made in the Ordinary Course of Business;

 

(v)           acquire (by merger, consolidation, acquisition of stock or assets or otherwise), directly or indirectly, any assets, securities, properties, interests or businesses, other than purchases of supplies in the Ordinary Course of Business;

 

(vi)          sell, lease or otherwise transfer, or voluntarily grant to any Third Party any Lien on, any Oil and Gas Interests, or otherwise divest or relinquish any right or asset having a value of $250,000 or more, other than (A) sales of inventory in the Ordinary Course of Business, (B) relinquishments resulting from the expiration of Oil and Gas Leases that Debtors do not have a right or option to renew, (C) Contracts for the sale of Hydrocarbons in the Ordinary Course of Business, not to exceed one (1) month in duration and (D) sales or other dispositions of materials, supplies, machinery, equipment,

 

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improvements, or other personal property or fixtures (i) in the Ordinary Course of Business which have been replaced with an item of substantially equal suitability or (ii) not used in current operations and which are not of a value in excess of $250,000 in the aggregate; provided that Cano shall provide notice to Buyer of any sale or disposition pursuant to this Section 5.01(b)(vi)(D)(ii) in an amount in excess of $100,000 in the aggregate;

 

(vii)         except as in effect on the date of this Agreement, create, incur, assume, suffer to exist or otherwise be liable with respect to any indebtedness for borrowed money or any guarantees thereof;

 

(viii)        assume or reject any 365 Contract, provided that the Debtors shall be permitted to reject any 365 Contract that is not a Desired 365 Contract at any time after the 365 Notice Date and assume any Desired 365 Contract at any time that such Contract is designated as a Desired 365 Contract in accordance with Section 5.03;

 

(ix)          enter into any material Contract that if entered into prior to the date hereof would be required to be listed in Schedule 3.10(a) other than (A) Contracts for capital expenditures permitted under Section 5.01(b)(iv) and Contracts permitted under Section 5.01(b)(vi), (B) Contracts of the type described in Section 3.10(a)(ii), Section 3.10(a)(iv), and Section 3.10(a)(vi) entered into in the Ordinary Course of Business, (C) confidentiality agreements entered into in accordance with the Bid Procedures Order, and (D) Contracts entered into to resolve Claims or otherwise in connection with the Bankruptcy Cases that would not affect any property or assets (other than cash) of any Debtor, create any obligation to be performed by any Reorganized Debtor after the Closing or otherwise adversely affect any Reorganized Debtor after the Closing.

 

(x)           amend or modify in any material respect or terminate any material Contract (other than terminations or expiration in accordance with its terms);

 

(xi)          request that the Bankruptcy Court approve or authorize the Debtors to take or omit to take any action that would breach the Debtor’s covenants under this Agreement or any other Transaction Document;

 

(xii)         (A) grant or amend any severance or termination pay or other arrangement with any director, officer or employee of any Debtor, (B) enter into or amend employment, deferred compensation or similar agreement with any director, officer or employee of any Debtor, (C) establish, adopt or amend (except as required by Applicable Law) any collective bargaining, bonus, profit-sharing, thrift, pension, retirement, deferred compensation, compensation, stock option, restricted stock or other benefit plan or arrangement covering any director, officer or employee of any Debtor or (D) increase the compensation, bonus or other benefits payable to any director, officer or employee of any Debtor;

 

(xiii)        change the methods of accounting or accounting practice by Cano, except as required by concurrent changes in GAAP as agreed to by its independent public accountants;

 

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(xiv)                       settle, or offer or propose to settle, (A) any material litigation, investigation, arbitration, proceeding or other claim involving or against any Debtor or (B) any litigation, arbitration, proceeding or dispute that relates to the Transactions;

 

(xv)                          change any annual Tax accounting period, file any amended Return, enter into any closing agreement, settle any Tax claim or assessment, surrender any right to claim a Tax refund, offset or other reduction in Tax liability or consent to any extension or waiver of the limitations period applicable to any Tax claim or assessment; or

 

(xvi)                       agree, resolve or commit to do any of the foregoing.

 

Section 5.02                             Additional Financial Information.

 

(a)                       Cano will use all commercially reasonable efforts to provide Buyer with the unaudited consolidated balance sheet and unaudited consolidated statements of operations and cash flows of the Debtors for each fiscal quarter completed after the date of this Agreement and prior to Closing, as soon as reasonably practicable after the end of each such quarter (the “Post-Signing Financial Statements”).

 

(b)                       Cano shall cause the Post-Signing Financial Statements delivered in accordance with Section 5.02(a) to fairly present, to Cano’s Knowledge, in all material respects, in conformity with GAAP applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of the Debtors as of the dates thereof and their consolidated results of operations and cash flows for the periods then ended (subject to normal year end audit adjustments and the absence of notes in the case of any unaudited interim financial statements).

 

Section 5.03                             Assumption and Rejection of Executory Contracts and Leases.

 

(a)                       Schedule 5.03(a) sets forth a complete set of the most recent “Schedule G — Executory Contracts and Unexpired Leases” of the Debtors (as such schedules may from time to time be amended or supplemented with written notice to Buyer, the “365 Schedule”).  Cano will amend or supplement the 365 Schedule from time to time promptly, and to provide Buyer written notice thereof, upon its determination that any Debtor is party to a 365 Contract that is not then set forth on the 365 Schedule.  At least fifteen (15) days prior to the date of mailing of notice in accordance with the Bid Procedures Order (the “365 Notice Date”) to all parties to 365 Contracts to be assumed, Cano will deliver to Buyer a copy of the 365 Schedule together with Cano’s good faith estimate of the Cure Costs that would be payable by any Debtor in connection with the assumption of each 365 Contract and, to the extent practicable, a good faith estimate of the rejection damages that would be payable by any Debtor in connection with the rejection of each 365 Contract (the actual amount of such rejection damages as finally determined, “Rejection Amount”).  If Cano has not previously provided or made available to Buyer a copy of any such 365 Contract, including any amendments, waivers or other modifications thereof, Cano shall upon Buyer’s request (i) provide a copy of such 365 Contract to Buyer if Cano has a copy of such 365 Contract readily available in its files or (ii) use its commercially reasonable efforts to obtain a copy of such 365 Contract if Cano does not have a

 

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copy of such 365 Contract readily available in its files and, upon obtaining a copy, provide a copy of such 365 Contract to Buyer.

 

(b)                       No later than three (3) days prior to the 365 Notice Date, Buyer shall provide Cano with a list of the 365 Contracts listed on the 365 Schedule received from Cano that Buyer desires to be assumed by the Debtor party thereto (collectively, and as further modified by the Buyer pursuant to the provisions of this Section 5.03(b), the “Desired 365 Contracts”).  As promptly as practicable following the designation by Buyer of any 365 Contract as a Desired 365 Contract, the Debtors shall commence appropriate proceedings before the Bankruptcy Court and otherwise take all necessary actions in order to determine the Cure Costs with respect to such Desired 365 Contract and to effect the assumption of such Desired 365 Contract by the applicable Debtor in accordance with the Bankruptcy Code, effective as of the Closing.  Furthermore, Cano shall take all necessary actions in order to effect the rejection or assignment to the Liquidating Trust by the applicable Debtor of each 365 Contract that is not a Desired 365 Contract at or prior to the Closing. Notwithstanding the foregoing, at any time prior to the Confirmation Hearing, Buyer may identify (i) any 365 Contract that has not been rejected as a Desired 365 Contract and upon receipt of any such notice Debtors shall use commercially reasonable efforts to effect the assumption of such 365 Contract by the applicable Debtor in accordance with the Bankruptcy Code and, if Debtors are successful in effecting such assumption as of Closing, such 365 Contract shall become a Desired 365 Contract and (ii) any Desired 365 Contract that has not been assumed as one that Buyer no longer desires to have assumed and such 365 Contract shall be deemed not to be a Desired 365 Contract.

 

(c)                        At, prior to or as soon as reasonably practicable after the Closing, Cano shall pay, or cause its Subsidiaries to pay, or cause the Liquidating Trust to pay all Cure Costs with respect to the Desired 365 Contracts, and the Debtors shall provide adequate assurance of future performance of all of the Desired 365 Contracts so that all Desired 365 Contracts can be assumed by the Debtors at or prior to the Closing in accordance with the provisions of Section 365 of the Bankruptcy Code and this Agreement (provided that Buyer shall cooperate with Debtors in providing such adequate assurance of future performance of all of the Desired 365 Contracts and Buyer acknowledges that such cooperation may require Buyer to provide information regarding Buyer and its Subsidiaries, as well as a commitment of performance by Buyer and/or its Subsidiaries with respect to the Desired 365 Contracts from and after the Closing to demonstrate adequate assurance of the performance of the Desired 365 Contracts, and the Debtors’ obligation to provide such adequate assurances is subject to the cooperation and providing of such information and commitment by Buyer).  Except as set forth in this Section 5.03(c) and in Section 5.03(f), neither Buyer nor any of its Subsidiaries (including the Reorganized Debtors) shall have any liability or obligation to any Person for any default under or Cure Costs related to any 365 Contract of any Debtor existing at or prior to the Closing.

 

(d)                       Cano will provide to Buyer a copy of any motion, application or other court document filed with, and any proposed orders submitted to, the Bankruptcy Court seeking authorization to assume or reject any 365 Contract, enter into, amend or waive any provision of any 365 Contract, other than as permitted under Section 5.01, in advance of filing (with a reasonable opportunity to review and comment on same) all of which must be, prior to filing, in form and substance reasonably satisfactory to Buyer in all material respects.

 

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(e)                        Each 365 Contract that is assumed by any Debtor in accordance with this Agreement shall vest in and be fully enforceable by the applicable Reorganized Debtor in accordance with its terms as of the applicable assumption date.

 

(f)                         If any 365 Contract listed on Schedule 5.03(a), other than the 365 Contracts listed on Schedule 5.03(f) (the “Initial Rejected Contracts”), is (i) not designated by Buyer as a Desired 365 Contract in accordance with Section 5.03(b) or (ii) designated as a Desired 365 Contract and subsequently deemed not to be a Desired 365 Contract as permitted under Section 5.03(b)(ii) (all such 365 Contracts described in clauses (i) and (ii), collectively, the “No Longer Desired 365 Contracts”), and the aggregate actual amount to be paid by the Debtors (or the Liquidating Trust) pursuant to the Plan in respect of the Rejection Amounts related to all No Longer Desired 365 Contracts exceeds the aggregate Cure Costs that would be payable if such No Longer Desired 365 Contracts would be assumed by the applicable Debtors, then the Purchase Price payable by Buyer pursuant to Section 2.01 shall be increased by the amount that such Rejection Amounts exceed such Cure Costs.

 

Section 5.04                             Well Elections.  If any Debtor is provided notice of any proposed drilling, reworking, recompletion, sidetracking, deepening or similar activity with respect to any well (other than a Trust Asset), then (i) if the expenditures with respect to such activity are identified on Schedule 5.01, Debtors shall elect to participate in such activity and (ii) if expenditures with respect to such activity are not identified on Schedule 5.01, the Debtors shall provide notice of such proposal, together with relevant seismic and other data relating to such proposal that is in Debtors’ possession, to Buyer promptly after Debtors’ receipt of notice of such proposal.  Buyer shall respond to any such notice provided to Buyer promptly after Buyer’s receipt of such notice.  If Buyer instructs Debtors in writing to participate in such activity sufficiently in advance of the deadline to make an election to participate, Debtors shall elect to participate in such activity and the expenditures paid by Debtors with respect to such activity prior to Closing shall be deemed consented to by Buyer for purposes of Section 5.01(b)(iv), and the Purchase Price shall by adjusted pursuant to Section 2.01(b); provided that if Buyer instructs Debtors in writing not to participate in such activity, or fails to timely instruct Debtors in writing to participate in such activity, Debtors may, at Debtors’ option, elect to participate in such activity, but the expenditures paid by Debtors with respect to such activity shall not be reimbursed pursuant to Section 2.01(b).

 

Section 5.05                             Access to Information.  From the date hereof until the Closing and subject to Applicable Law and the confidentiality agreement dated August 9, 2011, between Cano and Buyer (the “Confidentiality Agreement”), Cano shall (a) give to Buyer and its Representatives reasonable access for the purpose of conducting due diligence during normal business hours to the offices, properties, books and records of Cano and its Subsidiaries (subject to the terms, conditions and restrictions of agreements related to such offices and properties and, with respect to Oil and Gas Interests with Third Parties acting as the operator, the consent of the operator); provided that such access shall be upon reasonable advance notice and under reasonable circumstances, (b) furnish to Buyer and its Representatives such financial and operating data and other information available as of the date hereof or that becomes available at any time prior to the Closing Date as Buyer may reasonably request in connection with the Transactions and (c) instruct its Representatives to cooperate with Buyer in its due diligence; provided that in no

 

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event shall Cano or any of its Subsidiaries be obligated to provide or permit (i) any information the disclosure of which would (I) cause the loss of any legal privilege available to any Person relating to such information or would cause Cano or its Subsidiaries to breach a confidentiality obligation to which it is bound or (II) result in a violation of Applicable Law, (ii) copies of bids, letters of intent, expressions of interest or other proposals received from other Persons prior to the Bid Deadline in connection with the Transactions or information and analyses relating to such communications, except to the extent required in the Bid Procedures Order or (iii) access for any invasive environmental testing of any property and Buyer shall not be entitled to conduct any invasive environmental testing at, on or under any property of Cano.  After the Closing, Buyer, Reorganized Cano, and the Reorganized Subsidiaries will allow the Liquidating Trustee and its Representatives reasonable access during normal business hours to the books and records of Reorganized Cano and Reorganized Subsidiaries as it relates solely to pre-Closing financial information germane to the Chapter 11 cases and the payment of claims and related matters or performance of obligations assumed by Buyer, Reorganized Cano, and Reorganized Subsidiaries under this Stock Purchase Agreement; provided that such access shall expire six months after the Closing Date, but may be extended upon mutual agreement of the Parties.  Any access provided pursuant to this Section shall be conducted in such manner as not to interfere unreasonably with the conduct of the business of Cano and, after the Closing, Reorganized Cano, Reorganized Subsidiaries, and the Buyer.

 

ARTICLE VI
COVENANTS OF BUYER

 

Section 6.01                             Health Coverage.  The following provisions shall govern Health Coverage of present or former Cano employees.

 

(a)                       Active Participant.  From and after the Closing Date, Buyer shall take such action as may be necessary so that, on and after the Closing Date, eligible employees (and/or their eligible spouses and dependent children) of Cano or its Subsidiaries who after the Closing Date are employed by Buyer or an Affiliate of Buyer (“Transferred Employees”) are provided health care coverage either, as Buyer may determine in its discretion from time to time, (i) pursuant to terms and conditions of the health care arrangement as in effect and maintained by Cano immediately prior to the Closing Date (to the extent Buyer decides to maintain such arrangement following the Closing), or (ii) pursuant to a health care plan or program sponsored by Buyer on substantially the same basis as employees of Buyer and its Subsidiaries having similar responsibilities and positions.

 

(b)                       COBRA Benefits.  From and after the Closing Date and with respect to any former employee of Cano or its Subsidiaries (and/or his or her spouse and dependent children) who was an eligible COBRA beneficiary and experienced a “qualifying event” (as defined in COBRA) and has elected COBRA coverage or is in the election period prior to the Closing Date, Buyer shall at its election (i) provide coverage under a group health plan sponsored by Buyer in compliance with COBRA or (ii) provide coverage under Cano’s existing health plan or another subsequent Cano health plan for as long as Cano is required to offer COBRA eligible benefits to any “qualified beneficiary” and for a period of time no less than the period prescribed by or limited by COBRA.  Buyer shall be responsible after the Closing Date for the notices, extension of continuation coverage and other compliance with

 

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COBRA as to any of the persons described in the preceding sentence.  Seller shall assume the responsibility for providing to all employees on a timely basis, all necessary notices, documentation, and requests required prior to the Closing Date.

 

(c)                        Benefit Considerations.  The eligibility of any Transferred Employee to participate in any health care plan or program of Buyer or its Subsidiaries shall not be subject to any exclusions for any pre-existing conditions if such individual met the participation requirements of similar benefit plans and programs of Cano and its Subsidiaries.  Amounts paid before the Closing by Transferred Employees under any health plans of Cano and its Subsidiaries shall, after the Closing, be taken into account in applying deductible and out-of-pocket limits applicable under the health plans of Buyer and its Subsidiaries provided as of the Closing to the same extent as if such amounts had been paid under such health plans to Buyer and/or its Subsidiaries.

 

Section 6.02                             Tax Refunds.

 

(a)                       Buyer shall use commercially reasonable efforts to claim and prosecute, or to cause the Reorganized Debtors to claim and prosecute, all properly allowable Tax Refunds of the Debtors for all Pre-Closing Tax Periods and the portion of any Straddle Tax Period ending on the Closing Date (determined in accordance with Section 6.02(b)).  All such Tax Refunds shall be for the account of the Liquidating Trust and shall be promptly paid, after deduction for all reasonable and directly applicable costs and expenses incurred in obtaining said Tax Refunds by Buyer, to the Liquidating Trust when received by Buyer or any Reorganized Debtor.  As to all other Tax Refunds, the funds shall be for the account of Buyer or any Reorganized Debtor and not the Liquidating Trust.

 

(b)                       For purposes of Section 6.02(a), Tax Refunds of the Debtors for the portion of any Straddle Tax Period ending on the Closing Date shall be:

 

(i)                                     in the case of Tax Refunds attributable to Taxes that are either (A) based upon or related to income or receipts, or (B) imposed in connection with any production, sale or other transfer or assignment of property (real or personal, tangible or intangible), deemed equal to the amount that would be allowed as a Tax Refund if the Tax period of the Debtors ended with (and included) the Closing Date; provided that exemptions, allowances or deductions that are calculated on an annual basis (including depreciation and amortization deductions) shall be allocated between the period ending on and including the Closing Date and the period beginning after the Closing Date in proportion to the number of days in each period; and

 

(ii)                                  in the case of Tax Refunds attributable to Taxes that are imposed on a periodic basis with respect to the assets or capital of the Debtors, deemed equal to the amount that would be allowed as a Tax Refund for the entire Straddle Period, multiplied by a fraction the numerator of which is the number of calendar days in the portion of the period ending on and including the Closing Date and the denominator of which is the number of calendar days in the entire period.

