EXHIBIT 3
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SUBSCRIPTION AGREEMENT
between
FIRST RESERVE FUND VII, LIMITED PARTNERSHIP,
AND
DOMAIN ENERGY CORPORATION
Dated as of December 31, 1996
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TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE OF STOCK................................... 2
1.1. General ..................................................... 2
1.2. Consideration From the Buyer................................. 2
1.3. Delivery of the Company Shares............................... 3
ARTICLE II DEFINITIONS.................................................. 3
2.1. Defined Terms................................................ 3
ARTICLE III INITIAL CLOSING.............................................. 10
3.1. Time and Place............................................... 10
ARTICLE IV OPTION TO PURCHASE ADDITIONAL COMMON STOCK................... 10
4.1. Option ..................................................... 10
4.2. Exercise..................................................... 11
4.3. Notice ..................................................... 11
4.4. Conditions Precedent......................................... 11
ARTICLE V REPRESENTATIONS AND WARRANTIES............................... 11
5.1. Representations and Warranties of the Company................ 11
(a) Execution and Validity of Agreement..................... 11
(b) Corporate Organization.................................. 12
(c) Investments............................................. 12
(e) Capital Structure of the Company, the Tenneco Entities
and the Tenneco Entities' Subsidiaries................ 13
(f) Financial Statements.................................... 14
(g) Absence of Certain Changes or Events.................... 15
(h) Title to Properties; Encumbrances....................... 17
(i) Absence of Liens........................................ 20
(j) Insurance and Bonds..................................... 20
(k) Contracts............................................... 20
(l) Compliance with Contracts, Etc. ........................ 22
(m) Litigation.............................................. 22
(n) Compliance with Laws.................................... 23
(o) Employment Agreement and Related Matters................ 23
(p) Licenses and Government Approvals....................... 25
(q) Broker's or Finder's Fees............................... 26
(r) Transactions with Affiliates............................ 26
(s) Corporate Records....................................... 27
(t) Labor Matters........................................... 27
(u) Tax Matters............................................. 28
(v) Environmental Matters................................... 30
(w) Oil and Gas Reserve Information......................... 31
(x) Engineering Reports..................................... 32
(y) Not Subject to Utility Regulatory Authorities........... 33
(z) Worker's Compensation and Occupational Disease Reserve.. 33
(aa) Omissions............................................... 33
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5.2. Representations and Warranties of the Buyer.................. 33
(a) Due Organization and Power of the Buyer................. 33
(b) Authorization and Validity of Agreement................. 33
(c) No Conflict............................................. 34
(d) Purchase for Investment................................. 34
(e) Litigation.............................................. 35
(f) Ownership of Buyer Subordinated Note.................... 35
(g) Omissions............................................... 35
5.3. Limitations on Survival...................................... 35
ARTICLE VI COVENANTS.................................................... 36
6.1. Conduct of Business Pending the Initial Closing Date......... 36
6.2. Access to Information Concerning Properties and
Records; Confidentiality................................... 39
6.3. Releases..................................................... 40
6.4. Further Actions.............................................. 40
6.5. Application of Proceeds...................................... 40
6.6. Option Shares................................................ 40
ARTICLE VII CONDITIONS PRECEDENT......................................... 40
7.1. Conditions Precedent to Obligations of the Buyer............. 40
7.2. Conditions Precedent to Obligations of the Company........... 43
ARTICLE VIII INDEMNIFICATION.............................................. 44
8.1. Indemnification by the Company............................... 44
8.2. Indemnification by the Buyer................................. 44
8.3. Procedure for General Claims................................. 44
(a) General Claims by the Buyer............................. 44
(b) General Claims by the Company........................... 45
8.4. Procedure for Third Party Claims............................. 45
(a) Claims by the Buyer and the Company..................... 45
(b) Settlement or Decision of Third Party
Claims................................................ 47
8.5. Indemnification Matters...................................... 47
8.6. General Provisions........................................... 48
(a) Limitations on Indemnification.......................... 48
(b) Termination of Indemnification.......................... 48
ARTICLE IX MISCELLANEOUS................................................ 49
9.1. Termination and Abandonment.................................. 49
(a) General................................................. 49
(b) Procedure Upon Termination.............................. 49
9.2. Fees and Expenses............................................ 49
9.3. Transfer Taxes............................................... 49
9.4. Notices ..................................................... 49
9.5. Binding Effect; Benefit...................................... 50
9.6. Assignability................................................ 50
9.7. Amendment and Modification; Waiver........................... 51
9.8. Section Headings............................................. 51
9.9. Arbitration.................................................. 51
9.10. Counterparts................................................. 51
9.11. GOVERNING LAW................................................ 51
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SCHEDULES
5.1(c) -- Investments
5.1(d)(ii) -- No Conflict
5.1(e)(i) -- Capital Stock of the Company
5.1(e)(ii)(a) -- Capital Structure of the Tenneco Entities and
the Subsidiaries -- Pre-Closing
5.1(e)(ii)(b) -- Capital Structure of the Tenneco Entities and
the Subsidiaries -- Post-Closing
5.1(e)(iii) -- Liens in Respect of the Company, the Tenneco
Entities and the Subsidiaries
5.1(e)(v) -- Capital Structure of the Company, the Tenneco
Entities and the Subsidiaries -- Outstanding
Rights
5.1(f) -- Financial Statements
5.1(g) -- Absence of Certain Changes or Events
5.1(h)(i) -- Title to Properties
5.1(h)(iv) -- Encumbrances
5.1(i) -- Absence of Liens
5.1(k) -- Contracts
5.1(m) -- Litigation
5.1(o) -- Employment Agreements and Related Matters
5.1(p) -- Licenses and Government Approvals
5.1(r) -- Transactions With Affiliates
5.1(t) -- Labor Matters
5.1(u) -- Tax Matters
5.1(v) -- Environmental Matters
5.1(w) -- Oil and Gas Reserve Information
EXHIBITS
A -- Buyer Subordinated Loan Note
B -- Employment Agreement
C -- Securityholders Agreement
D -- Legal Opinion of Weil, Gotshal & Xxxxxx LLP
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SUBSCRIPTION AGREEMENT
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SUBSCRIPTION AGREEMENT, dated as of December 31, 1996, between Domain
Energy Corporation, a Delaware corporation (the "Company") and First Reserve
Fund VII, Limited Partnership, a Delaware limited partnership (together with
its successors and assigns, the "Buyer").