 

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Section 6.03                             Tax Returns.

 

(a)                       Buyer shall refrain, and shall cause each Reorganized Debtor to refrain, from making or being deemed to make, any election, including any election under Section 338 of the Code, that could cause the Debtors to realize additional income with respect to any Pre-Closing Period or the pre-Closing portion of the Straddle Period.  Buyer shall prepare or cause to be prepared all Tax Returns of the Debtors required to be filed after the Closing Date for the Straddle Period and all Pre-Closing Tax Periods, including the Tax Period ending as of the day on the Closing Date pursuant to Treasury Regulation Section 1.1502-76(b)(1)(ii) if the Reorganized Debtors become members of Buyer’s consolidated group as a result of Buyer’s purchase of the New Cano shares; provided, however, that if the Closing occurs before the filing of the Debtors’ Federal income Tax Return for the taxable year ended June 30, 2011, then the Liquidating Trust shall be responsible for filing such Tax Return (with the reasonable cooperation of Buyer) but at Buyer’s expense.  In the event Reorganized Debtors become members of Buyer’s consolidated group, the Parties agree that the transactions of the Debtors or the Reorganized Debtors that occur on the Closing Date that are outside the ordinary course of business of the Debtors or the Reorganized Debtors will be treated for all federal and state tax purposes as occurring at the beginning of the day following the Closing Date.  Each such Tax Return shall be prepared on a basis consistent with past practice except to the extent otherwise required by Applicable Law.  Not later than thirty (30) days prior to the due date for filing any such Tax Return, Buyer shall deliver a copy of such Tax Return, together with all supporting documentation and workpapers, to the Liquidating Trust for its review and approval.  Buyer will cause such Tax Return (as revised to incorporate the Liquidating Trust’s comments) to be timely filed and will provide a copy to the Liquidating Trust.

 

(b)                       Buyer shall not amend any Tax Returns of the Debtors that are attributable to Pre-Closing Tax Periods or Straddle Tax Periods without the prior written consent of the Liquidating Trust.

 

Section 6.04                             Financing.  Within 45 days of the date hereof, Buyer shall deliver to Cano a complete and correct copy of an executed commitment letter from F&M Bank and Trust Co. and other qualified banking institutions, in a form reasonably acceptable to Cano, in its sole discretion, which shall not unreasonably be withheld (the “Financing Commitment”), with respect to a debt financing in an amount sufficient to enable Buyer to perform its obligation to pay the Purchase Price, as adjusted pursuant to Section 2.01, at the Closing (the “Financing”).

 

ARTICLE VII
COVENANTS OF BUYER AND CANO

 

Buyer and Cano agree that:

 

Section 7.01                             Commercially Reasonable Efforts; Further Assurances.  Subject to the terms and conditions of this Agreement and subject to the Bankruptcy Code and any orders of the Bankruptcy Court, Buyer and Cano each will use all commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable to consummate the Transactions, including (a) finalizing, executing and delivering all Transaction Documents to which it or any of its Subsidiaries is a party prior to the Closing, (b) preparing and filing as promptly as practicable with any Governmental Authority or other Third Party all documentation to effect all necessary filings, notices, petitions, statements, registrations,

 

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submissions of information, applications and other documents and (c) obtaining and maintaining all approvals, consents, registrations, permits, authorizations and other confirmations required to be obtained from any Governmental Authority or other Third Party that are necessary, proper or advisable to consummate the Transactions; provided that the commercially reasonable efforts of any party hereto shall not be deemed to include (i) except as expressly set forth in this Agreement, entering into any settlement, undertaking, consent decree, stipulation or agreement with any Governmental Authority in connection with the Transactions or (ii) divesting or otherwise holding separate (including by establishing a trust or otherwise) any assets of Cano, Buyer or any of its Subsidiaries.  Cano and Buyer will execute and deliver or cause to be executed and delivered such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable in order to consummate or implement expeditiously the Transactions in accordance with the terms and conditions of this Agreement and the Plan.

 

Section 7.02                             Bankruptcy Proceedings.

 

(a)                       Cano will, and will cause each of its Subsidiaries to, commence appropriate proceedings before the Bankruptcy Court and otherwise use all of their respective commercially reasonable efforts to obtain entry of the Bid Procedures Order, the Disclosure Statement Order and the Confirmation Order, in each case prior to the applicable dates set forth in Article IX and any other order required to consummate the Plan and the Transactions as promptly as practicable, all of which orders, and any amendment or supplement to any of the foregoing, must be reasonably acceptable in form and substance to, and shall not be entered until consented to by, Cano and Buyer; provided that if, after the conclusion of the hearing to consider entry of any such order, the Bankruptcy Court makes any modifications to any proposed form of order which modification was not approved by Buyer prior to entry of such order, Buyer shall have five (5) Business Days after the entry of such order to raise any objections to such modifications.

 

(b)                       Cano agrees to provide Buyer and its counsel with copies of all material motions, applications, supporting papers and notices prepared by any Debtor (including forms of orders and notices to interested parties) relating in any way to the Bid Procedures Order, the Disclosure Statement, the Plan or otherwise relating to the Transactions prior to the filing of such documents and shall provide Buyer, to the extent practicable, with a reasonable opportunity to review and comment on such documents.  In addition, Cano will consult with Buyer prior to taking any other action in or with respect to the Bankruptcy Cases that could reasonably be expected, individually or in the aggregate, to (i) be inconsistent with this Agreement, any Transaction Document or the Transactions, (ii) materially impair or materially delay the Closing, (iii) have a Material Adverse Effect on the Transactions, any Desired 365 Contracts, the Reorganized Debtors, Buyer or its Subsidiaries or (iv) relate to the retention or compensation of any employees.

 

(c)                        Buyer will provide or cause to be provided to Cano, at its request, all information concerning Buyer as is reasonably required to be included in the Disclosure Statement to satisfy the requirements of Section 1125(a) of the Bankruptcy Code.

 

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(d)                       Cano will not permit any provision of the Disclosure Statement, the Plan or any schedules or exhibits thereto or any other material document relating to the Disclosure Statement, the Plan or the Transactions to be amended, modified, supplemented, withdrawn or revoked in any manner that adversely affects Buyer or the Reorganized Debtors or that material impairs or materially delays the Closing except with Buyer’s prior written consent.

 

(e)                        If entry of the Bid Procedures Order, the Disclosure Statement Order or the Confirmation Order or any other orders of the Bankruptcy Court relating to the Transactions, the Disclosure Statement, the solicitation of acceptances of the Plan or confirmation of the Plan shall be appealed or otherwise challenged by any party (including by petition for certiorari or motion for reconsideration, amendment, clarification, modification, vacation, stay, rehearing or reargument), Cano will diligently oppose such appeal, challenge, petition or motion and will use all commercially reasonable efforts to obtain an expedited resolution of any such appeal, petition or motion.

 

(f)                         Cano shall, and shall cause each of its Subsidiaries to, use commercially reasonable efforts to maintain the exclusive periods pursuant to Section 1121(d) of the Bankruptcy Code during which the Debtors may file a plan or plans of reorganization and solicit acceptances thereof.

 

Section 7.03                             Certain Filings.  Cano and Buyer shall cooperate with one another (a) in determining whether any action by or in respect of, or filing with, any Governmental Authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material Contracts, in connection with the consummation of the Transactions and (b) in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers.

 

Section 7.04                             Public Announcements.  Each of Cano and Buyer will obtain the consent (as to both form and content) of the other Party prior to issuing any press release or making any public statement with respect to this Agreement or the other Transaction Documents or the Transactions, except to the extent that such press release or other public announcement is required by Applicable Law.  Cano may file this Agreement and the other Transaction Documents with the SEC pursuant to the requirements of the 1934 Act and with the Bankruptcy Court upon execution of this Agreement, and Cano will give Buyer a prior opportunity to review and comment on drafts of such filings.  Cano may make this Agreement and the other Transaction Documents available to Alternative Bidders pursuant to the Bid Procedures Order.

 

Section 7.05                             Notices of Certain Events.  Each of Cano and Buyer shall promptly notify the other of:

 

(a)                       any written notice or other communication received by it from any Person alleging that the consent of such Person is or may be required in connection with the Transactions;

 

(b)                       any written notice or other communication received by it from any Governmental Authority in connection with the Transactions;

 

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(c)                        any Proceedings commenced or, in the case of Cano, to Cano’s Knowledge, or in the case of Buyer, to its Knowledge, threatened against, relating to or involving or otherwise affecting any Debtor or Buyer and any of its Subsidiaries, respectively, as the case may be, that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to any Section of this Agreement or that relate to the consummation of the Transactions;

 

(d)                       in the case of Cano, the damage or destruction by fire or other casualty of any material Oil and Gas Interests or in the event that any material Oil and Gas Interest becomes the subject of any Proceeding or, to Cano’s Knowledge, threatened Proceeding for the taking thereof or any part thereof or of any right relating thereto by condemnation, eminent domain or other similar governmental action;

 

(e)                        any inaccuracy of any representation or warranty contained in this Agreement at any time during the term hereof that could reasonably be expected to cause the conditions set forth in Section 8.02(a) and Section 8.03(a) not to be satisfied, in the case of Buyer, to Buyer’s Knowledge, or in the case of Cano, to Cano’s Knowledge; and

 

(f)                         any failure of that Party to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it hereunder;

 

provided that the delivery of any notice pursuant to this Section 7.05 shall not limit or otherwise affect the remedies available hereunder to the Party receiving such notice.

 

Section 7.06                             Confidentiality.  The Parties acknowledge that Buyer and Cano previously executed the Confidentiality Agreement.  Notwithstanding anything to the contrary in the Confidentiality Agreement, to the extent of any conflict between the provisions of the Confidentiality Agreement and the terms hereof, the terms hereof shall prevail.  The Parties acknowledge and understand that this Agreement will be filed with the Bankruptcy Court and may be made available by Debtors to Alternative Bidders as contemplated by the Bid Procedures Order.  The Parties agree that such disclosure shall not be deemed to violate any confidentiality obligations owing to any Party, whether pursuant to this Agreement, the Confidentiality Agreement or otherwise.  Notwithstanding the foregoing, this Section 7.06 shall not in any way limit, to the extent required by Applicable Law,  the disclosure of information by Debtors or their Affiliates in connection with the administration of the Bankruptcy Cases, pursuant to any provision of the Bankruptcy Code or any order of the Bankruptcy Court.

 

Section 7.07                             Indemnification.  BUYER SHALL PROTECT, DEFEND, INDEMNIFY AND HOLD EACH DEBTOR, EACH OF THEIR SUCCESSORS AND ALL OF THEIR RESPECTIVE MANAGERS, MEMBERS, PARTNERS, DIRECTORS, OFFICERS AND OWNERS HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, ACTIONS, CAUSES OF ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES CAUSED DIRECTLY OR INDIRECTLY BY THE ACTS OR OMISSIONS OF BUYER, ANY OF BUYER’S SUBSIDIARIES OR ANY PERSON ACTING ON BUYER’S OR ITS SUBSIDIARIES’ BEHALF IN CONNECTION WITH ANY DUE DILIGENCE CONDUCTED PURSUANT TO OR IN CONNECTION WITH THIS AGREEMENT, INCLUDING ANY SITE VISITS.  THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR

 

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NOT SUCH CLAIMS, ACTIONS, CAUSES OF ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES ARISE OUT OF (i) NEGLIGENCE (INCLUDING SOLE NEGLIGENCE, SIMPLE NEGLIGENCE, CONCURRENT NEGLIGENCE, ACTIVE OR PASSIVE NEGLIGENCE, BUT EXPRESSLY NOT INCLUDING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF ANY INDEMNIFIED PARTY, OR (ii) STRICT LIABILITY.  Buyer shall comply with all rules, regulations, policies and instructions reasonably required by Debtors, or any Third Person operator of any Oil and Gas Interests, which are provided to Buyer regarding Buyer’s actions while upon, entering or leaving any property, including any insurance requirements that Debtors may reasonably impose, or any such Third Person operator may impose, on contractors authorized to perform work on any property owned or operated by Debtors (or any such Third Person operator, as applicable).

 

Section 7.08                             Audits and Other Tax Proceedings.  Buyer and Reorganized Cano shall control the conduct of any audit, litigation or other administrative or judicial proceeding with respect to Taxes of the Debtors (each a “Tax Proceeding”) for any Tax period.  Buyer and Reorganized Cano shall promptly provide the Liquidating Trust with notice regarding the commencement of any Tax Proceeding for any Pre-Closing Tax Period or Straddle Tax Period.  Neither Buyer nor Reorganized Cano shall enter into any settlement or agreement of compromise with respect to any Tax Proceeding for any Pre-Closing Tax Period or Straddle Tax Period without the prior written consent of the Liquidating Trust, which such consent will not be unreasonably withheld.

 

Section 7.09                             Environmental Costs.

 

(a)                       On or prior to the Closing Date, Cano shall, or shall cause one of the Debtors, to take such actions as may be reasonably necessary to repair or remediate those items listed on Schedule 3.22, to the reasonable satisfaction of Cano (and Cano or Reorganized Cano, as the case may be, shall not have received written notice from the appropriate governmental entity within 30 days after the submission of the initial sundry notices relating to the actions taken to repair or remediate those items set forth on Schedule 3.22, indicating that the actions described in such sundry notices were insufficient to repair or remediate those items set forth on Schedule 3.22) (“Repair Efforts”).  The costs and expenses related to the Repair Efforts (“Environmental Costs”) shall be paid as follows:

 

(i)                                     if the aggregate amount of Environmental Costs are equal to or less than $50,000, they shall be paid (A) 100% by Cano if incurred prior to the Closing or (B) 100% from the Environmental Escrow Funds if incurred subsequent to the Closing;

 

(ii)                                  if the aggregate amount of Environmental Costs exceeds $50,000, but is equal to or less than $250,000, (A) if such Environmental Costs are incurred prior to the Closing, 50% of such excess amount shall be paid by Cano and the Purchase Price shall be increased 50% of such excess amount or (B) if such Environmental Costs are incurred subsequent to the Closing, 50% of such excess amount shall be paid by Buyer and 50% of such excess amount shall be paid from the Environmental Escrow Funds; and

 

(iii)                               If the aggregate amount of Environmental Costs exceeds $250,000, Reorganized Cano shall pay all of such excess amounts.

 

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(b)                       If the Repair Efforts are not completed prior to the Closing, Debtors agree and authorize Buyer to retain from the Purchase Price, in an interest bearing account, an amount equal to $150,000 minus all Environmental Costs paid by Cano prior to the Closing (the “Environmental Escrow Funds”), to be used as set forth in Section 7.09(a)(i)-(ii) above until exhausted or transferred to the Liquidating Trust as set forth below. Neither the Debtors, nor the Liquidating Trust, shall have any obligation or other liability with respect to any Environmental Costs except as specifically set forth in this Section 7.09.  Upon the earlier to occur of (i) the date which is six months immediately following the Closing Date (ii) the completion of the Repair Efforts or (iii) the payment of all Environmental Costs (the “Escrow Termination Date”), the balance of the Environmental Escrow Funds, if any, together with interest thereon accruing from the date of the Closing through and including the Escrow Termination Date, will be transferred by Buyer to the Liquidating Trust for distribution in accordance with the Plan.

 

ARTICLE VIII
CONDITIONS TO CLOSING

 

Section 8.01                             Conditions to Obligations of Buyer and Cano.  The obligations of Buyer and Cano to consummate the Closing are subject to the satisfaction (or, in the case of clause (d) of this Section 8.01, waiver by each) of each of the following conditions:

 

(a)                       No Applicable Law shall prohibit the Transactions or the consummation of the Closing.

 

(b)                       All of the conditions to the effective date of the Plan shall have been satisfied such that the Plan shall have became effective or shall become effective simultaneously with the Closing.

 

(c)                        All actions by or in respect of or filings with any Governmental Authority required to permit the consummation of the Closing shall have been taken, made or obtained.

 

(d)                       No Proceeding instituted by any Governmental Authority shall be pending and no injunction, order, decree or judgment of any Governmental Authority of competent jurisdiction shall be in effect, in each case which seeks to or does, as applicable, prohibit, restrain or enjoin the consummation of the Plan or the Transactions; provided that the Party seeking to rely on this Section 8.01(d) as a basis not to consummate the Closing must have used all commercially reasonable efforts to cause such Proceeding to have been dismissed or resolved in favor of the Parties or to prevent the entry of such injunction, order, decree or judgment.

 

Section 8.02                             Conditions to Obligation of Buyer.  The obligation of Buyer to consummate the Closing is subject to the satisfaction (or waiver by Buyer) of each of the following further conditions:

 

(a)                       (i) Cano shall have performed in all material respects all of its covenants and other obligations hereunder required to be performed by it on or prior to the Closing Date and (ii) the representations and warranties of Cano set forth in Article III of this Agreement shall be true and correct at and as of the Closing Date, as if made at and as of the Closing Date,

 

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other than those representations and warranties that are made as of a specific earlier date which representations need not be true and correct as of the Closing Date but must be true and correct as of such specific earlier date (except that, in each case, for purposes of this Section 8.02(a), in determining whether such representations and warranties are true and correct, all qualifications in such representations or warranties as to “material,” “in all material respects,” Material Adverse Effect or similar materiality qualifiers shall be disregarded) except: (A) for those failures to be true and correct that, individually or in the aggregate, do not constitute a Material Adverse Effect; (B) for changes therein specifically contemplated or permitted by this Agreement; and (C) that failure of any representation or warranty contained in Section 3.22 shall be disregarded for purposes of this Section 8.02(a) except to the extent of a knowing and intentional breach of such representation and warranty by Cano.

 

(b)                       The Bid Procedures Order, the Disclosure Statement Order and the Confirmation Order shall have been entered by the Bankruptcy Court, each such order shall be in form and substance reasonably acceptable to Buyer and each such order shall be a Final Order and in full force and effect.

 

(c)                        The Bankruptcy Court shall have determined that the Plan is feasible in accordance with its terms.

 

(d)                       Buyer shall have received all Post-Signing Financial Statements that are required to have been delivered to Buyer as of the Closing Date in compliance with Section 5.02.

 

(e)                        If Buyer shall have given Cano a written request at least fifteen (15) Business Days prior to Closing that any employees of any Debtor specified in such request shall cease to be employed by any Debtor effective at the Closing, each such specified employee shall have ceased to be employed by any Debtor.