WHEREAS, Teleo Ventures, a Delaware corporation ("Teleo"), has
entered into a Stock Purchase Agreement, dated as of December 24, 1996 (the
"Stock Purchase Agreement"), with El Paso Natural Gas Company, a Delaware
corporation ("El Paso"); and
WHEREAS, pursuant to a Master Assignment and Assumption Agreement of
December 31, 1996 between Teleo and Company, and as permitted by the Stock
Purchase Agreement, Teleo has assigned, and Company has assumed, all of
Teleo's rights and obligations thereunder; and
WHEREAS, the Stock Purchase Agreement provides for, among other
things, the acquisition by the Company of all of the outstanding capital stock
of Tenneco Ventures Corporation, a Delaware corporation ("Ventures"), and all
of the outstanding capital stock of Tenneco Gas Production Corporation, a
Delaware corporation ("TGP" and, collectively with Ventures, the "Tenneco
Entities") (hereinafter the "Stock Purchase"); and
WHEREAS, in connection with the Stock Purchase and the transactions
contemplated hereby, it is contemplated that each of Xxxxxxx X. Xxxxx, Xxxxxxx
X. Xxxxxxxx, Xxxxxxxxx X. Xxxxx, Xxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx, Xxxxxx X.
Xxxxxx, Xxxx X. Xxxxxxxxx and Xxxxxxx X. Xxxxxx (the "Management Investors"),
may purchase shares of Common Stock (as defined below);
WHEREAS, the Company has entered into a Credit Agreement, dated as of
the date hereof (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), with the banks parties thereto (the "Banks")
and The Chase Manhattan Bank, as administrative agent; and
WHEREAS, the Buyer wishes to purchase from the Company and the
Company wishes to issue and to sell to the Buyer 9,519.4717 shares (the "Firm
Common Shares" and, together with the Option Shares (as hereinafter defined),
the "Company Shares") of common stock, par value $0.01 per share (the "Common
Stock"), of the Company, representing 100% of the outstanding Common Stock
(such issuance, sale and purchase referred to herein as the "Firm Share
Purchase");
WHEREAS, the Company has requested that the Buyer loan $8,000,000 to
Domain Energy Guarantor Corporation, a wholly-owned subsidiary of the Company
(the "Buyer Subordinated Loan") and the Buyer has agreed to make the Buyer
Subordinated Loan upon the terms and conditions of a Subordinated Promissory
Note in the
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form attached hereto as Exhibit A (the "Buyer Subordinated Loan Note") and in
consideration of, among other things the grant by the Company of the Option
(as hereinafter defined);
WHEREAS, in partial consideration for the Buyer agreeing to make the
Buyer Subordinated Loan the Company has agreed to provide the Buyer with the
Option (as hereinafter defined) to purchase 2,538.5258 shares of Common Stock;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements hereinafter set forth, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I PURCHASE AND SALE OF STOCK
1.1. General.
(a) Upon the terms and subject to the conditions of this Agreement,
the Company agrees to issue and to sell to the Buyer, and the Buyer agrees
to buy from the Company, at the Initial Closing (as hereinafter defined)
described in Section 3.1 hereof, 9,519.4717 Firm Common Shares.
(b) Upon the terms and subject to the conditions of this Agreement,
if the Buyer elects to exercise the Option (as hereinafter defined), the
Company will issue and sell to the Buyer, and the Buyer will buy from the
Company, at the Subsequent Closing (as hereinafter defined) described in
Section 3.1(b) hereof, 2,538.5258 shares of Common Stock, subject to
adjustment pursuant to Section 4.1 (the "Option Shares").
1.2. Consideration From the Buyer.
(a) Upon the terms and subject to the conditions of this Agreement,
at the Initial Closing, the Buyer will deliver by wire transfer to the
Company at a bank account to be designated in writing by the Company
(which account may be an account of El Paso; it being acknowledged and
agreed that payment to an account of El Paso for the benefit of the
Company shall constitute payment to the Company) prior to the Initial
Closing Date (as hereinafter defined) an amount equal to $30 million, in
immediately available funds, in full consideration for the issuance and
sale of the Firm Common Shares.
(b) Upon the terms and subject to the conditions of this Agreement,
if the Buyer elects to exercise the Option described in Article IV, at the
Subsequent Closing, the Buyer will deliver to the Company the Option
Purchase Price (as hereinafter defined) as provided in Section 4.1 in full
consideration for the issuance and sale of the Option Shares. To the
extent the Option Purchase Price is being satisfied in whole or in part by
the delivery to the Company of the Buyer Subordinated Note, at the
Subsequent Closing
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the Buyer will deliver the Buyer Subordinated Note to the Company together
with a duly executed instrument of assignment transferring all of the Buyer's
right, title and interest in and to the Buyer Subordinated Note to the
Company.
1.3. Delivery of the Company Shares.
(a) On the Initial Closing Date, upon the terms and subject to the
conditions of this Agreement, the Company will deliver to the Buyer a
validly issued certificate registered in the name of the Buyer
representing 9,519.4717 Firm Common Shares.
(b) If the Buyer exercises the Option, on the Subsequent Closing Date
(as hereinafter defined), upon the terms and subject to the conditions of
this Agreement, the Company will deliver to the Buyers validly issued
certificates registered in the name of the Buyer representing the number
of Option Shares to be purchased by the Buyers on the Subsequent Closing
Date in the denominations designated by the Buyer.
ARTICLE II DEFINITIONS
2.1. Defined Terms. As used in this Agreement, the following
capitalized terms have the meanings ascribed to them in this section or in
those sections of this Agreement cross-referenced below:
"Affiliate" means, with respect to any Person, (i) any Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, such Person, or (ii) any
director, officer or partner of such Person or any Person specified in
clause (i) above, or (iii) any Immediate Family Member of any Person
specified in clause (i) or (ii) above.
"Agreement" means this Subscription Agreement, as the same may be
further amended, supplemented or otherwise modified from time to time.
"Balance Sheets" has the meaning assigned to such term in Section
5.1(f) hereof.
"Banks" has the meaning assigned to such term in the recitals hereof.
"Benefit Plans" has the meaning assigned to such term in Section
5.1(o)(i) hereof.
"Buyer" has the meaning assigned to such term in the preamble hereof.
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"Buyer Indemnified Party" and "Buyer Indemnified Parties" have the
meanings assigned to such terms in Section 8.1 hereof.
"Buyer Subordinated Loan" has the meaning assigned to such term in
the recitals hereof.
"Buyer Subordinated Loan Note" has the meaning assigned to such term
in the recitals hereof.
"Buyer Subordinated Note" has the meaning assigned to such term in
the recitals hereof.
"Buyer Subordinated Note Repayment Date" means the date on which the
principal amount of the Buyer Subordinated Note, together with all
interest thereon, has been repaid in full.
"Code" has the meaning assigned to such term in Section 5.1(o)(iii)
hereof.
"Common Stock" has the meaning assigned to such term in the recitals
hereof.
"Company" has the meaning assigned to such term in the preamble
herein.
"Company Indemnified Party" and "Company Indemnified Parties" have
the respective meanings assigned to such terms in Section 8.2 hereof.
"Company Shares" has the meaning assigned to such term in the
recitals hereof.
"Contract" has the meaning assigned to such term in Section 5.1(k)
hereof.
"Controlled Group" has the meaning assigned to such term in Section
5.1(o)(ii) hereof.
"Credit Agreement" has the meaning assigned to such term in the
recitals hereof.
"De Golver" has the meaning assigned to such term in Section 5.1(x)
hereof.
"Demand for Arbitration" has the meaning assigned to such term in
Section 8.9 hereof.
"El Paso" has the meaning assigned to such term in the recitals
hereof.
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"Employment Agreement" means the Employment Agreement, dated as of
December 31, 1996, between Xxxxxxx X. Xxxxx and the Company, attached
hereto as Exhibit B.
"Engineering Report" has the meaning assigned to such term in Section
5.1(x) hereof.
"Environmental Claim" means any notice by any Person alleging
potential liability (including without limitation potential liability for
investigatory costs, cleanup costs, remedial activity or removal costs,
government response costs, natural resource damages, property damages,
personal injuries, fines or penalties) arising out of, based on or
resulting from (A) the presence, or release or threatened release into the
environment, of any Material of Environmental Concern at any location,
whether or not owned by the Company or the Tenneco Entities, or (B)
circumstances forming the basis of any violation or alleged violation of,
or any liability or alleged liability under, any Environmental Law.
"Environmental Laws" means all statutes, codes, treaties and other
laws (including without limitation common law) and regulations, rules,
ordinances, decrees, orders and other pronouncements having the force and
effect of law, by any federal, state, local, foreign or other Governmental
Authority, relating to pollution or protection of human health or the
environment (including without limitation ambient and indoor air, surface
water, groundwater, land surface, subsurface strata, and flora and fauna).
"ERISA" has the meaning assigned to such term in Section 5.1(o)(i)
hereof.
"Event of Default" means the failure to pay principal or interest of
the Indemnification Note when due or the occurrence of customary
bankruptcy or insolvency events.
"Exercise Notice" has the meaning assigned to such term in Section
4.3 hereof.
"Exercise Period" has the meaning assigned to such term in Section
4.2 hereof.
"Fair Market Value per Share" has the meaning assigned to such term
in Section 8.3 hereof.
"Fee Properties" has the meaning assigned to such term in Section
5.1(h)(i) hereof.
"Fee Reserves" has the meaning assigned to such term in Section
5.1(h)(i) hereof.
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"Firm Common Shares" has the meaning assigned to such term in the
recitals hereof.
"Firm Share Purchase" has the meaning assigned to such term in the
recitals hereof.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Hydrocarbons" means oil, condensate, gas, casinghead gas, helium,
carbon dioxide and other liquid or gaseous hydrocarbons.
"Immediate Family Member" means, with respect to any Person, a
spouse, parent, child or sibling of such Person or a trust created for any
of their benefit, the benefit of any Immediate Family Member or the estate
of any Immediate Family Member.
"Indemnification Note" means, with respect to any indemnification
payment made by the Company to Buyer Indemnified Parties pursuant to
Article VII of this Agreement, a subordinated promissory note containing
the following terms: the principal amount of the note shall bear interest
from the date of the note, until paid in full; the Company agrees to repay
the entire principal amount of the note, and all accrued and unpaid
interest thereon, in a single payment on the earlier of (a) one month
following the payment in full of all amounts under the Credit Agreement
whether for principal, interest, premium, if any or any other reason (b)
the four year anniversary of the issuance of the note and (c) the
occurrence of an event of default (to be defined to consist of a failure
to pay principal or interest on the Indemnification Note when due or the
occurrence of specified bankruptcy or insolvency-related events; interest
shall be calculated at the rate of the prime rate of Chase Manhattan Bank
plus 2% per annum, on the basis of a 365 day year and the actual number of
days elapsed; the Company may prepay the note at any time without
prepayment penalty or premium; and other terms (including subordination
provisions) in form and substance reasonably satisfactory to the Company
and the Buyer and satisfactory to the Banks under the Credit Agreement.
"Indemnified Party" has the meaning assigned to such term in Section
8.4(a) hereof.
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"Indemnifying Party" has the meaning assigned to such term in Section
8.4(a) hereof.
"Initial Closing" has the meaning assigned to such term in Section
3.1(a) hereof.
"Initial Closing Date" has the meaning assigned to such term in
Section 3.1(a) hereof.
"Investment" means each corporation, association, partnership, joint
venture or other entity in which the Company, the Tenneco Entities or any
Tenneco Entities' Subsidiary has a debt or equity investment, in each case
other than the Tenneco Entities' Subsidiaries.
"Knowledge", including the usage "to the Knowledge of the Company"
and variations thereof, means knowledge which exists to the extent of the
actual knowledge of the Management Investors in whatever capacity such
knowledge was obtained, with respect to the representation and warranty
being made.
"Leased Reserves" has the meaning assigned to such term in Section
5.1(h)(ii) hereof.
"License" has the meaning assigned to such term in Section 5.1(p)
hereof.