 

(f)                         The Liquidating Trustee shall have executed and delivered the Liquidating Trust Agreement, and the Liquidating Trust Agreement shall be in full force and effect.

 

Section 8.03                             Conditions to Obligation of Cano.  The obligation of Cano to consummate the Closing is subject to the satisfaction of the following further conditions:

 

(a)                       (i) Buyer shall have performed in all material respects all of its covenants and obligations hereunder required to be performed by it at or prior to the Closing Date and (ii) the representations and warranties of Buyer set forth in Article IV of this Agreement shall be true and correct in all material respects at and as of the Closing Date, as if made at and as of the Closing Date.

 

(b)                       The Bid Procedures Order, the Disclosure Statement Order and the Confirmation Order, together with any other order of the Bankruptcy Court required to consummate the Plan and the Transactions, shall have been entered by the Bankruptcy Court and shall be in full force and effect.

 

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ARTICLE IX
TERMINATION

 

Section 9.01                             Grounds for Termination.  Subject to the penultimate sentence of this Section 9.01, this Agreement may be terminated at any time prior to the Closing:

 

(a)                       by mutual written agreement of Cano and Buyer;

 

(b)                       by either Cano or Buyer if the Closing and the effective date of the Plan shall not have been consummated on or before one hundred eighty (180) days after the Firm Financing Date (the “End Date”);

 

(c)                        by either Cano or Buyer if there shall be any Applicable Law that makes consummation of the Transactions illegal or otherwise prohibited or if consummation of the Transactions would violate any nonappealable final order, decree or judgment of any Governmental Authority having competent jurisdiction;

 

(d)                       by Buyer if:

 

(i)                                     the Bid Procedures Order, in form and substance reasonably acceptable to Buyer, shall not have been entered before forty-five (45) days after the Firm Financing Date (subject to the proviso below) or if the Bid Deadline shall be a date later than ninety (90) days after the Firm Financing Date;

 

(ii)                                  the Disclosure Statement shall not have been approved by the Bankruptcy Court on or before ninety (90) days from the Firm Financing Date (subject to the proviso below);

 

(iii)                               the Confirmation Order shall not have been approved by the Bankruptcy Court on or before one hundred fifty (150) days from the Firm Financing Date (subject to the proviso below);

 

(iv)                              the Bankruptcy Court shall have approved any Alternative Transaction, or Cano shall have entered into any definitive agreement with respect to any Alternative Transaction which agreement has been approved by the Bankruptcy Court;

 

(v)                                 Cano shall have breached any of its representations and warranties, or shall have failed to perform or comply with any of its covenants and agreements, contained in this Agreement such that the condition set forth in clauses (i) and (ii) of Section 8.02(a) shall not be satisfied, and Buyer shall have given at least ten (10) days written notice to Cano to cure such breaches and failures but such condition remains unsatisfied; or

 

(vi)                              any condition set forth in Section 8.01 or Section 8.02 shall have become incapable of being satisfied by the End Date;

 

provided that the deadlines set forth in clause (i), (ii) or (iii) of this Section 9.01(d) shall be subject to the Court’s docket, and accordingly, (A) the deadline shall be deemed extended

 

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through the date of the hearing set by the Court if, after using reasonable efforts, the Debtors are unable to obtain a docket setting for such hearing prior to such date and (B) the deadline shall be deemed extended through the date of a continued hearing set by the Court for consideration of such order if, after using reasonable efforts, the Debtors are unable to conclude such hearing prior to the expiration of such deadlines.

 

(e)                        by Cano if:

 

(i)                                     the Bankruptcy Court shall have approved any Alternative Transaction, or Cano shall have entered into any definitive agreement with respect to any Alternative Transaction which agreement has been approved by the Bankruptcy Court;

 

(ii)                                  Buyer shall have breached any of their respective representations or warranties or failed to perform or comply with any of their respective covenants or agreements contained in this Agreement such that the condition set forth in clauses (i) and (ii) of Section 8.03(a) shall not to be satisfied, and Cano shall have given at least ten days written notice to Buyer to cure such breaches and failures but such condition remains unsatisfied;

 

(iii)                               any condition set forth in Section 8.01 or Section 8.03 shall have become incapable of being satisfied by the End Date;

 

(iv)                              Buyer shall not have deposited the Escrow Amount with the Escrow Agent within one (1) Business Day after the date of execution of this Agreement by all Parties; or

 

(v)                                 Buyer shall have breached its covenants in Section 6.04.

 

Notwithstanding the foregoing, Cano shall not be permitted to terminate this Agreement pursuant to this Section 9.01, other than pursuant to Section 9.01(e)(v), if it is in breach of any of its representations and warranties or shall have failed to perform or comply with any of its covenants and agreements such that either (A) the condition to closing set forth in clauses (i) and (ii) of Section 8.02(a) shall not be satisfied or (B) such breach or failure to perform or comply by Cano is the primary cause of the occurrence of any event giving Cano a right to terminate this Agreement or the failure of the Closing to have occurred; and Buyer shall not be permitted to terminate this Agreement pursuant to this Section 9.01 if Buyer is in breach of any of its respective representations and warranties or shall have failed to perform or comply with any of its respective covenants and agreements such that either (A) the condition to closing set forth in clauses (i) and (ii) of Section 8.03(a) shall not be satisfied or (B) such breach or failure to perform or comply by Buyer is the primary cause of the occurrence of any event giving Buyer a right to terminate this Agreement or the failure of the Closing to have occurred.  The Party desiring to terminate this Agreement pursuant to this Section 9.01 (other than pursuant to Section 9.01(a)) shall give written notice of such termination to the other Party.

 

Section 9.02                             Effect of Termination.  If this Agreement is terminated as permitted by Section 9.01, such termination shall be without liability of either Party (or any stockholder or Representative of such Party) to the other Party to this Agreement, except as provided in this

 

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Section 9.02 or Section 9.03; provided that if such termination shall result from any intentional breach by either Party of any of its representations or warranties or intentional failure to perform or comply with any of its covenants or agreements contained in this Agreement, such Party shall be fully liable for any and all liabilities and damages incurred or suffered by the other Party as a result of such failure; provided further that if Cano terminates this Agreement pursuant to Section 9.01(e)(ii) (and Cano is permitted to so terminate this Agreement notwithstanding the last paragraph of Section 9.01), Section 9.01(e)(iv) or Section 9.01(e)(v), Cano shall be entitled to distribution of the Escrow Amount in accordance with Section 11.02(a), and, in addition, Buyer shall be fully liable for any and all liabilities, damages, costs and expenses (including reasonable attorneys’ fees) incurred or suffered by Cano as a result of Buyer not consummating the transactions contemplated by this Agreement.  The Parties acknowledge that in the event that Cano terminates this Agreement pursuant to Section 9.01(e)(ii) (and Cano is permitted to so terminate this Agreement notwithstanding the last paragraph of Section 9.01), Section 9.01(e)(iv) or Section 9.01(e)(v), (a) the distribution of the Escrow Amount in accordance with Section 11.02(a) shall not be deemed to constitute liquidated damages paid to Cano, (b) Cano fully reserves its rights and remedies under federal and state law in connection with such termination and (c) Cano shall not be limited or precluded in any manner from exercising such rights and remedies against Buyer, including for breach of contract.  The provisions of Section 7.06 and Articles IX, X and XI shall survive any termination hereof pursuant to Section 9.01.

 

Section 9.03                             Break-Up Fee.

 

(a)                       If (i) this Agreement is terminated by Buyer pursuant to and in accordance with Section 9.01(d)(iv) or by Cano pursuant to and in accordance with Section 9.01(e)(i), (ii) Buyer shall not have breached any of its representations or warranties or failed to perform or comply with any of its covenants or agreements contained in this Agreement such that the condition set forth in clauses (i) and (ii) of Section 8.03(a) shall not to be satisfied, (iii) Buyer shall have fully performed its obligations contained in Section 6.04 and (iv) any Debtor or Debtors consummate any Alternative Transaction at any time on or prior to the date that is twelve (12) calendar months after the date of this Agreement, the Debtors shall pay to Buyer a termination fee equal to $1,475,000 (the “Break-Up Fee”), which Break-Up Fee shall be payable upon consummation of such Alternative Transaction.

 

(b)                       Each Debtor acknowledges that the agreements contained in this Section 9.03 are an integral part of the Transactions and that, without these agreements, Buyer would not enter into this Agreement.

 

(c)                        Upon any termination of this Agreement under circumstances where the Break-Up Fee is payable by the Debtors pursuant to this Section 9.03 and such Break-Up Fee is paid in full to Buyer by the Debtors, such Break-Up Fee shall be Buyer’s sole remedy in connection with this Agreement, the Transactions and the termination hereof and thereof, and Buyer shall be precluded from any other remedy against the Debtors, at law or in equity or otherwise, and Buyer shall not seek to obtain any recovery, judgment, or damages of any kind, including direct, consequential, indirect, or punitive damages, against the Debtors or any of their respective Representatives, shareholders or Affiliates in connection with this Agreement or the Transactions or the termination hereof or thereof and the Debtors and their respective Representatives, shareholders and Affiliates shall be fully released and discharged from any

 

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liability or obligation under or resulting from this Agreement and the Transactions or the termination hereof and thereof.

 

(d)                       Buyer represent to Debtors that this Section 9.03 is a condition precedent to Buyer’s execution of this Agreement and is necessary to ensure that Buyer will continue to pursue the proposed acquisition of the Reorganized Cano, and each Debtor acknowledges that the Break-Up Fee, if payable hereunder, (i) constitutes an actual and necessary cost and expense of preserving the Debtors’ estates, within the meaning of Section 503(b) of the Bankruptcy Code, (ii) is of substantial benefit to the Debtors’ estates, (iii) is reasonable and appropriate, including in light of the size and nature of the Transactions and the efforts that have been or will be expended by Buyer, notwithstanding that the proposed Transactions are subject to higher or better offers, and (iv) was negotiated by the Parties at arm’s-length and in good faith.

 

(e)                        The Debtors’ obligation to pay the Break-Up Fee, as provided herein, shall (i) survive termination of this Agreement pursuant to Section 9.01(d)(iv) or Section 9.01(e)(i), (ii) be paid, in cash, on the date of consummation of the first Alternative Transaction consummated by the Debtors during the period specified in Section 9.03(a) or one (1) Business Day thereafter, from the sale proceeds thereof or otherwise from the Debtors’ cash balances, and (iii) constitute an administrative expense Claim against any Debtor under Section 503(b) or 507(a)(2) of the Bankruptcy Code.

 

ARTICLE X
MISCELLANEOUS

 

Section 10.01                      Notices.  All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission) and shall be given,

 

If to Buyer:

 

NBI Services, Inc.

PO Box 4470

Tulsa, OK 74159

Attn: Richard Nichols

Fax:  (918) 582-0777

 

with a copy to:

 

McDonald, McCann & Metcalf, LLP

15 East 5th Street, Suite 1800

Tulsa, OK 74103

Attn: Gary M. McDonald and Chad J. Kutmas

Fax:  (918) 430-3707

 

If to Debtors:

 

Cano Petroleum, Inc.

 

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6500 North Belt Line Road, Suite 200

Irving, Texas 75063

Attn: James R. Latimer

Fax:  (214) 687-9298

 

with a copy to:

 

Thompson & Knight LLP

One Arts Plaza

1722 Routh Street, Suite 1500

Dallas, Texas 75201

Attn: Arthur J. Wright; David M. Bennett; Wesley P. Williams

Fax:  (214) 999-1695; (214) 880-3293; (214) 999-1567

 

or such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto.  All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a Business Day in the place of receipt.  Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.

 

Section 10.02                      Survival.  The representations and warranties contained herein and in any certificate or other writing delivered pursuant hereto shall terminate upon and not survive the Closing and there shall be no liability thereafter in respect thereof.  Each of the covenants of the Parties hereto contained in this Agreement shall terminate upon the Closing except to the extent that performance under such covenant is to take place after Closing, in which case such covenant shall survive the Closing until the earlier of (i) performance of such covenant in accordance with this Agreement or, if time for performance of such covenant is specified in this Agreement, 60 days following the expiration of the time period for such performance and (ii) the expiration of applicable statute of limitations with respect to any claim for any failure to perform such covenant; provided that if a written notice of claim with respect to any covenant to be performed after Closing is given prior to the expiration of such covenant then such covenant shall survive until, but only for purposes of, the resolution of such claim by final, non-appealable judgment or settlement.

 

Section 10.03                      Amendments and Waivers.

 

(a)                       Any provision of this Agreement may be amended or waived prior to Closing if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each Party to this Agreement, or in the case of a waiver, by the Party against whom the waiver is to be effective.

 

(b)                       No failure or delay by any Party 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.  The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

 

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Section 10.04                      Expenses.  Except as otherwise expressly provided herein, all costs and expenses incurred in connection with this Agreement shall be paid by the Party incurring such cost or expense.

 

Section 10.05                      Successors and Assigns.  The provisions of this Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and assigns; provided that no Party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement, in whole or in part, by operation of law or otherwise, without the prior written consent of each other Party hereto, except that Buyer may assign, delegate or otherwise transfer its rights and obligations under this Agreement, in whole or from time to time in part, to one or more of its Subsidiaries; provided that no such transfer or assignment will release Buyer of its obligations hereunder or enlarge, alter or change any obligation of any Debtor to Buyer.

 

Section 10.06                      Governing Law.  THE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

 

Section 10.07                      Jurisdiction.  Each party hereto agrees that it shall bring any action or proceeding in respect of any claim arising out of or related to this Agreement or the transactions contained in or contemplated by this Agreement and the Ancillary Agreements, exclusively in (a) the Bankruptcy Court so long as the Bankruptcy Cases remain open and (b) after the close of the Bankruptcy Cases or in the event that the Bankruptcy Court determines that it does not have jurisdiction, the United States District Court for the Northern District of Texas or any Texas State court sitting in Dallas (together with the Bankruptcy Court, the “Chosen Courts”), and solely in connection with claims arising under this Agreement or any other Transaction Document or the Transactions (i) irrevocably submits to the exclusive jurisdiction of the Chosen Courts, (ii) waives any objection to laying venue in any such action or proceeding in the Chosen Courts, (iii) waives any objection that the Chosen Courts are an inconvenient forum or do not have jurisdiction over any party hereto and (iv) agrees that service of process upon such party in any such action or proceeding shall be effective if notice is given in accordance with Section 10.01.  Cano irrevocably designates Delaware Registry, Ltd., 3511 Silverside Road, Suite 105, Wilmington, Delaware as its agent and attorney-in-fact for the acceptance of service of process and making an appearance on its behalf in any such claim or proceeding and for the taking of all such acts as may be necessary or appropriate in order to confer jurisdiction over it before the Chosen Courts, and Cano stipulates that such consent and appointment is irrevocable and coupled with an interest.  Buyer irrevocably designates Richard J. Nichols, PO Box 4470, Tulsa, Oklahoma 74159 as its agent and attorney-in-fact for the acceptance of service of process and making an appearance on its behalf in any such claim or proceeding and for the taking of all such acts as may be necessary or appropriate in order to confer jurisdiction over it before the Chosen Courts, and Buyer stipulates that such consent and appointment is irrevocable and coupled with an interest.

 

Section 10.08                      WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

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Section 10.09                      Counterparts; Effectiveness; Third Party Beneficiaries.  This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by all of the other parties hereto.  Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication).  No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any Person other than the parties hereto and their respective successors and assigns.

 

Section 10.10                      Entire Agreement.  This Agreement, the Confidentiality Agreement, the Escrow Agreement and the other Transaction Documents constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof and thereof.

 

Section 10.11                      Severability.  If any term, provision, covenant or restriction contained in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; and in lieu of each such invalid, void or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such invalid, void or unenforceable provision as may be valid, binding and enforceable.

 

Section 10.12                      Specific Performance.  The Parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the Parties shall be entitled to an injunction or injunctions to prevent breaches or threatened breaches of this Agreement (without posting any bond or other undertaking) or to enforce specifically the performance of the terms and provisions hereof in any federal court located in the Northern District of Texas or any Texas State court sitting in Dallas, in addition to any other remedy to which they are entitled at law or in equity.

 

Section 10.13                      Certain Acknowledgements and Limitations.

 

(a)                       Buyer confirms, acknowledges and agrees that it has had access to and has inspected the books, records and assets of Debtors to the extent that it wished to do so prior to the execution of this Agreement and that Buyer is relying upon its own investigations and inspections of the books, records and assets of Debtors prior to the execution of this Agreement in entering into this Agreement and proceeding with the Transactions on the terms as set forth herein.  Buyer acknowledges and agrees that any description of the Debtors, their businesses, operations and assets (including the Oil and Gas Interests) in this Agreement, the Disclosure Schedules or any other Transaction Document is for the sole purpose of identification only and no representation, warranty or condition is or will be given by Debtors in respect of the accuracy of any description, except as expressly set forth in Article III herein.  Buyer has reviewed and has had access to all documents, records and information which it has desired to review prior to the execution of this Agreement, and has had the opportunity to ask questions,

 

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and has received sufficient answers, in connection with its decision to enter into this Agreement, and to consummate the Transactions.  In deciding to enter into this Agreement, and to consummate the Transactions, other than the express representations and warranties of Cano set forth in Article III, Buyer has relied solely upon its own knowledge, investigation, judgment and analysis and not on any disclosure or representation made by, or any duty to disclose on the part of, Debtors or Debtors’ Representatives.

 

(b)                       Any and all duties and obligations which any Party may have to any other Party with respect to or in connection with this Agreement, the other Transaction Documents or the Transactions are limited to those specifically set forth in this Agreement and the other Transaction Documents.  Neither the duties nor obligations of any Party, nor the rights of any Party, shall be expanded beyond the terms of this Agreement and the other Transaction Documents on the basis of any legal or equitable principle or on any other basis whatsoever.  Neither any equitable or legal principle nor any implied obligation of good faith or fair dealing nor any other matter requires any Party to incur, suffer or perform any act, condition or obligation contrary to the terms of this Agreement and the other Transaction Documents, whether or not existing and whether foreseeable or unforeseeable.  Each of the Parties acknowledges that it would be unfair, and that it does not intend, to increase any of the obligations of the other Party on the basis of any implied obligation or otherwise.