"Lien" has the meaning assigned to such term in Section 5.1(d)
hereof.
"Loss" and "Losses" have the respective meanings assigned to such
terms in Section 8.1 hereof.
"Management Investors" has the meaning assigned to such term in the
recitals hereof.
"Material Adverse Effect" means a material adverse effect on the
business, operations, properties, financial condition or results of
operations of (a) the Company or (b) the Tenneco Entities and the Tenneco
Entities' Subsidiaries on a consolidated basis.
"Materials of Environmental Concern" means any and all chemicals,
pollutants, contaminants, wastes, toxic or hazardous substances or
materials, petroleum and petroleum products and other materials that are
regulated under, or could result in the imposition of liability under, any
Environmental Laws.
"Multiemployer Plan" has the meaning assigned to such term in Section
5.1(o)(ii) hereof.
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"1996 Budget" means the Company's 1996 budget, a copy of which has
been provided to the Buyer prior to the execution of this Agreement.
"Notice of Claim" has the meaning assigned to such term in Section
8.3 hereof.
"Oil and Gas Interests" means direct and indirect interests in and
rights with respect to oil, gas, helium, carbon dioxide, mineral, and
related properties and assets of any kind and nature, direct or indirect,
including working, royalty, and overriding royalty interests, production
payments, operating rights, net profit interests, other nonworking
interests, and nonoperating interests; all interests in and rights with
respect Hydrocarbons and other minerals or revenues therefrom and all
contracts in connection therewith and claims and rights thereto (including
all oil and gas leases, operating 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; 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 all interests in equipment and machinery (including
well equipment and machinery), oil and gas production, gathering,
transmissions, 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.
"Oil and Gas Leases" has the meaning assigned to such term in Section
5.1(h)(ii) hereof.
"Option" has the meaning assigned to such term in Section 4.1 hereof.
"Option Purchase Price" has the meaning assigned to such term in
Section 4.1 hereof.
"Option Share Purchase" has the meaning assigned to such term in
Section 4.3 hereof.
"Option Shares" has the meaning assigned to such term in Section
1.1(b) hereof.
"Payout" has the meaning assigned to such term in Section 4.1 hereof.
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"Pension Plan" has the meaning assigned to such term in Section
5.1(o)(iii) hereof.
"Person" means any individual, corporation, limited liability
company, partnership, trust, joint stock company, business trust,
unincorporated association, joint venture, Governmental Authority or other
entity of any nature whatsoever.
"Predecessors" has the meaning assigned to such term in Section
5.1(f) hereof.
"Properties" has the meaning assigned to such term in Section
5.1(h)(ii) hereof.
"Reserves" has the meaning assigned to such term in Section
5.1(h)(ii) hereof.
"Securityholders Agreement" means the Securityholders Agreement,
dated as of December 31, 1996, among the Company, the Buyer and the
Management Investors and the other stockholders of the Company, attached
hereto as Exhibit C.
"Stock Purchase Agreement" has the meaning assigned to such term in
the recitals hereof.
"Subsequent Closing" has the meaning assigned to such term in Section
3.1(a) hereof.
"Subsequent Closing Date" has the meaning assigned to such term in
Section 3.1(a) hereof.
"subsidiaries" means as to any Person a corporation, partnership, or
similar entity of which (i) a majority of the outstanding shares of voting
stock, limited liability company interests or similar securities or
interests are at the time owned, directly or indirectly through one or
more intermediaries, or both, by such Person or (ii) such Person is the
general partner (or performs a role similar to a general partner).
"Subsidiary Stock" has the meaning assigned to such term in Section
5.1 (e)(ii) hereof.
"Tax" or "Taxes" has the meaning assigned to such term in Section
5.1(v)(i) hereof.
"Tax Return" or "Tax Returns" has the meaning assigned to such term
in Section 5.1(v)(i) hereof.
"Teleo" has the meaning assigned to such term in the recitals hereof.
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"Tenneco Entities" has the meaning assigned to such term in the
recitals hereof.
"Tenneco Entities' Subsidiaries" has the meaning assigned to such
term in Section 5.1(c) hereof.
"TGP" has the meaning assigned to such term in the recitals herein.
"Third Party Claims" has the meaning assigned to such term in Section
8.4(a) hereof.
"Transaction Documents" shall mean, collectively, this Agreement, the
Securityholders Agreement, the Credit Agreement, the Stock Purchase
Agreement, the Buyer Subordinated Note and the Employment Agreement.
"Transactions" has the meaning assigned to such term in Section
5.1(d) hereof.
"Ventures" has the meaning assigned to such term in the recitals
hereof.
ARTICLE III INITIAL CLOSING
3.1. Time and Place.
(a) The closing of the Firm Share Purchase (the "Initial Closing")
will take place at the offices of Weil, Gotshal & Xxxxxx LLP, 000
Xxxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx, or at such other location as the
parties hereto mutually agree, at 10:00 a.m. Houston time on December 31,
1996, or on such other time and date as may be mutually agreed upon by the
parties hereto (the "Initial Closing Date").
(b) The closing of the Option Share Purchase (a "Subsequent Closing")
will take place at the offices of Weil, Gotshal & Xxxxxx LLP, 000
Xxxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx, or at such other location as the
parties hereto mutually agree, at such time and date as may be mutually
agreed upon by the parties hereto in accordance with the provisions of
Section 4.4 (a "Subsequent Closing Date").
ARTICLE IV OPTION TO PURCHASE ADDITIONAL COMMON STOCK
4.1. Option. Subject to the terms and conditions of this Agreement,
the Company hereby grants to the Buyer an option (the "Option") to purchase
the Option Shares for an aggregate purchase price (the "Option Purchase
Price") of $8,000,000 plus any cash interest payment on the Buyer Subordinated
Note actually
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received by the Buyer; provided, that the number of the Option Shares shall be
appropriately adjusted for any stock dividends, splits, reverse splits,
combinations, reclassifications, recapitalizations, reorganizations and the
like occurring after the date hereof. The Option Purchase Price shall be
satisfied in full (i) prior to the Buyer Subordinated Note Repayment date, the
delivery to the Company of the Buyer Subordinated Note together with the
payment of an amount in cash equal to any repayments of principal of, and all
payments of interest on, the Buyer Subordinated Note previously received by
the Buyer and (ii) after the Buyer Subordinated Note Repayment Date, by the
payment of the Option Purchase Price in cash. The Company acknowledges and
agrees that the Option Purchase Price may be satisfied by the delivery of the
Buyer Subordinated Note as provided in this Agreement irrespective of the
validity, regularity or enforceability of the Buyer Subordinated Note, the
bankruptcy, insolvency or other condition of the obligor under the Buyer
Subordinated Note or any breach by such obligor of its obligations under the
Buyer Subordinated Note. The Company acknowledges that the Buyer Subordinated
Note shall be delivered to the Company on an "as is, where is" basis without
any representation, warranty or indemnity by the Buyer except as set forth in
Section 5.2.
4.2. Exercise. The Option may be exercised by the Buyer, in its sole
discretion, by the Buyer delivering an Exercise Notice (as hereinafter
defined) to the Company at any time during the period (the "Exercise Period")
commencing on the Initial Closing Date and ending on the earlier of (a) the
third year anniversary of the Initial Closing Date or (b) the 30th day after
the Buyer Subordinated Note Repayment Date.
4.3. Notice. If the Buyer wishes to exercise the Option (the "Option
Share Purchase"), the Buyer shall send a written notice (an "Exercise Notice")
to the Company of its intention to exercise the Option. The Subsequent Closing
Date for the Option Share Purchase shall be not less than 5 nor more than 60
days (or such longer period as may be required by applicable law or
regulation) from the date on which such notice is delivered to the Company.
4.4. Conditions Precedent. The obligation of the Buyer to purchase
Option Shares pursuant to the Buyer's exercise of the Option shall be subject
to the satisfaction of the conditions set forth in paragraph 8.1(b) hereof.
ARTICLE V REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of the Company. The Company
represents and warrants to the Buyer as follows:
(a) Execution and Validity of Agreement. The Company has all
requisite corporate power and authority to execute
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and deliver this Agreement and the other Transaction Documents to which it
is a party and to perform its obligations hereunder and thereunder. This
Agreement and the other Transaction Documents to which the Company is a
party have been duly executed and delivered by the Company and, assuming
due authorization, execution and delivery by the other parties to the
Transaction Documents, constitute the legal, valid and binding agreements
of the Company. Assuming due authorization, execution and delivery by the
other parties hereto and thereto, each of this Agreement and the
Securityholders Agreement are enforceable against the Company in
accordance with their terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating
to or limiting creditors' rights generally or by equitable principles
relating to enforceability.
(b) Corporate Organization.
(i) The Company is a corporation duly organized, validly existing and
in good standing under the laws of Delaware, has the corporate power and
authority to own, use and operate its properties and to carry on its
business as the same is now being conducted and is duly qualified or
licensed to do business as a foreign corporation in each jurisdiction in
which the nature of its business or properties makes such qualification
necessary.
(ii) Each of the Tenneco Entities and the Tenneco Entities'
Subsidiaries (as hereinafter defined) is a corporation or limited
liability company, as the case may be, duly organized, validly existing
and in good standing under the laws of its State of organization, has the
corporate power and authority to own, use and operate its properties and
to carry on its business as the same is now being conducted and is duly
qualified or licensed to do business as a foreign corporation in each
jurisdiction in which the nature of its business or properties makes such
qualification necessary, except any such jurisdiction in which the failure
to so qualify or be licensed would not have a Material Adverse Effect.
(c) Investments. As of the date hereof, the Company does not have any
direct or indirect subsidiaries other than its wholly-owned subsidiary,
Domain Energy Guarantor Corporation, a Delaware corporation. Other than
those subsidiaries listed in Schedule 5.1(c) (the "Tenneco Entities'
Subsidiaries"), the Tenneco Entities do not have any direct or indirect
subsidiaries. The Tenneco Entities own the percentage of the outstanding
capital stock or ownership units of the Tenneco Entities' Subsidiaries as
set forth in Schedule 5.1(c). Immediately following the Initial Closing,
the Company will own all of the outstanding capital stock of the Tenneco
Entities. Except for the interests set
13
forth on Schedule 5.1(c) neither the Company, the Tenneco Entities or any
of the Tenneco Entities' Subsidiaries have any debt or equity investment,
or other interest, direct or indirect, in any corporation, association,
partnership, joint venture or other entity.
(d) No Conflict. Neither the execution and delivery by the Company or
either of the Tenneco Entities of the Transaction Documents to which it is
a party, nor the performance by the Company or the Tenneco Entities of the
transactions contemplated hereby and thereby, including without limitation
the sale of the Company Shares to the Buyer, the initial borrowings under
the Credit Agreement and the issuance of the Buyer Subordinated Note
(collectively the "Transactions"), will (i) violate or conflict with any
of the provisions of the certificate of incorporation or by-laws of the
Company, the Tenneco Entities or any of the Tenneco Entities'
Subsidiaries, (ii) except as set forth in Schedule 5.1(d)(ii), with or
without the giving of notice or the lapse of time or both, violate or
constitute a default under, or result in the acceleration of or entitle
any party to accelerate (whether after the giving of notice or lapse of
time or both) any obligation under any mortgage, indenture, deed of trust,
lease, contract, agreement, license or other instrument or violate any
provision of any law, order, judgment, decree, restriction or ruling of
any Governmental Authority to which the Company, the Tenneco Entities or
any of the Tenneco Entities' Subsidiaries is a party or by which any of
their respective property is bound or encumbered or (iii) except as
provided in the Transaction Documents, result in the creation of any lien,
mortgage, pledge, charge, security interest or similar encumbrance
("Lien") upon any of the assets of the Company, the Tenneco Entities or
any of the Tenneco Entities' Subsidiaries or the loss of any license or
other contractual right with respect thereto.
(e) Capital Structure of the Company, the Tenneco Entities and the
Tenneco Entities' Subsidiaries.
(i) The authorized capital stock of the Company as of the date hereof
consists of 20,000 shares of Common Stock, no shares of which are issued
and outstanding as of the date hereof. Immediately following the Initial
Closing and consummation of the Stock Purchases, the authorized, issued
and outstanding capital stock of the Company will be as set forth on
Schedule 5.1(e)(i).