 

(c)                        EACH OF BUYER AND THE DEBTORS AGREE THAT, (A) EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES MADE BY CANO THAT ARE EXPRESSLY SET FORTH IN ARTICLE III OF THIS AGREEMENT, NEITHER DEBTORS NOR ANY OF THEIR AFFILIATES OR REPRESENTATIVES HAVE MADE AND SHALL NOT BE DEEMED TO HAVE MADE TO BUYER OR TO ANY OF ITS REPRESENTATIVES ANY REPRESENTATION OR WARRANTY OF ANY KIND, AND (B) EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES MADE BY BUYER THAT ARE EXPRESSLY SET FORTH IN ARTICLE IV AND SECTION 9.03(D) OF THIS AGREEMENT, NEITHER BUYER NOR ANY OF THEIR AFFILIATES OR REPRESENTATIVES HAVE MADE AND SHALL NOT BE DEEMED TO HAVE MADE TO DEBTORS OR TO ANY OF ITS REPRESENTATIVES ANY REPRESENTATION OR WARRANTY OF ANY KIND.  NO PERSON HAS BEEN AUTHORIZED BY DEBTORS TO MAKE ANY REPRESENTATION OR WARRANTY RELATING TO DEBTORS OR THEIR BUSINESS OR OPERATIONS OR THE ASSETS, OR OTHERWISE IN CONNECTION WITH THE TRANSACTIONS AND, IF MADE, SUCH REPRESENTATION OR WARRANTY MAY NOT BE RELIED UPON.  NO PERSON HAS BEEN AUTHORIZED BY BUYER TO MAKE ANY REPRESENTATION OR WARRANTY RELATING TO BUYER OR ITS BUSINESSES OR OPERATIONS, OR OTHERWISE IN CONNECTION WITH THE TRANSACTIONS AND, IF MADE, SUCH REPRESENTATION OR WARRANTY MAY NOT BE RELIED UPON.  BUYER FURTHER AGREES THAT NO DEBTORS SHALL HAVE OR BE SUBJECT TO ANY LIABILITY TO BUYER OR ANY OTHER PERSON OR ENTITY RESULTING FROM THE DISTRIBUTION TO BUYER, OR THEIR RESPECTIVE USE, OF ANY SUCH INFORMATION. BUYER FURTHER AGREES AND ACKNOWLEDGES THAT NO DEBTOR SHALL HAVE OR BE SUBJECT TO ANY LIABILITY TO BUYER OR ANY OTHER PERSON OR ENTITY RESULTING FROM

 

49



 

THE DISTRIBUTION TO BUYER, OR THEIR RESPECTIVE USE, OF ANY SUCH INFORMATION.

 

(d)                       UNDER NO CIRCUMSTANCES SHALL ANY PARTY TO THIS AGREEMENT BE LIABLE FOR ANY SPECIAL, EXEMPLARY, PUNITIVE, REMOTE, SPECULATIVE, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES OR LIABILITIES ARISING OUT OF ANY ACTUAL, ALLEGED OR INTENTIONAL BREACH OF THIS AGREEMENT, INCLUDING LOSS OF REVENUE OR INCOME, DAMAGES BASED ON ANY MULTIPLIER OF PROFITS OR OTHER VALUATION METRIC, COST OF CAPITAL, DIMINUTION OF VALUE OR LOSS OF BUSINESS REPUTATION OR OPPORTUNITY, AND NO CLAIM SHALL BE MADE OR AWARDED AGAINST ANY PARTY TO THIS AGREEMENT THEREFOR.

 

Section 10.14                      Disclosure Schedules.  All references to Schedules in Article III of this Agreement refer to Schedules contained in the Disclosure Schedule.  The information in the Disclosure Schedule constitutes exceptions, qualifications and/or supplements to particular representations or warranties of Cano as set forth in this Agreement.  The Disclosure Schedule shall not be construed as indicating that any disclosed information is required to be disclosed, and no disclosure shall be construed as an admission that such information is material to, outside the ordinary course of business of, or required to be disclosed by, Cano or constitutes a Material Adverse Effect.  Capitalized terms used in the Disclosure Schedule that are not defined therein and are defined in this Agreement shall have the meanings given to them in this Agreement.  The captions contained in the Disclosure Schedule are for the convenience of reference only, and shall not be deemed to modify or influence the interpretation of the information contained in the Disclosure Schedules or this Agreement.  The statements in each Schedule of the Disclosure Schedule qualify and relate to the corresponding provisions in the Sections of this Agreement to which they expressly refer and to each other provision in this Agreement to which the applicability of a statement or disclosure in a particular Schedule of the Disclosure Schedule is reasonably apparent on its face.

 

ARTICLE XI
PURCHASE PRICE DEPOSIT

 

Section 11.01                      Escrow Deposit.  No later than one (1) Business Day after the execution of this Agreement by all Parties, Buyer shall deposit with Hal Commercial Escrow Services, Inc., a Texas corporation, in its capacity as escrow agent (the “Escrow Agent”) pursuant to the Escrow Agreement, $2,000,000 in cash or other form of immediately available U.S. funds (together with any and all interest and other earnings thereon while held by the Escrow Agent, the “Escrow Amount”), which Escrow Amount shall be held, invested and released by the Escrow Agent in accordance with the provisions of the Escrow Agreement and this Article XI.

 

Section 11.02                      Distribution of Escrow Amount.  Subject to the provisions of the Escrow Agreement, the Escrow Amount shall be distributed as follows:

 

(a)                       if (i) this Agreement is terminated prior to Closing by Cano pursuant to (A) Section 9.01(e)(ii) and Cano is permitted to so terminate this Agreement notwithstanding

 

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the last paragraph of Section 9.01 or (B) Section 9.01(e)(v) or (ii) the conditions to the obligations of Buyer to consummate the Closing set forth in Section 8.01 and Section 8.02 shall have been satisfied or waived by Buyer but Buyer shall have failed to perform their obligations under Section 2.01 or Section 2.02 for more than two (2) Business Days after notice thereof by Cano, then the Escrow Amount shall be delivered to Cano (subject to deduction for any amounts payable by Cano or Buyer, as applicable, to the Escrow Agent under the Escrow Agreement); provided that such distribution of the Escrow Amount to Cano shall in no event be deemed a deposit, advance or other prepayment of any future amount that Buyer may become obligated to pay to Cano for any reason; or

 

(b)                       if the Closing shall occur or if this Agreement is terminated prior to Closing for any reason other than as stated in Section 11.02(a), the Escrow Amount shall be delivered to Buyer (subject to deduction for any amounts payable by Cano or Buyer to the Escrow Agent under the Escrow Agreement).

 

Section 11.03                      Disbursement Directions.  When any Party becomes entitled to any distribution of all or any portion of the Escrow Amount pursuant to this Agreement, Buyer and Cano shall promptly execute and deliver to the Escrow Agent joint written instructions setting forth the amounts to be paid to such Party from the Escrow Amount in accordance with Section 11.02 (a “Joint Direction”).  Each of Buyer and Cano agree to confer as promptly as practicable and to use its reasonable best efforts to reach agreement as to the calculation of and entitlement to such amounts.  In furtherance and not in limitation of the foregoing:

 

(a)                       Buyer and Cano agree jointly to instruct the Escrow Agent in writing within two (2) Business Days after any termination of this Agreement or prior to Closing to distribute the Escrow Amount in accordance with Section 11.02(a) or Section 11.02(b), as applicable; and

 

(b)                       if Cano or Buyer shall fail to execute and deliver a Joint Direction, either Cano or Buyer, as applicable, shall be entitled to receive distributions from the Escrow Amount from the Escrow Agent promptly upon delivery to the Escrow Agent of a written instruction, order or judgment (setting forth the amounts to be paid to such Party pursuant to Section 11.02) issued or entered by (A) the Bankruptcy Court, if the Bankruptcy Cases are open or the Bankruptcy Court then has jurisdiction to enter such instruction, order or judgment or (B) if the Bankruptcy Cases have been closed or the Bankruptcy Court no longer has such jurisdiction, a court of competent jurisdiction.

 

[Remainder of page intentionally left blank.  Signature pages to follow.]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

 

BUYER:

 

 

 

NBI SERVICES, INC.

 

 

 

 

 

By:

/s/ Richard J. Nichols

 

 

Richard J. Nichols,

 

 

Chief Executive Officer

 

 

 

 

 

DEBTORS:

 

 

 

Cano Petroleum, Inc.

 

 

 

 

 

By:

/s/ James R. Latimer III

 

 

James R. Latimer III,

 

 

Chief Executive Officer

 

 

 

 

 

Cano Petro of New Mexico, Inc.

 

 

 

 

 

By:

/s/ James R. Latimer III

 

 

James R. Latimer III,

 

 

President

 

 

 

 

 

Ladder Companies, Inc.

 

 

 

 

 

By:

/s/ James R. Latimer III

 

 

James R. Latimer III,

 

 

President

 

 

 

 

 

Square One Energy, Inc.

 

 

 

 

 

By:

/s/ James R. Latimer III

 

 

James R. Latimer III,

 

 

President

 

SIGNATURE PAGE TO

STOCK PURCHASE AGREEMENT

 



 

 

Tri-Flow, Inc.

 

 

 

 

 

By:

/s/ James R. Latimer III

 

 

James R. Latimer III,

 

 

President

 

 

 

 

 

W.O. Energy of Nevada, Inc.

 

 

 

 

 

By:

/s/ James R. Latimer III

 

 

James R. Latimer III,

 

 

President

 

 

 

 

 

WO Energy, Inc.

 

 

 

 

 

By:

/s/ James R. Latimer III

 

 

James R. Latimer III,

 

 

President

 

 

 

 

 

W.O. Operating Company, Ltd.

 

 

 

By: WO Energy, Inc., its general partner

 

 

 

 

 

By:

/s/ James R. Latimer III

 

 

James R. Latimer III,

 

 

President

 

 

 

 

 

W.O. Production Company, Ltd.

 

 

 

By: WO Energy, Inc., its general partner

 

 

 

 

 

By:

/s/ James R. Latimer III

 

 

James R. Latimer III,

 

 

President

 

SIGNATURE PAGE TO

STOCK PURCHASE AGREEMENT

 



 

EXHIBIT A

 

PLAN OF REORGANIZATION

 

[See attached.]

 



 

David M. Bennett

Texas Bar No. 02139600

Katharine E. Battaia

Texas Bar No. 24046712

THOMPSON & KNIGHT LLP

1722 Routh Street, Suite 1500

Dallas, Texas 75201

214.969.1700 (telephone)

214.969.1751 (facsimile)

david.bennett@tklaw.com

katie.battaia@tklaw.com

Demetra L. Liggins

Texas Bar No. 24026844

THOMPSON & KNIGHT LLP

333 Clay Street, Suite 3300

Houston, Texas 77002

713.654.8111 (telephone)

713.654.1871 (facsimile)

demetra.liggins@tklaw.com

 

 

Proposed Counsel for Debtors and Debtors-in-Possession

 

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

 

IN RE

 

§

 

 

 

 

§

 

CASE NO.

CANO PETROLEUM, INC., ET AL.

 

§

 

JOINTLY ADMINISTERED

 

 

§

 

 

Debtors.

 

§

 

(CHAPTER 11)

 

JOINT PLAN OF REORGANIZATION

 

DATED:  March 7, 2012.

 

JOINT PLAN OF REORGANIZATION

 



 

TABLE OF CONTENTS

 

 

Page

 

 

ARTICLE I DEFINED TERMS, RULES OF INTERPRETATION, AND COMPUTATION OF TIME

1

Section 1.01

Scope of Defined Terms; Rules of Construction

1

Section 1.02

Defined Terms

1

Section 1.03

Rules of Interpretation

16

Section 1.04

Computation of Time

16

Section 1.05

Reference to Monetary Figures

16

Section 1.06

Exhibits and Plan Supplement

16

Section 1.07

Deemed Acts

17

 

 

 

ARTICLE II UNCLASSIFIED CLAIMS (NOT ENTITLED TO VOTE ON THIS PLAN)

17

Section 2.01

Treatment of Administrative Claims

17

Section 2.02

Bar Dates for Certain Claims

17

Section 2.03

Payment of Statutory Fees

19

Section 2.04

Treatment of Priority Tax Claims

19

 

 

 

ARTICLE III CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS

19

Section 3.01

Introduction

19

Section 3.02

Voting; Presumptions

19

Section 3.03

Identification of Claims and Interests

20

 

 

 

ARTICLE IV TREATMENT OF CLAIMS AND INTERESTS

26

Section 4.01

Priority Non-Tax Claims

26

Section 4.02

Senior Secured Claims

27

Section 4.03

UBE Junior Secured Claim

28

Section 4.04

Miscellaneous Secured Claims

29

Section 4.05

General Unsecured Claims

30

Section 4.06

Royalty Claims

30

Section 4.07

Intercompany Claims

30

Section 4.08

Preferred Stock

31

Section 4.09

Interests

31

Section 4.10

One Satisfaction of Senior Secured Claims and UBE Junior Secured Claim

31

 

 

 

ARTICLE V ACCEPTANCE OR REJECTION OF THIS PLAN

32

Section 5.01

Designation of Unimpaired Classes

32

Section 5.02

Designation of Impaired Classes

32

Section 5.03

Classes Entitled to Vote

32

Section 5.04

Classes Not Entitled to Vote

32

Section 5.05

Date of Distributions on Account of Allowed Claims

32

Section 5.06

Sources of Cash for the Plan Distributions

33

Section 5.07

Cram Down — Nonconsensual Confirmation

33

 

I



 

ARTICLE VI MEANS FOR IMPLEMENTATION OF THIS PLAN AND POST EFFECTIVE DATE GOVERNANCE

33

Section 6.01

Sale of the Acquired Property

33

Section 6.02

Application of PSA Sale Proceeds

33

Section 6.03

Available Cash

34

Section 6.04

Other Assets

34

Section 6.05

Avoidance Actions

35

Section 6.06

Purchase and Sale Agreement and Related Documents

35

Section 6.07

Deemed Consolidation of Debtors for Plan Purposes Only

35

Section 6.08

Creation of Liquidating Trust

36

Section 6.09

Governance Documents

36

Section 6.10

Directors and Officers

36

Section 6.11

Cancellation of Existing Secured Claims

36

Section 6.12

Vesting of the Vested Assets

36

Section 6.13

Cancellation of Interests,

37

Section 6.14

Issuance of New Interests

37

Section 6.15

Exemption from Registration

38

Section 6.16

Authorization for Transaction

38

Section 6.17

Preservation of Rights of Action; Settlement

38

Section 6.18

Employee Benefit Plans

39

Section 6.19

Exclusivity Period

39

Section 6.20

Effectuating Documents

39

Section 6.21

Exemption from Certain Transfer Taxes

40

Section 6.22

Liquidating Trustee Closing of the Chapter 11 Cases

40

 

 

 

ARTICLE VII LIQUIDATING TRUST AND LIQUIDATING TRUSTEE

40

Section 7.01

The Creation of the Liquidating Trust

40

Section 7.02

Funding of Res of Trust

40

Section 7.03

The Liquidating Trustee

41

Section 7.04

Retention of Professionals

41

Section 7.05

Compensation of the Liquidating Trustee

42

Section 7.06

Liquidating Trust Expenses

42

Section 7.07

Liability; Indemnification

42

Section 7.08

Termination

43

Section 7.09

Liquidating Trustee Authority

43

 

 

 

ARTICLE VIII PROVISIONS GOVERNING DISTRIBUTIONS GENERALLY

44

Section 8.01

Timing and Delivery of Distributions

44

Section 8.02

Method of Cash Distributions

44

Section 8.03

Failure to Negotiate Checks

44

Section 8.04

Fractional Dollars

45

Section 8.05

Compliance with Tax Requirements

45

Section 8.06

De Minimis Distributions

45

Section 8.07

Setoffs

45

Section 8.08

Distribution Record Date

45

 

II



 

ARTICLE IX RESERVES ADMINISTERED BY THE LIQUIDATING TRUST

46

Section 9.01

Establishment of Reserve Accounts, Other Assets and Beneficiaries

46

Section 9.02

Undeliverable Distribution Reserve

46

Section 9.03

Claims Reserve

46

Section 9.04

Gift Reserve

47

Section 9.05

Liquidating Trust Expense Reserve

47

Section 9.06

Avoidance Actions Proceeds Reserve

47

 

 

 

ARTICLE X EXECUTORY CONTRACTS, UNEXPIRED LEASES, AND OTHER AGREEMENTS

47

Section 10.01

Assumption/Rejection

47

Section 10.02

Cure Amounts

48

Section 10.03

Assumed Executory Contracts and Unexpired Leases

48

Section 10.04

Insurance Policies

48

Section 10.05

Pass-through

48

Section 10.06

Claims Based on Rejection of Executory Contracts and Unexpired Leases

49

Section 10.07

Reservation of Rights

49

Section 10.08

Nonoccurrence of Effective Date

49

 

 

 

ARTICLE XI PROCEDURES FOR RESOLVING DISPUTED, CONTINGENT, AND UNLIQUIDATED CLAIMS

49

Section 11.01

Expunging of Certain

49

Section 11.02

Objections to Claims

50

Section 11.03

Estimation of Claims

50

Section 11.04

No Distributions Pending Allowance

51

Section 11.05

Distributions After Allowance

51

Section 11.06

Reduction of Claims

51

 

 

 

ARTICLE XII CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THIS PLAN

51

Section 12.01

Conditions Precedent to Confirmation

51

Section 12.02

Occurrence of the Effective Date

52

Section 12.03

Substantial Consummation

53

Section 12.04

Waiver of Conditions

53

Section 12.05

Revocation, Withdrawal, or Non-Consummation

53

 

 

 

ARTICLE XIII AMENDMENTS AND MODIFICATIONS

53

 

 

ARTICLE XIV RETENTION OF JURISDICTION

54

 

 

 

ARTICLE XV EFFECT OF THIS PLAN ON CLAIMS AND INTEREST

55

Section 15.01

Compromise and Settlements

55

Section 15.02

Satisfaction of Claims

56

Section 15.03

Discharge of Liabilities

56

Section 15.04

Releases

57

Section 15.05

Exculpation

61

Section 15.06

Permanent Injunction

61

Section 15.07

Setoffs

61

 

III



 

Section 15.08

Recoupment

62

Section 15.09

Release of Liens

62

Section 15.10

Good Faith

62

Section 15.11

Rights of defendants and Avoidance Actions

62

 

 

 

ARTICLE XVI MISCELLANEOUS PROVISIONS

63

Section 16.01

Severability of Plan Provisions

63

Section 16.02

Successors and Assigns

63

Section 16.03

Binding Effect

63

Section 16.04

Notices

63

Section 16.05

Term of Injunctions or Stay

64

Section 16.06

Dissolution of Committee

64

Section 16.07

No Admissions

65

Section 16.08

Notice of the Effective Date

65

Section 16.09

Default Under Plan

65

Section 16.10

Governing Law

65

Section 16.11

Plan Documents

66

Section 16.12

Entire Agreement

66

 

 

 

ARTICLE XVII CONFIRMATION REQUEST

66

 

IV



 

INTRODUCTION

 

Cano Petroleum, Inc., (“Cano”) and its debtor affiliates, as debtors and debtors-in-possession (collectively, the “Debtors”)(1) filed for bankruptcy protection on March 7, 2012.  The Debtors hereby propose the following Joint Plan of Reorganization for the resolution of outstanding creditor claims against, and equity interests in, the Debtors.  The Debtors are the proponents of this Plan within the meaning of Bankruptcy Code § 1129 (as hereinafter defined).