(ii) Set forth on Schedule 5.1(e)(ii)(a) is the authorized, issued
and outstanding capital stock of the Tenneco Entities as of the date
hereof and the authorized capital stock or partnership or limited
liability company interests, as the case may be (collectively, the
"Subsidiary Stock"), and the issued and outstanding Subsidiary Stock of
14
each Tenneco Entities' Subsidiary as of the date hereof. Immediately
following the Initial Closing and consummation of the Stock Purchases, the
authorized, issued and outstanding capital stock of the Tenneco Entities
and Subsidiary Stock will be as set forth on Schedule 5.1(e)(ii)(b).
(iii) Except as set forth on Schedule 5.1(e)(iii), all issued and
outstanding shares or units of Authorized Common Stock and common stock of
the Tenneco Entities and the Subsidiary Stock have been duly authorized
and validly issued, are fully paid and nonassessable and free of
preemptive rights with no personal liability attaching to the ownership
thereof, and such ownership is free and clear of all Liens.
(iv) The Company Shares have been duly authorized by the Company and,
upon payment and delivery in accordance with this Agreement, will be
validly issued, fully paid and nonassessable and free of preemptive rights
with no personal liability attaching to the ownership thereof.
(v) Except as set forth on Schedule 5.1(e)(v), and except for the
Securityholders Agreement and rights contained in the Company's
Certificates of Incorporation, there are no outstanding options, warrants,
calls, rights or other securities or commitments or any other agreements
of any character relating to the sale, issuance or voting of any shares of
the capital stock or limited liability company interests, as the case may
be, of the Company, the Tenneco Entities or any Tenneco Entities'
Subsidiary, whether issued or unissued, or any securities convertible into
or evidencing the right to purchase any shares of capital stock or limited
liability company interests, as the case may be, of the Company, the
Tenneco Entities or any Tenneco Entities' Subsidiary.
(f) Financial Statements. The Company has heretofore furnished to the
Buyer consolidated and consolidating balance sheets (the "Balance Sheets")
of TGP and Ventures, as predecessors in interest of the Company and its
subsidiaries (in such capacity, the "Predecessors") as at December 31,
1995 and the related consolidated and consolidating statements of income,
retained earnings and cash flows of the predecessors for the fiscal year
ended on said date, and the consolidated and consolidating balance sheets
of the Predecessors as at September 30, 1996 and the related consolidated
and consolidating statements of income, retained earnings and cash flows
of the Predecessors for the nine-month period ended on such date. All such
financial statements are complete and correct and fairly present the
consolidated financial condition of the Predecessors and (in the case of
said consolidating financial statements) the respective unconsolidated
financial condition of the
15
Predecessors, as at said dates and the consolidated and unconsolidated
results of their operations for the fiscal year and nine-month period
ended on said dates (subject, in the case of such financial statements as
at September 30, 1996, to normal year-end audit adjustments), all in
accordance with generally accepted accounting principles and practices
applied on a consistent basis. Except as disclosed on Schedule 5.1(f),
there is no material liability or obligation of any kind, whether accrued,
absolute, fixed or contingent, of the Tenneco Entities and the Tenneco
Entities' Subsidiaries which would be required to be presented in
financial statements or notes thereto prepared in accordance with
generally accepted accounting principles that is not reflected or reserved
against in the Balance Sheets (or the notes thereto), other than
liabilities or obligations incurred in the ordinary course of business
since December 31, 1995. The Company does not have any liability or
obligation of any kind, whether accrued, absolute, fixed or contingent,
other than obligations and liabilities arising under the Transaction
Documents.
(g) Absence of Certain Changes or Events. Since December 31, 1995,
except as disclosed in Schedule 5.1(g), and except for the conclusion of,
and preparation for, the Transactions, the Tenneco Entities and the
Tenneco Entities' Subsidiaries have operated their respective businesses
only in the ordinary course consistent with past practice and there has
not been, with respect to the Tenneco Entities or any of the Tenneco
Entities' Subsidiaries:
(i) any change in the business or financial condition of the
Tenneco Entities or any of the Tenneco Entities' Subsidiaries which
has had, or would reasonably be expected to have, either in any case
or in the aggregate, a Material Adverse Effect;
(ii) the incurrence of any indebtedness for money borrowed in
excess of $500,000 (other than borrowings under the Credit Agreement
and indebtedness permitted under the Credit Agreement) or the
creation of any Lien on any properties or assets (whether tangible or
intangible) having an aggregate value in excess of $500,000, other
than Liens required or permitted under the Credit Agreement;
(iii) other than as set forth in the 1996 Budget: (A) any
general increase, or any announcement of any general increase, in the
wages, salaries, compensation, bonuses, commissions, incentives,
pension or other benefits payable by the Tenneco Entities or any of
the Tenneco Entities' Subsidiaries to its directors or employees, or
(B) any specific increase, or any announcement of any specific
increase in any of the foregoing payable by the Tenneco Entities or
any of the
16
Tenneco Entities' Subsidiaries to any director or any employee,
except in either case (I) as set forth in the Employment Agreement,
and (II) increases in salaries and salary bonuses not greater than 3%
in the aggregate since December 31, 1995;
(iv) any new agreement, plan, policy, program or arrangement to
pay pensions, retirement allowances or other employee benefits to any
director, employee or agent or sales representative, whether past or
present, including any severance or consulting arrangement;
(v) any commitment or amendment to any additional pension,
profit-sharing, deferred compensation, group insurance, severance
pay, retirement or other employee benefit plan, fund or similar
arrangement in existence on the date hereof;
(vi) any termination, discontinuance, closing or disposition of
any plant, facility or business operation (other than sales or other
dispositions in the ordinary course of business or as previously
disclosed to the Buyer) of Oil and Gas Interests, any layoffs of
employees or implementation of any early retirement, separation or
window program or planning or announcement of any such action or
program for the future;
(vii) any material transfer or grant of any rights under any
concessions, property leases, licenses, agreements, trademarks,
tradenames, service marks, brandmarks, brand names, copyrights,
patents, inventions, processes, technical know-how or other
proprietary rights either within or outside the United States;
(viii) any capital expenditure in excess of $250,000 other than
as set forth in the 1996 Budget;
(ix) any damage, destruction or loss (whether or not covered by
insurance) to any asset of the Tenneco Entities or any of the Tenneco
Entities' Subsidiaries, other than damage, destruction or losses
which, individually or in the aggregate, have not had and would not
reasonably be expected to have, a Material Adverse Effect; or
(x) except for such transactions reflected in the Shareholder
Advance Account (as such term is defined in the Stock Purchase
Agreement), any declaration, setting aside or payment of any dividend
or other distribution on or in respect of its shares of capital stock
or limited liability company interests, as the case may be, or any
direct or indirect redemption, retirement,
17
purchase or other acquisition of any such shares or interests, as the
case may be.