 

Although styled as a “joint plan,” this Plan consists of nine (9) separate plans (one for each of the Debtors).  Consequently, except as provided in this Plan for purposes of voting on this Plan and making and receiving distributions under this Plan, votes will be tabulated separately for each Debtor with respect to each Debtor’s plan of reorganization and distributions will be made separately to each separate Class as provided in this Plan.  Reference is made to the Disclosure Statement (as hereinafter defined) for a discussion of the Debtors’ history, businesses, properties, results of operations and projections of future operations, as well as a summary and description of this Plan and certain related matters.  No materials other than the Disclosure Statement, this Plan and any exhibits and schedules attached hereto or thereto or referenced herein or therein have been authorized by the Debtors for use in soliciting acceptances or rejections of this Plan.

 

ALL HOLDERS OF CLAIMS OR INTERESTS ARE ENCOURAGED TO READ THIS PLAN AND THE DISCLOSURE STATEMENT CAREFULLY AND IN THEIR ENTIRETY BEFORE VOTING ON THIS PLAN.

 

ARTICLE I

 

DEFINED TERMS, RULES OF INTERPRETATION,
AND COMPUTATION OF TIME

 

Section 1.01         Scope of Defined Terms; Rules of Construction

 

For purposes of this Plan, except as expressly defined elsewhere in this Plan or unless the context otherwise requires, all capitalized terms used herein shall have the meanings ascribed to them in Article I of this Plan.  Any term used but not defined herein that is defined in the Bankruptcy Code or the Bankruptcy Rules, as the case may be, shall have the meaning ascribed in the Bankruptcy Code or the Bankruptcy Rules.  Whenever the context requires, such terms shall include the plural as well as the singular.  The masculine gender shall include the feminine, and the feminine gender shall include the masculine.

 

Section 1.02         Defined Terms

 

(1)                                 Acquired Property means the New Interests and/or the Debtors’ Assets, as the case may be, that are purchased by the Successful Bidder pursuant to the Purchase and Sale Agreement.

 


(1)  The Debtors include Cano Petroleum, Inc., Cano Petro of New Mexico, Inc., Ladder Companies, Inc., Square One Energy, Inc., Tri-Flow, Inc., WO Energy of Nevada, Inc., W.O. Operating Company, Ltd., W.O. Production Company, Ltd., and WO Energy, Inc.

 

1



 

(2)           Administrative Claim(s) means a Claim(s) for costs and expenses of administration pursuant to Bankruptcy Code §§ 503(b), 507(a)(2), 507(b), or 1114(e)(2), including:  (a) the actual and necessary costs and expenses incurred after the Petition Date and through the Effective Date of preserving the Estates and operating the businesses of the Debtors (such as wages, salaries, or commissions for services, and payments for goods and other services and leased premises); (b) all fees and charges assessed against the Estates pursuant to section 1930 of chapter 123 of Title 28 of the United States Code; (c) all Allowed Professional Fee Claims; (d) any Cure Costs; and (e) all Claims for compensation or expense reimbursement for making a substantial contribution in the Chapter 11 Cases pursuant to Bankruptcy Code §§ 503(b)(3), (4), and (5) Allowed by the Bankruptcy Court.

 

(3)           Administrative Claims Bar Date shall have the meaning set forth in Section 2.02 of this Plan unless the Bankruptcy Court orders otherwise.

 

(4)           Affiliate has the meaning set forth in Bankruptcy Code § 101(2).  For purposes of Article XVI of the Plan and the definition of Related Person, an Affiliate of a Person shall also include another Person controlling, controlled by or under common control with such first Person.  For purposes of this definition, “control” means, when used with respect to any Person, 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 correlative meanings.

 

(5)           Allowed means with reference to any Claim or Interest:  any Claim or Interest or any portion thereof (a) as to which no objection to allowance has been interposed on or before the latter of (i) the Claims Objection Deadline or (ii) the expiration of such other applicable period of limitation fixed by the Bankruptcy Code, the Bankruptcy Rules, or the Bankruptcy Court, or is listed on the Bankruptcy Schedules as liquidated, non-contingent and undisputed; (b) as to which any objection to its allowance has been settled, waived through payment or withdrawn, as permitted herein, or denied by a Final Order; (c) as to which liability of the Debtors and the amount thereof has been determined and expressly allowed by a Final Order; (d) as to which the liability of the Debtors and the amount thereof are determined and expressly allowed by Final Order of a court of competent jurisdiction other than the Bankruptcy Court; or (e) that is expressly deemed allowed in a liquidated amount in this Plan; provided, however, that with respect to an Administrative Claim, “Allowed Administrative Claim” means an Administrative Claim as to which a timely request for payment has been made in accordance with Section 2.02 of this Plan (if such written request is required) or other Administrative Claim, in each case as to which the Debtors, the Pre-Petition Agents, or the Liquidating Trustee (1) have not interposed a timely objection or (2) have interposed a timely objection and such objection has been settled, waived through payment or withdrawn, as permitted herein, or denied by a Final Order.

 

(6)           Allowed Plan Carve Out Claims means the Allowed Administrative Claims (including Cure Costs), Allowed Priority Tax Claims, Allowed Priority Non-Tax Claims, Allowed Miscellaneous Secured Claims, and Allowed Royalty Claims.

 

(7)           Auction means the Bankruptcy Court ordered event by which competing bids are obtained for the Acquired Property as contemplated by the Bid Procedures Order.

 

(8)           Available Cash means all Cash and Cash Equivalents of the Debtors, determined in accordance with generally accepted accounting principles in the United States, as of 11:59 PM on the date immediately before the Closing.

 

(9)           Avoidance Actions means any and all actual or potential claims or Causes of Action to avoid a transfer of property or an obligation incurred by the Debtors pursuant to any

 

2



 

applicable section of the Bankruptcy Code, including §§ 544, 545, 547, 548, 549, 550, 551, 553(b), and 724(a).

 

(10)         Avoidance Actions Proceeds means the proceeds of the resolution of Avoidance Actions.

 

(11)         Avoidance Actions Proceeds Reserve means the Distribution Reserve Account established for the Avoidance Actions Proceeds.

 

(12)         Ballot means the document for accepting or rejecting the Plan, in the form approved by the Bankruptcy Court.

 

(13)         Balloting Agent means BMC Group, employed and retained by the Debtors pursuant to an order of the Bankruptcy Court [Dkt. No.       ], as noticing and balloting agent.

 

(14)         Bankruptcy Code means the Bankruptcy Reform Act of 1978, as codified in title 11 of the United States Code, 11 U.S.C. §§ 101-1532, as in effect on the Petition Date as heretofore or hereafter amended.

 

(15)         Bankruptcy Court means the United States Bankruptcy Court for the Northern District of Texas, Dallas Division or any other bankruptcy court having jurisdiction over the Chapter 11 Cases from time to time.

 

(16)         Bankruptcy Rules means, collectively, the Federal Rules of Bankruptcy Procedure and the Official Bankruptcy Forms, as amended, the Federal Rules of Civil Procedure, as amended, as applicable to the Chapter 11 Cases or proceedings therein, and the Local Rules of the Bankruptcy Court, as applicable to the Chapter 11 Cases or proceedings therein, as the case may be.

 

(17)         Bankruptcy Schedules means the schedules of assets and liabilities, lists of executory contracts and unexpired leases, and related information Filed by the Debtors pursuant to Bankruptcy Code § 521 and Bankruptcy Rule 1007(b), as such schedules may be amended or supplemented from time to time as permitted hereunder in accordance with Bankruptcy Rule 1009 or orders of the Bankruptcy Court.

 

(18)         Bankruptcy SOFAs means the statements of financial affairs and related financial information Filed by the Debtors pursuant to Bankruptcy Code § 521 and Bankruptcy Rule 1007(b), as such statements may be amended or supplemented from time to time as permitted hereunder in accordance with Bankruptcy Rule 1009 or orders of the Bankruptcy Court.

 

(19)         Bar Date(s) means the applicable date(s) designated by the Bankruptcy Court as the last date for Filing proofs of Claims or Interests in the Chapter 11 Cases of the respective Debtors.

 

(20)         Bid Procedures means those certain Bid Procedures approved pursuant to the Bid Procedures Order.

 

(21)         Bid Procedures and Sale Motion means that certain Motion to (A) Approve the Stock Purchase Agreement and Authorize the Debtors to Enter Into the Stock Purchase Agreement and Comply with Their Obligations Thereunder; (B) Approve a Break-Up Fee in Connection with the Transaction Contemplated by the Stock Purchase Agreement; (C)  Approve the Procedures for the Solicitation of Higher or Better Offers; (D) Approve the Form and Manner of Notice; (E) Approve Procedures for Determining Cure Amounts for Executory

 

3



 

Contracts and Unexpired Leases; and (F) Grant Related Relief [Dkt. No.       ] Filed on March 7, 2012.

 

(22)         Bid Procedures Order means that certain Order (A) Approving the Stock Purchase Agreement and Authorize the Debtors to Enter Into the Stock Purchase Agreement and Comply with Their Obligations Thereunder; (B) Approving the Break-Up Fee in Connection with the Transaction Contemplated by the Stock Purchase Agreement; (C)  Approving the Procedures for the Solicitation of Higher or Better Offers; (D) Approving the Form and Manner of Notice; (E) Approving Procedures for Determining Cure Amounts for Executory Contracts and Unexpired Leases; and (F) Granting Related Relief [Dkt. No.        ], which was entered by the Bankruptcy Court on                           , 2012.

 

(23)         Business Day means any day, excluding Saturdays, Sundays or “legal holidays” (as defined in Bankruptcy Rule 9006(a)), on which commercial banks are open for business in Dallas, Texas.

 

(24)         Cano means Cano Petroleum, Inc., a Delaware corporation, the Debtor in Case No.                pending in the Bankruptcy Court, and one of the jointly-administered Debtors in the Chapter 11 Cases.

 

(25)         Cano New Mexico means Cano Petro of New Mexico, Inc., a Texas Corporation, the Debtor in Case No.          pending in the Bankruptcy Court, and one of the jointly administered Debtors in the Chapter 11 Cases.

 

(26)         Cash means legal currency of the United States of America or equivalents thereof, including bank deposits and checks.

 

(27)         Cash Collateral Budget(s) means the budget(s) approved as part of any Cash Collateral Order entered in the Bankruptcy Cases.

 

(28)         Cash Collateral Order  means an order(s) of the Bankruptcy Court authorizing the Debtors’ use of cash collateral during the pendency of the Chapter 11 Cases.

 

(29)         Cash Equivalents means any item or asset of Debtors readily converted to Cash, such as bank accounts, marketable securities, treasury bills, certificate of deposit, commercial paper maturing less than one year from date of issue, or other liquid investments.

 

(30)         Causes of Action means all actions, causes of action, liabilities, obligations, rights, suits, damages, judgments, remedies, demands, setoffs, defenses, recoupments, crossclaims, counterclaims, third-party claims, indemnity claims, contribution claims, or any other claims whatsoever, whether known or unknown, matured or unmatured, fixed or contingent, liquidated or unliquidated, disputed or undisputed, suspected or unsuspected, foreseen or unforeseen, direct or indirect, choate or inchoate, existing or hereafter arising, in law, equity, or otherwise, based in whole or in part upon any act or omission or other event occurring before the Petition Date or during the course of the Chapter 11 Cases, including through the Effective Date.

 

(31)         Chapter 11 Case(s) means (a) when used in reference to a particular Debtor or group of Debtors, the Chapter 11 case or cases pending for that Debtor or particular group of Debtors in the Bankruptcy Court, and (b) when used in reference to all of the Debtors, the above-captioned jointly-administered Chapter 11 cases pending for the Debtors in the Bankruptcy Court.

 

4



 

(32)         Claim means a claim, whether or not asserted or Allowed, as defined in Bankruptcy Code § 101(5).

 

(33)         Claim Objection Deadline means the first Business Day, which is at least 180 days after the Effective Date, or such later date as may be established by the Bankruptcy Court in accordance with Section 11.02(b) of the Plan.

 

(34)         Claims Reserve means the sum of (a) all budgeted expenses (including Professional Fees) set forth in the Cash Collateral Budget which are incurred and unpaid as of the Closing, but only to the extent any such expense is not greater than the budgeted line item for such expense and such expense exceeds the amount of any retainer or deposit held by the party to whom the expense is owed; and (b) the Plan Carve Out.

 

(35)         Class means a category of Claims or Interests as set forth in Article III below pursuant to Bankruptcy Code § 1122.

 

(36)         Closing means the closing of the sale of the Acquired Property to the Purchaser in accordance with the Sale Order and/or the Confirmation Order.

 

(37)         Closing Accounts Receivable shall have the meaning set forth in the Purchase and Sale Agreement.

 

(38)         Collateral means any property or interest in property of the Debtors’ Estates subject to a Lien to secure the payment or performance of a Claim, which Lien is not subject to avoidance under the Bankruptcy Code or otherwise invalid under the Bankruptcy Code or applicable state law.

 

(39)         Committee means the official committee of unsecured creditors, if any, appointed pursuant to Bankruptcy Code § 1102(a) in the Chapter 11 Cases.

 

(40)         Confirmation means entry by the Bankruptcy Court of the Confirmation Order on the docket of the Chapter 11 Cases.

 

(41)         Confirmation Date means the date on which the Confirmation Order is entered on the docket in the Chapter 11 Cases within the meaning of Bankruptcy Rules 5003 and 9021.

 

(42)         Confirmation Hearing means the hearing(s) held by the Bankruptcy Court to consider Confirmation of this Plan pursuant to Bankruptcy Code § 1129, as such hearing may be continued from time to time.

 

(43)         Confirmation Order means the order entered by the Bankruptcy Court confirming this Plan pursuant to Bankruptcy Code § 1129.

 

(44)         Consummation means the occurrence of the Effective Date, which shall take place simultaneously with the completion of the Closing.

 

(45)         Combined Hearing shall mean the Confirmation Hearing and the Sale Hearing, as such hearings may be continued from time to time.

 

(46)         Credit Agreements means the Senior Credit Agreement and the Junior Credit Agreement.

 

(47)         Creditor means any Person who holds a Claim against any Debtor.

 

5



 

(48)         Cure Costs means all costs required of a Debtor to cure any and all monetary defaults including pecuniary losses, pursuant to Bankruptcy Code § 365, of such Debtor arising under any Desired 365 Contract.

 

(49)         Debtor(s) means individually or collectively the following debtors and debtors-in-possession:  Cano, Cano New Mexico, Ladder, Square One, Tri-Flow, W.O. Nevada, W.O. Operating, W.O. Production, and WO Energy.

 

(50)         Debtors’ Assets means substantially all of the assets of the Debtors as of the date of Auction, but specifically excluding cash, accounts receivables, deposits, interest in insurance policies (other than proceeds of a casualty loss), or the proceeds thereof, any and all other litigation rights or other claims and causes of action (including Avoidance Actions) arising under state or federal law, and any tax refund claims.

 

(51)         Desired 365 Contract means any and all executory contracts and unexpired leases (a) to be assumed by one or more of the Debtors and vested in the respective Reorganized Debtors; or (b) designated by the Purchaser as a Desired 365 Contract and assumed by one or more of the Debtors and assigned to the Purchaser, each on the Effective Date pursuant to the Purchase and Sale Agreement, and as set forth in Article X.

 

(52)         Disallowed means all or such part of a Claim that is disallowed by a Final Order of the Bankruptcy Court or other court of competent jurisdiction.

 

(53)         Disclosure Statement means the Joint Disclosure Statement for the Debtors’ Joint Plan of Reorganization dated as of March 7, 2012, as the same may be amended, modified or supplemented from time to time, including all exhibits and schedules thereto, that is prepared and distributed in accordance with the Bankruptcy Code, the Bankruptcy Rules, and any other applicable law.

 

(54)         Disclosure Statement Order means the Order (A) Approving (I) Disclosure Statement for the Joint Plan of Reorganization for the Debtors, (II) Summary Plan and Disclosure Statement, and (III) Unimpaired Class Notice; (B) Setting Dates for the Objection and Hearing Relating to the Confirmation of the Plan; and (C) Authorizing Other Relief Relating to Plan Solicitation and the Confirmation of the Plan [Dkt. No.       ] entered by the Bankruptcy Court on                       , 2012.

 

(55)         Disputed means, in reference to a Claim or Interest, any Claim or Interest not otherwise Allowed or Disallowed pursuant to this Plan or an order of the Bankruptcy Court (a) which has been Scheduled, or hereafter is listed on the Bankruptcy Schedules as unliquidated, contingent, or disputed, and which has not been resolved by written agreement of the parties (or, in the case of the Plan Carve Out Claims, which has not been resolved by written agreement of the parties and the Pre-Petition Agents or an order of the Bankruptcy Court with respect to which the Pre-Petition Agents have had notice and an opportunity to object); (b) proof of which was required to be Filed but as to which a Proof of Claim or Interest was not timely or properly Filed; (c) proof of which was timely and properly Filed and which has been or hereafter is listed on the Bankruptcy Schedules as unliquidated, disputed, or contingent; (d) that is disputed in accordance with the provisions of this Plan; or (e) as to which the Debtors or Reorganized Debtors, as applicable, or the Pre-Petition Agents or the Liquidating Trustee have interposed a timely objection in accordance with the Bankruptcy Code, the Bankruptcy Rules, and any orders of the Bankruptcy Court, or is otherwise disputed by the Debtors or Reorganized Debtors, as applicable, or the Pre-Petition Agents or the Liquidating Trustee in accordance with applicable law, which objection or dispute has not been withdrawn or determined by a Final Order; provided, however, that for purposes of determining whether a particular Claim is a Disputed Claim before the expiration of any period of limitation fixed for the interposition by the Debtors

 

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or the Pre-Petition Agents or the Liquidating Trustee of objections to the allowance of Claims, any Claim that is not an Allowed Claim shall be deemed Disputed.

 

(56)         Distribution Date means the date(s), occurring as soon as practicable after the Effective Date, upon which distributions are made pursuant to the terms of this Plan to Holders of Allowed Administrative Claims, and other Allowed Claims (other than the Union Senior Secured Claim, the Natixis Hedge Claim, or the UBE Junior Secured Claim); provided, however, that should such Allowed Claims be paid in the ordinary course of business, the Distribution Date shall be the date such Allowed Claim becomes payable under the terms of any contract or agreement or applicable non-bankruptcy law.

 

(57)         Distribution Record Date means the record date which is set forth in Section 8.08 of this Plan.

 

(58)         Distribution Reserve Account(s) shall mean one or more of the following accounts established by the Liquidating Trustee pursuant to this Plan: the Claims Reserve, the Gift Reserve, the Undeliverable Distribution Reserve, the Liquidating Trust Expense Reserve, and/or the Avoidance Actions Proceeds Reserve.

 

(59)         Effective Date means the first Business Day on which all conditions precedent set forth in Section 12.02 of this Plan have been satisfied or waived as permitted hereunder.

 

(60)         Employee Benefit Plans means any employment, compensation, pension, welfare, healthcare, bonus, incentive compensation, sick leave and other leave, vacation pay, expense, reimbursement, dependent care, retirement, savings, deferred compensation, supplemental pension, retention, workers compensation, life insurance, disability, dependent care, dependent healthcare, education, severance or other compensation or benefit plan, agreement or arrangement for the benefit of the current or former directors, offices or employees (whether salaried or hourly, active or retired) of the applicable Debtor.

 

(61)         Entity has the meaning set forth in Bankruptcy Code § 101(15).

 

(62)         Environmental Escrow Funds shall have the meaning set forth in the Purchase and Sale Agreement.

 

(63)         Equity Interests means the New Cano Stock sought to be purchased by the Stalking Horse under the Stalking Horse SPA.

 

(64)         Estate(s) means individually or collectively the estate created for such Debtor in its Chapter 11 Case pursuant to Bankruptcy Code § 541.

 

(65)         Exhibit means an exhibit annexed either to this Plan, the Plan Documents, or the Disclosure Statement or Filed as part of the Plan Supplement.

 

(66)         File, Filed or Filing means file, filed, or filing with the Bankruptcy Court or its authorized designee in the Chapter 11 Cases.

 

(67)         Final Order means an Order of the Bankruptcy Court: (a) as to which the time to appeal, petition for writ of certiorari, or otherwise seek appellate review or to move for re-argument, rehearing, or reconsideration has expired and to which no appeal, petition for writ of certiorari, or other appellate review, or proceeding for re-argument, rehearing, or reconsideration shall be pending; (b) as to which any right to appeal, petition for certiorari, or move for re-argument, rehearing, or reconsideration shall have been waived in writing by the party with such

 

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right; or (c) as to which an appeal, writ of certiorari, motion for re-argument or rehearing has been Filed or sought and such order shall not have been stayed.

 

(68)         Free and Clear means, except as otherwise provided in the Purchase and Sale Agreement, free and clear of all Liens, Claims, Causes of Action, encumbrances, interests, claims, pledges, security interests, rights of setoff, restrictions or limitation on use, successor liabilities, conditions, rights of first refusal, options to purchase, obligations to allow participation, agreements or rights, rights asserted in litigation matters, rights asserted in adversary proceedings in these Cases, competing rights of possession, obligations to lend, matters filed of record that relate to, evidence or secure an obligation of the Debtors or the Estates, (and all created expenses and charges) of any type under, among other things, any document, instrument, agreement, affidavit, matter filed of record, cause, or state or federal law, whether known or unknown, legal or equitable, and all liens, rights of offset, replacement liens, adequate protection liens, charges, obligations, or claims granted, allowed or directed in any Order.

 

(69)         General Unsecured Claim means any Claim that is not Secured, entitled to priority under the Bankruptcy Code, or a Subordinated Equity Securities Claim.

 

(70)         Gifted Amount means Cash in the amount of the lesser of (i) ten percent (10%) of all Allowed General Unsecured Claims; and (ii) $300,000.00 to be transferred to the Liquidating Trust as provided in Section 9.04 of this Plan, but which would otherwise be distributed to the Pre-Petition Secured Lenders on account of the Allowed Senior Secured Claims or the Allowed UBE Junior Secured Claim.

 

(71)         Gift Reserve means the Distribution Reserve Account established for the Gifted Amount.

 

(72)         Governance Documents means any certificate of incorporation, certificate of formation, bylaws, limited liability company agreements (or any other formation and organizational documents) of the Debtors in effect as of the Petition Date.

 

(73)         Governors has the meaning given in Section 6.10 of this Plan.

 

(74)         Holder means the beneficial holder of any Claim or Interest.

 

(75)         Impaired means, when used with reference to a Claim or Interest, a Claim or Interest that is impaired within the meaning of Bankruptcy Code § 1124.

 

(76)         In Pay Status means as to Royalty Claims means the owner of the Royalty Claim (a) whose identity is known; (b) as to which no portion of his/her Royalty Claim is subject to a dispute; and (c) whose properly executed documents of title, including division orders, require the operator to pay such Royalty Claim in accordance with applicable non-bankruptcy law.  To the extent the ownership of a Royalty Claim is subject to a dispute or is the subject of pending litigation, the Royalty Claim is not In Pay Status.

 

(77)         Intercompany Claim means any Claim by a Debtor against another Debtor.

 

(78)         Interest(s) means the interest of any holder of equity securities in any of the Debtors represented by any issued and outstanding common stock or interests, preferred stock or interests, or other instrument evidencing a present ownership interest in any of the Debtors before the Effective Date (including before the Petition Date), whether or not transferable, any restricted stock units, calls, rights, puts, awards, commitments, repurchase rights, unvested or unexercised options, warrants, unvested common interests, unvested preferred interests or any

 

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other agreements of any character related to the common stock or preferred stock interests of any of the Debtors, obligating any of the Debtors to issue, transfer, purchase, redeem, or sell any equity interests or other equity securities, any rights under any equity incentive plans, voting agreements and registration rights agreements regarding equity securities of any of the Debtors, any claims arising from the rescission of a purchase, sale or other acquisition of any outstanding common stock interests or preferred stock interests or other equity securities (or any right, claim, or interest in and to any common stock interests, preferred stock interests or other equity securities) of any of the Debtors, any claims for the payment of any distributions with respect to any common stock or preferred stock interests of any of the Debtors, and any claims for damages or any other relief arising from the purchase, sale, or other acquisition of any of the Debtors’ outstanding common stock interests, preferred stock interests or other equity securities, however evidenced but specifically excluding “Equity Interests” sold to the Purchaser pursuant to the Purchase and Sale Agreement.

 

(79)         Internal Revenue Code means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute or statutes.

 

(80)         Junior Credit Agreement means that certain Subordinated Credit Agreement dated December 17, 2008 among Cano, the financial institutions party thereto from time to time, and UBE as administrative agent and as issuing lender.

 

(81)         Junior Lien Documents means the Junior Credit Agreement, and all other notes, instruments, promissory notes, agreements, deeds of trust, mortgages, security agreements, assignments, pledges, and financing statements that evidence, secure or relate to the Junior Credit Agreement or any liens securing the UBE Junior Secured Claim.

 

(82)         Junior Pre-Petition Agent means UBE, as administrative agent and issuing lender under the Junior Credit Agreement, or any successor thereto.

 

(83)         Junior Secured Lenders mean the lenders and holders of indebtedness under the Junior Credit Agreement or any other Junior Lien Documents.

 

(84)         Ladder means Ladder Companies, Inc., a Delaware corporation, the Debtor in Case No.            pending in the Bankruptcy Court, and one of the jointly-administered Debtors in the Chapter 11 Cases.

 

(85)         Lien means a charge against or interest in property to secure payment of a debt or performance of an obligation.

 

(86)         Liquidating Trust means the entity created pursuant to Article VII of this Plan.

 

(87)         Liquidating Trust Agreement means the document titled “Liquidating Trust Agreement” approved and entered into in accordance with this Plan pursuant to which the Liquidating Trust will be established and administered.

 

(88)         Liquidating Trust Assets  means the assets transferred to the Liquidating Trust, which are: (a) Avoidance Actions; (b) Distribution Reserve Accounts; (c) Other Assets; (d) all remaining amounts from the Environmental Escrow Funds as provided in the Purchase and Sale Agreement; (e) such other assets identified in the Plan Supplement; (f) Unclaimed Property; and (g) the Closing Accounts Receivable and proceeds thereof as set forth in the Purchase and Sale Agreement.

 

(89)         Liquidating Trust Expense Reserve means that Distribution Reserve Account established in accordance with Section 9.05 of this Plan.

 

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(90)         Liquidating Trustee means the Person appointed in accordance with this Plan and the Liquidating Trust Agreement to oversee and administer the Liquidating Trust and as identified in the Plan Supplement.

 

(91)         Miscellaneous Secured Claim means any Secured Claim against any Debtor other than the Union Senior Secured Claim, the Natixis Hedge Claim, or the UBE Junior Secured Claim.

 

(92)         Natixis  means both Natixis and Natixis Financial Products, Inc.

 

(93)         Natixis Hedge Claim means the entirety of any Claim arising under the termination of the Debtors’ swap contracts or under any of the other Natixis Lien Documents.

 

(94)         Natixis Lien Documents means that certain Interest Rate Basis Swap Contract for $20.0 million in notional exposure and those Fixed Priced Commodity Swap Contracts, and all other master agreements, confirmations, instruments, agreements, deeds of trust, mortgage, security agreements, assignments, pledges, and financing statements that evidence secure, or relate to the Natixis Hedge Claim, or any liens securing any of the Natixis Hedge Claim.

 

(95)         NBI means NBI Services, Inc., the buyer under the Stalking Horse SPA.

 

(96)         Net Proceeds means all proceeds received from the sale, disposition, collection or other monetization of any Other Asset, less reasonable and customary out-of-pocket expenses incurred by the Liquidating Trustee in connection with such sale, disposition, collection or other monetization.

 

(97)         New Cano Stock means the shares of stock in Reorganized Cano which will be issued under this Plan in accordance with Bankruptcy Code § 1145 and as described in Section 6.08.

 

(98)         New Interests means the New Cano Stock and New Subsidiaries Equity Interests.

 

(99)         New Subsidiaries Equity Interest means the shares of stock, membership and/or equity interests in the respective Reorganized Subsidiaries issued pursuant to this Plan.

 

(100)      Other Assets  means any assets of the Debtors that are not transferred to the Purchaser at Closing, including but not limited to Unclaimed Property, or (ii) not owned at Closing by a Debtor whose Equity Interests are sold to the Purchaser.

 

(101)      Person means an individual, corporation, general or limited partnership, limited liability company, trust, liquidating trust, incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.

 

(102)      Petition Date means the date on which each of the respective Debtors Filed their voluntary petitions for relief under chapter 11 of the Bankruptcy Code.

 

(103)      Plan means this Joint Plan of Reorganization, including any Exhibits and all supplements, appendices and schedules thereto, either in its present form or as the same may be altered, amended, modified or supplemented from time to time as permitted herein and in accordance with the provisions of the Bankruptcy Code and the terms hereof.

 

(104)      Plan Carve Out means $4,900,000.00, the sum of all estimated Allowed Plan Carve Out Claims.  To the extent that any Allowed Plan Carve Out Claims are paid before the

 

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Plan Carve Out is provided to the Liquidating Trust pursuant to Section 6.02(a), the amount of the Plan Carve Out provided to the Liquidating Trust shall be reduced by the amount of such Claims paid previously

 

(105)      Plan Carve Out Claims means the Administrative Claims (including Cure Costs), the Priority Tax Claims, the Priority Non-Tax Claims, the Miscellaneous Secured Claims, and the Royalty Claims.

 

(106)      Plan Default Notice shall have the meaning set forth in Section 16.08 of this Plan.

 

(107)      Plan Distribution means the payment or distribution under this Plan of Cash, assets, securities or instruments evidencing an obligation under this Plan or other property of any nature to any Holder of an Allowed Claim.

 

(108)      Plan Documents means all documents, forms, lists and agreements contemplated under this Plan (including, but not limited to the Plan Supplement) to effectuate the terms and conditions hereof.

 

(109)      Plan Supplement means any supplement to this Plan, and the compilation of Plan Documents and forms of documents and Exhibits to this Plan, as amended, modified or supplemented from time to time, to be Filed by the Debtors as permitted herein on or before the Plan Supplement Filing Date.

 

(110)      Plan Supplement Filing Date means the date not later than five (5) days before the Voting Deadline, which date may be modified by agreement between the Debtors, the Pre-Petition Agents, the Purchaser, and the Committee, if any.

 

(111)      Plan Support Agreement means that certain Plan Support and Lock-Up Agreement entered into between the Debtors, Union, Natixis, UBE, and the other Supporting Lenders (as defined therein) dated as of March 7, 2012.

 

(112)      Potential Bidder means any Person who wishes to participate in the bidding process.

 

(113)      Preferred Stock means all of the outstanding Series D convertible preferred stock issued by Cano.

 

(114)      Prepaid JOA Funds means Cash paid to any Debtor (in its capacity as operator with respect to operated properties) as prepayments for non-operators’ share of items under operating agreements for which payment has not been made by any Debtor as of the Closing.

 

(115)      Priority Non-Tax Claims means any Claim other than an Administrative Claim or a Priority Tax Claim, entitled to priority in payment as specified in Bankruptcy Code § 507(a).

 

(116)      Priority Tax Claim means a Claim that is entitled to priority pursuant to Bankruptcy Code § 507(a)(8).

 

(117)      Pro Rata means that proportion that a Claim or Interest in a particular Class bears to the aggregate amount of all Claims or Interests in such Class, except in cases where Pro Rata is used in reference to multiple Classes, in which case Pro Rata means the proportion that a Claim or Interest in a particular Class bears to the aggregate amount of all Claims in such multiple Classes.

 

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(118)      Pre-Petition Agents means Union and UBE.

 

(119)      Pre-Petition Senior Secured Agent means Union, as administrative agent and issuing lender under the Senior Credit Agreement, or any successor thereto.

 

(120)      Pre-Petition Secured Lenders means Natixis and the lenders and holders of indebtedness under the Senior Credit Agreement and Junior Credit Agreement.

 

(121)      Professional means any professional (a) employed in the Chapter 11 Cases pursuant to Bankruptcy Code §§ 327, 328 or 1103 and to be compensated for services rendered pursuant to Bankruptcy Code §§ 327, 328, 329, 330 or 331, or (b) seeking compensation and reimbursement pursuant to Bankruptcy Code § 503(b)(4).

 

(122)      Professional Fee Claim means a Claim of a Professional for compensation or reimbursement of expenses relating to services after the Petition Date through the Effective Date.

 

(123)      Proof of Claim (or Interest) means the proof of claim (or interest) that must be Filed by a Holder of a Claim (or Interest) by the date(s), if any, designated by the Bankruptcy Court as the Bar Date.

 

(124)      PSA Sale Proceeds means all of the sale proceeds received from the sale, disposition, collection or other monetization of the Acquired Property as contemplated under the Purchase and Sale Agreement.

 

(125)      Purchase and Sale Agreement means the agreement for the purchase and sale of the Acquired Property between some or all of the Debtors and the Purchaser, as amended and restated, or otherwise modified from time to time.  If the Stalking Horse is the Purchaser, the Stalking Horse SPA shall be the Purchase and Sale Agreement.

 

(126)      Purchaser means the Person or group that is the Successful Bidder under the Bid Procedures and that purchases the Acquired Property pursuant to the Sale Order and/or the Confirmation Order.

 

(127)      Qualified Bidder means a Potential Bidder who has met the prerequisites to become a qualified bidder set forth in the Bid Procedures.

 

(128)      Related Persons means, with respect to any Person, such Person’s predecessors, successors and assigns (whether by operation of law or otherwise) and their respective present and former Affiliates and each of their respective current and former members, partners, equity-holders, officers, directors, employees, managers, shareholders, partners, financial advisors, attorneys, accountants, investment bankers, consultants, agents and professionals, each acting in such capacity, and any Person claiming by or through any of them (including their respective officers, directors, managers, shareholders, partners, employees, members and professionals).

 

(129)      Released Parties means, collectively, each of the Debtors, the Reorganized Debtors, the Committee (if any), Union, UBE, Natixis, the Supporting Lenders, and each of their respective Related Persons.

 

(130)      Reorganized Cano means Cano from and after the Effective Date.

 

(131)      Reorganized Cano New Mexico means Cano New Mexico from and after the Effective Date.

 

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(132)      Reorganized Debtors means Reorganized Cano, Reorganized Cano New Mexico, Reorganized Ladder, Reorganized Square One, Reorganized Tri-Flow, Reorganized WO Energy, Reorganized W.O. Nevada, Reorganized W.O. Operating, and Reorganized W.O. Productions.

 

(133)      Reorganized Ladder means Ladder from and after the Effective Date.

 

(134)      Reorganized Square One means Square One from and after the Effective Date.

 

(135)      Reorganized Subsidiaries means each of the Subsidiaries from and after the Effective Date.

 

(136)      Reorganized Tri-Flow means Tri-Flow from and after the Effective Date.

 

(137)      Reorganized WO Energy means WO Energy from and after the Effective Date.

 

(138)      Reorganized W.O. Nevada means W.O. Nevada from and after the Effective Date.

 

(139)      Reorganized W.O. Operating means W.O. Operating from and after the Effective Date.

 

(140)      Reorganized W.O. Production means W.O. Production from and after the Effective Date.

 

(141)      Retained Funds means any Prepaid JOA Funds or Suspense Funds which at Closing are required to be (i) in a Reorganized Debtor whose Interests are sold to the Purchaser or (ii) delivered by a Debtor to the Purchaser pursuant to the Purchase and Sale Agreement.