(h) Title to Properties; Encumbrances.
(i) The Company, the Tenneco Entities and the Tenneco Entities'
Subsidiaries have good and marketable title to the respective real
properties and oil and gas reserves that they own and which are
reflected on the Balance Sheet and other 1995 financial statements
referred to in Section 5.1(f) or were acquired since December 31,
1995, including all joint ventures and other investments
(collectively, the "Fee Properties") free and clear of all Liens
except (a) capitalized financing leases, (b) Liens for ad valorem
real property taxes not yet due or payable, due but not yet payable
or due and payable but not yet delinquent, (c) mechanics',
materialmen's, operators, tax or similar Liens affecting the Fee
Properties (but not excepting any such Liens which secure obligations
which are delinquent unless such delinquent obligations are being
contested in good faith by appropriate legal proceedings), (d)
purchase money Liens arising in the ordinary course of business which
may be delinquent provided, such delinquent Liens are being contested
in good faith by appropriate legal proceedings, (e) those mortgages,
pledges and other Liens identified on Schedule 5.1(h)(i), (f) the
mortgages, security interests and Liens granted pursuant to the
Credit Agreement or any documents executed in connection therewith
and (g) such imperfections of title, easements and other similar
encumbrances, if any, which do not in the aggregate materially
detract from the value or materially interfere with the present use
by the Company, the Tenneco Entities and the Tenneco Entities'
Subsidiaries, as the case may be, of the Fee Properties. Fee
Properties consisting of oil and gas reserves are sometimes
hereinafter referred to as "Fee Reserves."
(ii) The Company has made available to the Buyer all agreements
(collectively, with any and all amendments, supplements or other
modifications thereto, the "Oil and Gas Leases") pursuant to which
the Company, the Tenneco Entities and the Tenneco Entities'
Subsidiaries lease, sublease or otherwise possess any occupancy,
usage rights or Oil and Gas Interests with respect to any real
property (such properties are hereinafter referred to collectively as
the "Leased Properties"; the Leased Properties together with the Fee
Properties, collectively, the "Properties") or the reserves of oil
and gas described on the 1995 financial statements referred to in
Section 5.1(f) (the "Leased Reserves"). The Leased Reserves together
with the Fee
18
Reserves are hereinafter collectively referred to as the "Reserves".
Except with respect to the Reserves, the Company, the Tenneco
Entities and the Tenneco Entities' Subsidiaries have no reserves of
oil and gas and the Reserves are all of the oil and gas reserves
utilized by the Company, the Tenneco Entities and the Tenneco
Entities' Subsidiaries in its business.
(iii) The Tenneco Entities or one of the Tenneco Entities'
Subsidiaries is a party to each of the Oil and Gas Leases pursuant to
which the Tenneco Entities or one of the Tenneco Entities'
Subsidiaries leases the Leased Properties and the Leased Reserves.
Each of the Oil and Gas Leases is validly executed by the lessee, in
full force and effect and represents a binding obligation of the
Tenneco Entities, the Tenneco Entities' Subsidiary (as the case may
be) and, to the Knowledge of the Company, the lessor thereunder in
accordance with the terms thereof. Except as set forth in Schedule
5.1(h)(i), there is no default by the Tenneco Entities or any of the
Tenneco Entities' Subsidiaries under the Oil and Gas Leases or to the
Knowledge of the Company by any of the other parties to the Oil and
Gas Leases, nor, to the Knowledge of the Company, has any event
occurred which with notice, the passage of time or both would
constitute such a default. The Company has no Knowledge of any
adverse claims to the Leased Reserves or the rights described in the
Oil and Gas Leases, nor have the Tenneco Entities received any notice
of default under the Oil and Gas Leases and the quiet and peaceful
possession of the Leased Reserves by the Tenneco Entities or one of
the Tenneco Entities' Subsidiaries has not been disturbed. Except as
disclosed on Schedule 5.1(h)(i), the Tenneco Entities have no
Knowledge of any facts which, through notice or the passage or time,
would constitute grounds for a forfeiture of any of the Leased
Reserves under any of the Oil and Gas Leases. Except as otherwise may
be set forth in any of the Oil and Gas Leases, to the Knowledge of
the Company, each of the lessors or sub-lessors under the Oil and Gas
Leases has title to the Leased Reserves leased pursuant thereto. For
purposes hereof, the term "title" shall mean that the party
possessing the same has good and marketable title to all oil and gas
to which such expression is directed, together with all rights
necessary to remove such oil and gas, the necessary rights to conduct
such removal and the right to lease or sublease same to the Tenneco
Entities and the Tenneco Entities' Subsidiaries in accordance with
the terms of the Oil and Gas Leases.
(iv) Except as set forth in Schedule 5.1(h)(iv), to the
Knowledge of the Company, (i) the operations of
19
the Tenneco Entities and the Tenneco Entities' Subsidiaries are not
dependent upon any rights to the use of real properties of others
except under the Oil and Gas Leases, the Licenses and the Contracts
and (ii) all buildings, structures, machines and equipment used in
the operations of the Tenneco Entities and the Tenneco Entities'
Subsidiaries have been maintained in all respects in a state of
adequate repair and are otherwise generally adequate for their normal
operation, except for such failures that, individually or in the
aggregate, would not have a Material Adverse Effect. Except as set
forth in Schedule 5.1(h)(iv), (A) the Tenneco Entities have not
received any notice that (1) any of such buildings, structures,
machines, equipment or (2) the current use of the Properties does not
conform in all material respects with all applicable ordinances,
regulations and zoning or other laws, (B) such machinery and
equipment is in all material respects in useable condition, and (C)
to the Knowledge of the Company, there is no pending or threatened
condemnation, eminent domain or similar proceeding affecting any part
of the Properties or the Reserves.