 

(142)      Royalty means a cost-free share of production from the oil, gas and mineral estate measured by production and/or sale of minerals from the oil, gas and/or mineral leases owned by the Debtors and any related escheat obligations.

 

(143)      Royalty Claims means any Claim for Royalty other than claims related to Suspense Funds.

 

(144)      Royalty Owner means any royalty owner or working interest owner of the Debtors In Pay Status.

 

(145)      Sale Hearing means the hearing(s) held by the Bankruptcy Court to approve the Transaction and/or consider confirmation of this Plan pursuant to Bankruptcy Code § 363, as such hearing may be continued from time to time.

 

(146)      Sale Order means that certain Order (I) Authorizing the Debtors to Sell Their Property, (II) Authorizing the Debtors to Assume and Assign Certain Executory Contracts and Unexpired Leases and (III) Granting Related Relief, entered by the Bankruptcy Court, [Dkt. No.         ] which order may be the same as the Confirmation Order.

 

(147)      Scheduled means, with respect to any Claim or Interest, the status and amount, if any, of such Claim or Interest as set forth in the Bankruptcy Schedules.

 

(148)      Secured means, when referring to a Claim:  (a) secured by a Lien on property in which the Estate has an interest, which Lien is valid, perfected, and enforceable pursuant to applicable law or by reason of a Bankruptcy Court order, or that is subject to setoff pursuant to

 

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Bankruptcy Code § 553, to the extent of the value of the Creditor’s interest in the Estate’s interest in such property or to the extent of the amount subject to setoff, as applicable, as determined pursuant to Bankruptcy Code § 506(a); or (b) Allowed pursuant to this Plan as a Secured Claim.

 

(149)      Securities Act means the Securities Act of 1933, 15 U.S.C. §§ 77a-77aa, as now in effect or hereafter amended.

 

(150)      Senior Credit Agreement means the Amended and Restated Credit Agreement dated as of December 17, 2008 among Cano, the financial institutions party thereto from time to time, and Union as administrative agent and as issuing lender, as amended.

 

(151)      Senior Lien Documents means the Senior Credit Agreement, the Senior Lien Notes, the Subordination and Intercreditor Agreement dated as of December 17, 2008, and all other instruments, agreements, deeds of trust, mortgages, security agreements, assignments, pledges, and financing statements that evidence, secure or relate to the Senior Credit Agreement, the Senior Lien Notes, or any Liens securing the Union Senior Secured Claim or the Natixis Hedge Claim.

 

(152)      Senior Lien Notes  means any and all promissory notes of Cano or the other Debtors, if any, payable to the order of any Senior Secured Lender evidencing indebtedness of Cano to such Lender under the Senior Credit Agreement.

 

(153)      Senior Pre-Petition Agent means Union Bank, N.A., as administrative agent and issuing lender under the Senior Credit Agreement, or any successor thereto.

 

(154)      Senior Secured Claims means collectively, the Union Senior Secured Claim and the Natixis Hedge Claim

 

(155)      Senior Secured Claim Distribution Amounts means all distributions made on account of the Senior Secured Claims pursuant to Section 4.02.

 

(156)      Senior Secured Deficiency Claim shall have the meaning set forth in Section 4.02 of this Plan.

 

(157)      Senior Secured Lenders mean the lenders and holders of indebtedness under the Senior Credit Agreement or any other Senior Lien Documents.

 

(158)      Square One means Square One Energy, Inc., a Texas corporation, the Debtor in Case No.          pending in the Bankruptcy Court and one of the jointly-administered Debtors in the Chapter 11 Cases.

 

(159)      Stalking Horse means NBI and such other buyer as identified in the Stalking Horse SPA whether or not such party is the Successful Bidder at the Auction.

 

(160)      Stalking Horse SPA means the Stock Purchase Agreement dated March 7, 2012, as amended, restated, or otherwise modified from time to time, entered into between the Debtors and the Stalking Horse.

 

(161)      Subordinated Equity Securities Claim means a Claim, if any, subject to subordination under Bankruptcy Code § 510(b), including without limitation, any Claim that arises from the rescission of a purchase or sale of an Interest, or for damages arising from the purchase or sale of such a security, or for reimbursement, indemnification, or contribution allowed under Bankruptcy Code § 502 on account of such Claim.

 

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(162)                   Subsidiary(ies) means a Debtor other than Cano; specifically Cano New Mexico, Ladder, Square One, Tri-Flow, WO Energy, W.O. Nevada, W.O. Operating, and W.O. Production.

 

(163)                   Successful Bidder has the meaning set forth in the Bid Procedures.

 

(164)                   Supporting Lenders has the meaning set forth in the Plan Support Agreement.

 

(165)                   Suspense Funds means any Cash received by any Debtor (in its capacity as an operator with respect to operated properties) in “suspense” and held by any Debtor at Closing.

 

(166)                   Transaction(s) means the transactions contemplated by the Purchase and Sale Agreement and approved by the Sale Order and/or Confirmation Order.

 

(167)                   Tri-Flow means Tri-Flow, Inc. an Oklahoma corporation, the Debtor in Case No.       pending in the Bankruptcy Court, and one of the jointly-administered Debtors in the Chapter 11 Cases.

 

(168)                   UBE means UnionBanCal Equities, Inc., as administrative agent and issuing lender under the Junior Credit Agreement.

 

(169)                   UBE Junior Secured Claim means all claims arising under the Junior Credit Agreement, or any other Junior Lien Documents.

 

(170)                   UBE Junior Secured Deficiency Claim shall have the meaning set forth in Section 4.03 of this Plan.

 

(171)                   Unclaimed Property has the meaning set forth in Section 8.03 of this Plan.

 

(172)                   Unimpaired means a Claim or Interest that is not Impaired.

 

(173)                   Union means Union Bank, N.A., as administrative agent and issuing lender under the Senior Credit Agreement.

 

(174)                   Union Senior Secured Claim means the entirety of any Claim arising under the Senior Credit Agreement, or any other Senior Lien Documents.

 

(175)                   Vested Assets means all of the Debtors’ (and their respective estates) right, title and interest in and to any assets, contracts, leases, oil and gas leases, as defined in the Purchase and Sale Agreement, properties and businesses, as the same shall exist as of the Effective Date of every kind, type of designation, whether tangible or intangible, known or unknown, real, personal or mixed wherever located, including all Claims and causes of action (for the avoidance of doubt, other than Avoidance Actions) against any Person to the extent not released or discharged pursuant to this Plan, that are to be owned by one or more of the Reorganized Debtors as described in the Purchase and Sale Agreement pursuant to which any New Interests are to be issued or transferred to the Purchaser.

 

(176)                   Voting Deadline means the date by which a Creditor must deliver a Ballot to accept or reject this Plan as set forth in the order of the Bankruptcy Court approving the instructions and procedures relating to the solicitation of votes with respect to this Plan.

 

(177)                   Voting Record Date means the record date for voting on this Plan, which shall be                                         , 2012.

 

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(178)                   WO Energy means WO Energy, Inc., a Texas corporation, the Debtor the Debtor in Case No.          pending in the Bankruptcy Court and one of the jointly-administered Debtors in the Chapter 11 Cases.

 

(179)                   W.O. Nevada means W.O. Energy of Nevada, Inc., a Nevada corporation, the Debtor in Case No.          pending in the Bankruptcy Court and one of the jointly-administered Debtors in the Chapter 11 Cases.

 

(180)                   W.O Operating means W.O. Operating Company, Ltd., a Texas limited partnership, the Debtor in Case No.          pending in the Bankruptcy Court and one of the jointly-administered Debtors in the Chapter 11 Cases.

 

(181)                   W.O. Production means W.O. Production Company, Ltd., a Texas limited partnership, the Debtor in Case No.          pending in the Bankruptcy Court and one of the jointly-administered Debtors in the Chapter 11 Cases.

 

Section 1.03                            Rules of Interpretation

 

For purposes of this Plan, (i) except as provided in Article XIII, any reference in this Plan to a contract, instrument, release, indenture, or other agreement or document being in a particular form or on particular terms and conditions means that such document shall be substantially in such form or substantially on such terms and conditions; (ii) except as provided in Article XIII, any reference in this Plan to an existing document or exhibit Filed or to be Filed means such document or exhibit as it may have been or may be amended, modified, or supplemented as permitted herein; (iii) unless otherwise specified, all references in this Plan to Sections, Articles, Schedules, and Exhibits are references to Sections, Articles, Schedules, and Exhibits of or to this Plan; (iv) the words “herein,” “hereto,” and “hereof” refer to this Plan in its entirety rather than to a particular portion of this Plan; (v) captions and headings to Articles and Sections are inserted for convenience of reference only and are not intended to be a part of or to affect the interpretation of this Plan; and (vi) the rules of construction set forth in Bankruptcy Code § 102 and in the Bankruptcy Rules shall apply.

 

Section 1.04                            Computation of Time

 

In computing any period of time prescribed or allowed by this Plan, the provisions of Bankruptcy Rule 9006(a) shall apply.

 

Section 1.05                            Reference to Monetary Figures

 

All references in this Plan to monetary figures shall refer to legal currency of the United States of America, unless otherwise expressly provided.

 

Section 1.06                            Exhibits and Plan Supplement

 

All Exhibits, all Plan Documents, as well as the Plan Supplement, are incorporated into and are a part of this Plan as if set forth in full herein, and, to the extent not annexed hereto, such Exhibits and Plan Supplement shall be timely Filed with the Clerk of the Bankruptcy Court on or before the Plan Supplement Filing Date.  Holders of Claims and Interests may obtain a copy of the Filed Exhibits and the Plan Supplement upon written request to the Debtors’ counsel.  Upon their Filing, the Exhibits and the Plan Supplement may be inspected in the office of the clerk of

 

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the Bankruptcy Court or at the Bankruptcy Court’s website at http://www.txnb.uscourts.gov, or at the Balloting Agent’s website for these Cases at www.bmcgroup.com/cano.  The documents contained in the Exhibits and Plan Supplement shall be approved by the Bankruptcy Court pursuant to the Confirmation Order.  The Debtors explicitly reserve the right to modify or make additions to or subtractions from any Exhibit to this Plan or the Plan Supplement and to amend, modify or supplement any Exhibit to this Plan before the Confirmation Date.

 

Section 1.07                            Deemed Acts

 

Whenever an act or event is expressed under this Plan to have been deemed done or to have occurred, it shall be deemed to have been done or to have occurred without any further act by any party, by virtue of this Plan and the Confirmation Order.

 

ARTICLE II

 

UNCLASSIFIED CLAIMS
(NOT ENTITLED TO VOTE ON THIS PLAN)

 

In accordance with Bankruptcy Code § 1123(a)(l), Administrative Claims and Priority Tax Claims have not been classified and thus are excluded from the Classes of Claims and Interests set forth in Article III and Article IV hereof.  These unclassified Claims are treated as follows:

 

Section 2.01                            Treatment of Administrative Claims

 

Except as otherwise provided for in this Plan, and subject to the requirements of Section 2.02 of this Plan, each Holder of an Allowed Administrative Claim shall, in full satisfaction, release, settlement, and discharge of such Allowed Administrative Claim:  (a) to the extent such claim is due and owing on the Effective Date, be paid in full, in Cash, on the Effective Date; (b) to the extent such claim is not due and owing on the Effective Date, be paid in full, in Cash, (i) in accordance with the terms of any agreement among the Liquidating Trustee, the Pre-Petition Agents and such Holder, or (ii) when such claim becomes due and payable under applicable non-bankruptcy law, or (iii) in the ordinary course of business; or (c) receive such other treatment as to which such Holder may agree with the Liquidating Trustee and the Pre-Petition Agents.  Cash payments of Allowed Administrative Claims shall be paid from the Claims Reserve, or if the Claims Reserve is insufficient to pay all Allowed Administrative Claims, any shortfall shall be paid from the Gift Reserve or from the Avoidance Actions Proceeds Reserve.

 

Section 2.02                            Bar Dates for Certain Claims

 

(a)                                 Administrative Claims; Substantial Contribution Claims.  The Confirmation Order will establish a Bar Date for Filing of all Administrative Claims, including substantial contribution claims (but not including Professional Fee Claims, claims for the expenses of the members of the Committee and Administrative Claims in section (b) or (c) below), which date will be thirty (30) days after the Confirmation Date (the “Administrative Claims Bar Date”).  Holders of asserted Administrative Claims, other than Professional Fee Claims, claims for U.S. Trustee fees under 28 U.S.C. §1930, administrative tax claims and administrative ordinary case liabilities described in section (b) below, must submit proofs of Administrative Claim on or

 

17



 

before such Administrative Claims Bar Date or forever be barred from doing so.  A notice prepared by the Debtors will set forth such date and constitute notice of this Administrative Claims Bar Date.  The Reorganized Debtors and the Pre-Petition Agents shall have thirty days (30) days (or such longer period as may be allowed by order of the Bankruptcy Court) following the Administrative Claims Bar Date to review and object to such Administrative Claims before a hearing for determination of allowance of such Administrative Claims.

 

(b)                                 Administrative Ordinary Course Liabilities.  Holders of Administrative Claims that are based on liabilities incurred and paid by any Debtor in the ordinary course of the applicable Debtor’s business (other than Claims of governmental units for taxes and for interest and/or penalties related to such taxes) on and after the Petition Date shall not be required to File any request for payment of such Administrative Claims.  For the avoidance of doubt, Holders of Administrative Claims pursuant to Bankruptcy Code § 503(b)(9) shall be required to File a proof of Administrative Claim on or before the Administrative Claims Bar Date.

 

(c)                                  Administrative Tax Claims.  All requests for payment of Administrative Claims by a governmental unit for taxes (and for interest and/or penalties related to such taxes) for any tax year or period, all or any portion of which occurs or falls within the period from and including the Petition Date through and including the Effective Date, and for which no bar date has otherwise been previously established, must be Filed and served on the Reorganized Debtors, the Pre-Petition Agents, and any other party specifically requesting a copy in writing on or before the later of (a) thirty (30) days following the Confirmation Date; and (b) one hundred and twenty (120) days following the Filing of the tax return for such taxes for such tax year or period with the applicable governmental unit.  Any Holder of any such Claim that is required to File a request for payment of such taxes and does not File and properly serve such a claim by the applicable Bar Date shall be forever barred from asserting any such claim against the Debtors, the Reorganized Debtors, the Liquidating Trust or their property, regardless of whether any such Claim is deemed to arise on or before the Effective Date.  Any interested party desiring to object to an Administrative Claim for taxes must File and serve its objection on counsel to the Debtors and the relevant taxing authority no later than ninety (90) days after the taxing authority Files and serves its application.

 

(d)                                 Professional Fee Claims.  All final requests for compensation or reimbursement of professional fees pursuant to Bankruptcy Code §§ 327, 328, 330, 331, 363, 503(b) or 1103 for services rendered to or on behalf of the applicable Debtors or the Committee (if one has been appointed) before the Confirmation Date (other than substantial contribution claims under Bankruptcy Code § 503(b)(4)) must be Filed and served on the Reorganized Debtors, the Pre-Petition Agents, and their respective counsel no later than thirty days (30) after the Confirmation Date, unless otherwise ordered by the Bankruptcy Court.  Objections to applications of such Professionals or other entities for compensation or reimbursement of expenses must be Filed and served on the Debtors, Pre-Petition Agents, and their counsel and the requesting Professional or other entity no later than thirty (30) days (or such longer period as may be allowed by order of the Bankruptcy Court) after the date on which the applicable application for compensation or reimbursement was served.

 

18



 

Section 2.03                            Payment of Statutory Fees

 

On or before the Effective Date (or as soon as reasonably practicable after such fees become due), the Debtors shall have paid in full, in Cash (including by check or wire transfer), in U.S. dollars, all fees payable pursuant to section 1930 of title 28 of the United States Code, in the amount determined by the Bankruptcy Court at the Confirmation Hearing.

 

Section 2.04                            Treatment of Priority Tax Claims

 

Each Holder of an Allowed Priority Tax Claim shall, in full satisfaction, release, and discharge thereof, receive (i) such treatment as to which such Holder may agree with the Liquidating Trustee, and the Pre-Petition Agents or (ii) at the sole option of the Liquidating Trustee, (a) payment in full, in Cash, of such Allowed Priority Tax Claim on the Effective Date; or (b) treatment in accordance with Bankruptcy Code §§ 1129(a)(9)(C) or 1129(a)(9)(D), as the case may be, with the Liquidating Trustee’s selection of (a) or (b) being subject to the prior written approval of Pre-Petition Agents.  Cash payments of Allowed Priority Tax Claims shall be paid from the Claims Reserve, or if the Claims Reserve is insufficient to pay all Allowed Priority Tax Claims, any shortfall shall be paid from the Gift Reserve or from the Avoidance Actions Proceeds Reserve.

 

ARTICLE III

 

CLASSIFICATION AND TREATMENT
OF CLAIMS AND INTERESTS

 

Section 3.01                            Introduction

 

The categories of Claims and Interests set forth herein classify Claims and Interests for all purposes, including for purposes of voting, confirmation, and distribution pursuant to this Plan and Bankruptcy Code §§ 1122 and 1123(a)(l).  A Claim or Interest shall be deemed classified in a particular Class only to the extent that it qualifies within the description of such Class, and shall be deemed classified in other Classes to the extent that any portion of such Claim or Interest qualifies within the description of such other Classes.  Notwithstanding anything to the contrary in this Plan, a Claim or Interest shall be deemed classified in a Class only to the extent that such Claim or Interest has not been paid, released, or otherwise settled before the Effective Date.

 

All Claims (except for Administrative Claims and Priority Tax Claims, which are not classified pursuant to Bankruptcy Code § 1123(a)(l)) are classified in Section 3.03 and Section 4.01 through Section 4.09 in this Plan.

 

Section 3.02                            Voting; Presumptions

 

(a)                                 Acceptance by Impaired Classes.  Each Impaired Class of Claims that will (or may) receive or retain property or any interest in property under this Plan shall be entitled to vote to accept or reject this Plan.  An Impaired Class of Claims shall have accepted this Plan if (i) the Holders (other than any Holder designated under Bankruptcy Code § 1126(e)) of at least two-thirds in amount of the Allowed Claims actually voting in such Class have voted to accept this

 

19



 

Plan and (ii) the Holders (other than any Holder designated under Bankruptcy Code § 1126(e)) of more than one-half in number of the Allowed Claims actually voting in such Class have voted to accept this Plan.  An Impaired Class of Interests shall have accepted this Plan if the Holders (other than any Holder designated under Bankruptcy Code § 1126(e)) of at least two-thirds in amount of the Allowed Interests actually voting in such Class have voted to accept this Plan.

 

(b)                                 Voting Presumptions.  Claims and Interests in Unimpaired Classes are conclusively deemed to have accepted this Plan pursuant to Bankruptcy Code § 1126(f) and, therefore, are not entitled to vote to accept or reject this Plan.  Claims and Interests in Classes that do not entitle the Holders thereof to receive or retain any property under this Plan are conclusively deemed to have rejected this Plan pursuant to Bankruptcy Code § 1126(g) and, therefore, are not entitled to vote to accept or reject this Plan.

 

Section 3.03                            Identification of Claims and Interests

 

The following tables designate the Classes of Claims against, and Interests in, the Debtors and specify which of those Classes and Interest are (a) Impaired or Unimpaired by this Plan; (b) entitled to vote to accept or reject this Plan in accordance with Bankruptcy Code § 1126; and (c) deemed to accept or reject this Plan.

 

CHART 3.03(A) - CANO

 

Class

 

Type of Allowed
Claim or Interest

 

Treatment

 

Impairment

 

Entitled to Vote

 

Administrative Claims

 

Paid in full in Cash on the Effective Date

 

Unclassified

 

No, not entitled to vote

 

Priority Tax Claims

 

Paid in full in Cash on the Effective Date

 

Unclassified

 

No, not entitled to vote

A1

 

Priority Non-Tax Claims

 

Paid in full in Cash on the Effective Date

 

Unimpaired

 

No, deemed to accept this Plan

A2

 

Senior Secured Claims

 

See Section 4.02

 

Impaired

 

Yes, entitled to vote

A3

 

UBE Junior Secured Claims

 

See Section 4.03

 

Impaired

 

Yes, entitled to vote

A4

 

Miscellaneous Secured Claims

 

Paid in full in Cash on the Effective Date

 

Unimpaired

 

No, deemed to accept this Plan.

A5

 

General Unsecured Claims

 

See Section 4.05

 

Impaired

 

Yes, entitled to vote

A6

 

Intercompany Claims

 

Canceled

 

Impaired

 

No, deemed to reject this Plan

 

20



 

A7

 

Preferred Stock

 

Canceled

 

Impaired

 

No, deemed to reject this Plan

A8

 

Interests

 

Canceled

 

Impaired

 

No, deemed to reject this Plan

 

CHART 3.03(B) — CANO NEW MEXICO

 

Class

 

Type of Allowed
Claim or Interest

 

Treatment

 

Impairment

 

Entitled to Vote

 

Administrative Claims

 

Paid in full in Cash on the Effective Date

 

Unclassified

 

No, not entitled to vote

 

Priority Tax Claims

 

Paid in full in Cash on the Effective Date

 

Unclassified

 

No, not entitled to vote

B1

 

Priority Non-Tax Claims

 

Paid in full in Cash on the Effective Date

 

Unimpaired

 

No, deemed to accept this Plan

B2

 

Senior Secured Claims

 

See Section 4.02

 

Impaired

 

Yes, entitled to vote

B3

 

UBE Junior Secured Claims

 

See Section 4.03

 

Impaired

 

Yes, entitled to vote

B4

 

Miscellaneous Secured Claims

 

Paid in full in Cash on the Effective Date

 

Unimpaired

 

No, deemed to accept this Plan

B5

 

General Unsecured Claims

 

See Section 4.05

 

Impaired

 

Yes, entitled to vote

B6

 

Intercompany Claims

 

Canceled

 

Impaired

 

No, deemed to reject this Plan

B7

 

Royalty Claims

 

Paid in full in Cash on the Effective Date

 

Unimpaired

 

No, deemed to accept this Plan

B8

 

Interests

 

Canceled

 

Impaired

 

No, deemed to reject this Plan

 

CHART 3.03(C) - LADDER

 

Class

 

Type of Allowed
Claim or Interest

 

Treatment

 

Impairment

 

Entitled to Vote

 

Administrative Claims

 

Paid in full in Cash on the Effective Date

 

Unclassified

 

No, not entitled to vote

 

Priority Tax Claims

 

Paid in full in Cash on the

 

Unclassified

 

No, not entitled to vote

 

21



 

Class

 

Type of Allowed
Claim or Interest

 

Treatment

 

Impairment

 

Entitled to Vote

 

 

 

 

Effective Date

 

 

 

 

C1

 

Priority Non-Tax Claims

 

Paid in full in Cash on the Effective Date

 

Unimpaired

 

No, deemed to accept this Plan

C2

 

Senior Secured Claims

 

See Section 4.02

 

Impaired

 

Yes, entitled to vote

C3

 

UBE Junior Secured Claims

 

See Section 4.03

 

Impaired

 

Yes, entitled to vote

C4

 

Miscellaneous Secured Claims

 

Paid in full in Cash on the Effective Date

 

Unimpaired

 

No, deemed to accept this Plan

C5

 

General Unsecured Claims

 

See Section 4.05

 

Impaired

 

Yes, entitled to vote

C6

 

Intercompany Claims

 

Canceled

 

Impaired

 

No, deemed to reject this Plan

C7

 

Royalty Claims

 

Paid in full in Cash on the Effective Date

 

Unimpaired

 

No, deemed to accept this Plan

C8

 

Interests

 

Canceled

 

Impaired

 

No, deemed to reject this Plan

 

CHART 3.03(D) — SQUARE ONE

 

Class

 

Type of Allowed
Claim or Interest

 

Treatment

 

Impairment

 

Entitled to Vote

 

Administrative Claims

 

Paid in full in Cash on the Effective Date

 

Unclassified

 

No, not entitled to vote

 

Priority Tax Claims

 

Paid in full in Cash on the Effective Date

 

Unclassified

 

No, not entitled to vote

D1

 

Priority Non-Tax Claims

 

Paid in full in Cash on the Effective Date

 

Unimpaired

 

No, deemed to accept this Plan

D2

 

Senior Secured Claims

 

See Section 4.02

 

Impaired

 

Yes, entitled to vote

D3

 

UBE Junior Secured Claims

 

See Section 4.03

 

Impaired

 

Yes, entitled to vote

D4

 

Miscellaneous Secured Claims

 

Paid in full in Cash on the Effective Date

 

Unimpaired

 

No, deemed to accept this Plan

 

22


 


 

Class

 

Type of Allowed
Claim or Interest

 

Treatment

 

Impairment

 

Entitled to Vote

D5

 

General Unsecured Claims

 

See Section 4.05

 

Impaired

 

Yes, entitled to vote

D6

 

Intercompany Claims

 

Canceled

 

Impaired

 

No, deemed to reject this Plan

D7

 

Royalty Claims

 

Paid in full in Cash on the Effective Date

 

Unimpaired

 

No, deemed to accept this Plan

D8

 

Interests

 

Canceled

 

Impaired

 

No, deemed to reject this Plan

 

CHART 3.03(E) — TRI-FLOW

 

Class

 

Type of Allowed
Claim or Interest

 

Treatment

 

Impairment

 

Entitled to Vote

 

Administrative Claims

 

Paid in full in Cash on the Effective Date

 

Unclassified

 

No, not entitled to vote

 

Priority Tax Claims

 

Paid in full in Cash on the Effective Date

 

Unclassified

 

No, not entitled to vote

E1

 

Priority Non-Tax Claims

 

Paid in full in Cash on the Effective Date

 

Unimpaired

 

No, deemed to accept this Plan.

E2

 

Miscellaneous Secured Claims

 

Paid in full in Cash on the Effective Date

 

Unimpaired

 

No, deemed to accept this Plan

E3

 

General Unsecured Claims

 

See Section 4.05

 

Impaired

 

Yes, entitled to vote

E4

 

Intercompany Claims

 

Canceled

 

Impaired

 

No, deemed to reject this Plan

E5

 

Interests

 

Canceled

 

Impaired

 

No, deemed to reject this Plan

 

CHART 3.03(F) — W.O. NEVADA

 

Class

 

Type of Allowed
Claim or Interest

 

Treatment

 

Impairment

 

Entitled to Vote

 

Administrative Claims

 

Paid in full in Cash on the Effective Date

 

Unclassified

 

No, not entitled to vote

 

Priority Tax Claims

 

Paid in full in

 

Unclassified

 

No, not entitled

 

23



 

Class

 

Type of Allowed
Claim or Interest

 

Treatment

 

Impairment

 

Entitled to Vote

 

 

 

 

Cash on the Effective Date

 

 

 

to vote

F1

 

Priority Non-Tax Claims

 

Paid in full in Cash on the Effective Date

 

Unimpaired

 

No, deemed to accept this Plan

F2

 

Senior Secured Claims

 

See Section 4.02

 

Impaired

 

Yes, entitled to vote

F3

 

UBE Junior Secured Claims

 

See Section 4.03

 

Impaired

 

Yes, entitled to vote

F4

 

Miscellaneous Secured Claims

 

Paid in full in Cash on the Effective Date

 

Unimpaired

 

No, deemed to accept this Plan

F5

 

General Unsecured Claims

 

See Section 4.05

 

Impaired

 

Yes, entitled to vote

F6

 

Intercompany Claims

 

Canceled

 

Impaired

 

No, deemed to reject this Plan

F7

 

Interests

 

Canceled

 

Impaired

 

No, deemed to reject this Plan

 

CHART 3.03(G) — W.O. OPERATING

 

Class

 

Type of Allowed
Claim or Interest

 

Treatment

 

Impairment

 

Entitled to Vote

 

Administrative Claims

 

Paid in full in Cash on the Effective Date

 

Unclassified

 

No, not entitled to vote

 

Priority Tax Claims

 

Paid in full in Cash on the Effective Date

 

Unclassified

 

No, not entitled to vote

G1

 

Priority Non-Tax Claims

 

Paid in full in Cash on the Effective Date

 

Unimpaired

 

No, deemed to accept this Plan

G2

 

Senior Secured Claims

 

See Section 4.02

 

Impaired

 

Yes, entitled to vote

G3

 

UBE Junior Secured Claims

 

See Section 4.03

 

Impaired

 

Yes, entitled to vote

G4

 

Miscellaneous Secured Claims

 

Paid in full in Cash on the Effective Date

 

Unimpaired

 

No, deemed to accept this Plan

G5

 

General Unsecured Claims

 

See Section 4.05

 

Impaired

 

Yes, entitled to vote

 

24



 

Class

 

Type of Allowed
Claim or Interest

 

Treatment

 

Impairment

 

Entitled to Vote

G6

 

Intercompany Claims

 

Canceled

 

Impaired

 

No, deemed to reject this Plan

G7

 

Royalty Claims

 

Paid in full in Cash on the Effective Date

 

Unimpaired

 

No, deemed to accept this Plan

G8

 

Interests

 

Canceled

 

Impaired

 

No, deemed to reject this Plan

 

CHART 3.03(H) — W.O. PRODUCTION

 

Class

 

Type of Allowed
Claim or Interest

 

Treatment

 

Impairment

 

Entitled to Vote

 

Administrative Claims

 

Paid in full in Cash on the Effective Date

 

Unclassified

 

No, not entitled to vote

 

Priority Tax Claims

 

Paid in full in Cash on the Effective Date

 

Unclassified

 

No, not entitled to vote

H1

 

Priority Non-Tax Claims

 

Paid in full in Cash on the Effective Date

 

Unimpaired

 

No, deemed to accept this Plan

H2

 

Senior Secured Claims

 

See Section 4.02

 

Impaired

 

Yes, entitled to vote

H3

 

UBE Junior Secured Claims

 

See Section 4.03

 

Impaired

 

Yes, entitled to vote

H4

 

Miscellaneous Secured Claims

 

Paid in full in Cash on the Effective Date

 

Unimpaired

 

No, deemed to accept this Plan

H5

 

General Unsecured Claims

 

See Section 4.05

 

Impaired

 

Yes, entitled to vote

H6

 

Intercompany Claims

 

Canceled

 

Impaired

 

No, deemed to reject this Plan

H7

 

Interests

 

Canceled

 

Impaired

 

No, deemed to reject this Plan

 

25



 

CHART 3.03(I) — WO ENERGY

 

Class

 

Type of Allowed
Claim or Interest

 

Treatment

 

Impairment

 

Entitled to Vote

 

Administrative Claims

 

Paid in full in Cash on the Effective Date

 

Unclassified

 

No, not entitled to vote

 

Priority Tax Claims

 

Paid in full in Cash on the Effective Date

 

Unclassified

 

No, not entitled to vote

I1

 

Priority Non-Tax Claims

 

Paid in full in Cash on the Effective Date

 

Unimpaired

 

No, deemed to accept this Plan

I2

 

Senior Secured Claims

 

See Section 4.02

 

Impaired

 

Yes, entitled to vote

I3

 

UBE Junior Secured Claims

 

See Section 4.03

 

Impaired

 

Yes, entitled to vote

I4

 

Miscellaneous Secured Claims

 

Paid in full in Cash on the Effective Date

 

Unimpaired

 

No, deemed to accept this Plan

I5

 

General Unsecured Claims

 

See Section 4.05

 

Impaired

 

Yes, entitled to vote

I6

 

Intercompany Claims

 

Canceled

 

Impaired

 

No, deemed to reject this Plan

I7

 

Interests

 

Canceled

 

Impaired

 

No, deemed to reject this Plan

 

ARTICLE IV

 

TREATMENT OF CLAIMS AND INTERESTS

 

Section 4.01                            Priority Non-Tax Claims

 

Classification:  Classes A1, B1, C1, D1, E1, F1, G1, H1, and I1 consist of the Allowed Priority Non-Tax Claims against the respective Debtors.

 

Treatment:  Except to the extent that a Holder of an Allowed Claim in Classes A1, B1, C1, D1, E1, F1, G1, H1, and I1 has agreed in writing with the Debtors (or the Liquidating Trustee) and the Pre-Petition Agents to a different treatment (in which event such other writing will govern), each Holder of an Allowed Claim in Classes A1, B1, C1, D1, E1, F1, G1, H1, and I1 shall receive, on account of, and in full and complete settlement, release and discharge of and in exchange for, such Claim, at the election of the Liquidating Trustee, (i) Cash equal to the amount of such Allowed Claims in Classes A1, B1, C1, D1, E1, F1, G1, H1, and I1 in accordance with Bankruptcy Code § 1129(a)(9), on the later of (a) the Effective Date (or as soon as reasonably practicable thereafter) and (b) the date such Claim in Classes A1, B1, C1, D1, E1, F1, G1, H1, and I1 becomes an Allowed Claim in Classes A1, B1, C1, D1, E1, F1, G1, H1, and I1 (or as soon as reasonably practicable thereafter); or (ii) such other treatment agreed to by the Debtors, Liquidating Trustee, and the Pre-Petition Agents required to render such Allowed

 

26



 

Claims in Classes A1, B1, C1, D1, E1, F1, G1, H1, and I1 Unimpaired pursuant to Bankruptcy Code § 1124.  Cash payments of Allowed Claims in Classes A1, B1, C1, D1, E1, F1, G1, H1, and I1 shall be paid from the Claims Reserve, or if the Claims Reserve is insufficient to pay all Allowed Priority Non-Tax Claims, any shortfall shall be paid from the Gift Reserve or from the Avoidance Actions Proceeds Reserve.

 

Voting:  Claims in Classes A1, B1, C1, D1, E1, F1, G1, H1, and I1 are Unimpaired.  Each Holder of an Allowed Claim in Classes A1, B1, C1, D1, E1, F1, G1, H1, and I1 shall be conclusively deemed to have accepted this Plan pursuant to Bankruptcy Code § 1126(f), and, therefore, shall not be entitled to vote to accept or reject this Plan.

 

Section 4.02                            Senior Secured Claims

 

Classification:  Classes A2, B2, C2, D2, F2, G2, H2, and I2 consist of the Senior Secured Claims against the Debtors.

 

Allowance:  The Senior Secured Claims against the Debtors are hereby Allowed as Secured Claims in Classes A2, B2, C2, D2, F2, G2, H2, and I2 in the amount of $                          , which amount is comprised of the Union Senior Secured Claim in the amount of $                             and the Natixis Hedge Claim in the amount of $                          , each of which are also hereby Allowed as a Secured Claim in such Classes and in such amounts.

 

Treatment:  In full satisfaction of the Allowed Senior Secured Claims, the Pre-Petition Senior Secured Agent shall receive:

 

(i)                                     on the Effective Date and as part of the Closing, from the Purchaser, all of the PSA Sale Proceeds, except for any portion of such proceeds transferred by the Purchaser to the Liquidating Trust to fund the (a) Claims Reserve as described in Section 6.02(a) of this Plan, (b) Liquidating Trust Expense Reserve as described in Section 6.02(b) of this Plan; and (c) Gift Reserve as described in Section 6.02(d) of this Plan;

 

(ii)                                  on the Effective Date, from the Debtors, contemporaneously with the payment from the Purchaser in clause (i) above, all Available Cash, if any, except for (a) the amounts transferred to the Liquidating Trust to fund the Claims Reserve and the Liquidating Trust Expense Reserve pursuant to Section 6.02 of this Plan; and (b) any amounts that constitute Retained Funds;

 

(iii)                               as soon as reasonably practicable after the Effective Date, the Net Proceeds of the sale, collection or other monetization of all or each a portion of the Other Assets, except for Avoidance Actions which shall be liquidated for the benefit of the Holders of Allowed Plan Carve Out Claims and Allowed General Unsecured Claims until satisfaction in full of such Allowed Claims, at which time any remaining funds in the Gift Reserve or the Avoidance Actions Proceeds Reserve shall be transferred to the Pre-Petition Secured Agent or UBE, as applicable;

 

(iv)                              as soon as reasonably practicable after the Effective Date, any remaining funds in the Claims Reserve after the payment of the Allowed Plan Carve Out Claims;

 

(v)                                 as soon as reasonably practicable after the Effective Date, the proceeds of the sale, collection or other monetization of the Closing Accounts Receivable in accordance with the Purchase and Sale Agreement;

 

27



 

(vi)                              any remaining funds in the Liquidating Trust Expense Reserve on the date the Liquidating Trust is terminated;

&nb