(v) Other than in the ordinary course of business, neither the
Tenneco Entities nor any of the Tenneco Entities' Subsidiaries have
leased, subleased, optioned, assigned or otherwise transferred or
entered into any agreement to lease, sublease, option, assign or
otherwise transfer any interest in the Reserves so as to materially
reduce its interest in the Reserves as reflected in the financial
statements referred to in Section 5.1(f). No rights of reassignment,
preferential purchase rights, option rights, back-in rights or other
rights to transfer any material interest in any of the Reserves to
any third party exist that would be triggered or violated by this
Agreement.
(vi) To the Knowledge of the Company, the Tenneco Entities and
the Tenneco Entities' Subsidiaries own or control all material
ancillary rights, including surface access rights, rights-of-way,
water rights, access to utilities and the like necessary to gain
vehicular and pedestrian access to, produce, process and market
Reserves from the Properties in the same manner and at the same rates
as were in effect as of December 31, 1995.
(vii) With respect to the Fee Reserves, there are no parties in
possession or, to the Knowledge of the Company, asserting a right of
possession adverse to the possession of the Tenneco Entities or the
Tenneco Entities' Subsidiaries, and, to the Knowledge of the
20
Tenneco Entities, there are no parties asserting title adverse to the
title of the Tenneco Entities or any of the Tenneco Entities'
Subsidiaries which, if successful, would materially detract from the
value or materially interfere with the present use by the Tenneco
Entities and the Tenneco Entities' Subsidiaries of the Fee Reserves
and the Fee Properties.
(i) Absence of Liens. Except as described in Schedule 5.1(i), each of
the Tenneco Entities and the Tenneco Entities' Subsidiaries has good
title, free of all Liens, to all equipment, machinery and fixtures (to the
extent they constitute personal property) owned or utilized in its
business (or a valid and binding lease therefor) and all its receivables
(the "Personal Properties") except for (A) capitalized financing leases,
(B) Liens for ad valorem personal property taxes not yet due or payable,
due but not yet payable, or due and payable but not yet delinquent, (C)
landlords' or similar Liens affecting the Personal Properties, (D)
purchase money Liens arising in the ordinary course of business, (E) the
mortgages, security interests and Liens granted pursuant to the Credit
Agreement or any documents executed in connection therewith, (F) Liens
permitted under the Credit Agreement and (G) Liens which do not,
individually or in the aggregate, materially detract from the value of the
Personal Properties or materially interfere with the present uses thereof.
(j) Insurance and Bonds. All policies of insurance, self-insurance
permits (other than insurance provided to employees) and reclamation,
workers compensation and other bonds relating to the Tenneco Entities and
the Tenneco Entities' Subsidiaries and their respective businesses, assets
and employees as of the date hereof (including carriers, policy numbers,
effective and termination dates and coverage and self-insured retention
amounts) are in full force and effect, all premiums due thereon have been
paid and each of the Tenneco Entities and the Tenneco Entities'
Subsidiaries has, to the Knowledge of the Company, complied with the
material provisions of such policies, permits and bonds. All properties of
the Tenneco Entities and the Tenneco Entities' Subsidiaries are insured in
such amounts and against such risks as are usually insured against by
Persons owning or operating similar properties in the localities where
such properties are located.
(k) Contracts. Except for the Transaction Documents, the Oil and Gas
Leases, the insurance policies and bonds referred to in Section 5.1(j) and
plans listed on Schedule 5.1(o), Schedule 5.1(k) hereto accurately lists
the material contracts, leases, agreements, plans, policies, indentures,
licenses and arrangements having any other legally binding basis to which
the Company, the Tenneco Entities or any of the Tenneco Entities'
Subsidiaries is a party or by which it
21
or any of its property is bound (other than those to which the only
parties are the Company, the Tenneco Entities and/or the Tenneco Entities'
Subsidiaries) meeting any of the following criteria (each such contract,
lease, agreement, plan, policy, indenture, license or arrangement (other
than the Oil and Gas Leases, the insurance policies and bonds referred to
in Section 5.1(j) and plans listed on Schedule 5.1(o)) referred to in this
Section 5.1(k) and in Section 5.1(l) below a "Contract") (for purposes of
this Section 5.1(k), "material" shall mean material to the business,
operations, properties, financial condition or results of operations of
the Company, the Tenneco Entities and the Tenneco Entities' Subsidiaries
on a consolidated basis)):
(i) any such contract, lease, agreement, plan, policy, indenture
or other such arrangement involving commitments to others to make
capital expenditures or purchases or sales involving $250,000 or more
in any one case, except commitments which may be terminated without
liability or penalty by the Company, the Tenneco Entities or any of
the Tenneco Entities' Subsidiaries on not more than 90 days notice;
(ii) any such contract, lease, agreement, plan, policy,
indenture or other such arrangement relating to any direct or
indirect indebtedness for borrowed money (including but not limited
to loan agreements, lease-purchase arrangements, guarantees of
payment or collection, agreements to purchase goods or services or to
supply funds or other undertakings on which others rely in extending
credit) or any conditional sales contracts, chattel mortgages,
equipment lease agreements and other security arrangements with
respect to personal property with a value in excess of $500,000 in
each instance used or owned by the Company, the Tenneco Entities or
any of the Tenneco Entities' Subsidiaries;
(iii) any such contract, lease, agreement, plan, policy,
indenture or other such arrangement containing covenants limiting the
freedom of the Company, the Tenneco Entities or any of the Tenneco
Entities' Subsidiaries to compete in any line of business with any
person or in any area or territory;
(iv) any such contract, lease, agreement, plan, policy,
indenture or other such arrangement containing express terms and
conditions with any sales agent, representative, franchisee or
distributor of any of the products of the Company, the Tenneco
Entities or any of the Tenneco Entities' Subsidiaries;
22
(v) other than the Oil and Gas Leases, any such contract, lease,
agreement, plan, policy, indenture or other such arrangement which
requires the payment of royalties; and
(vi) any other such contract, lease, agreement, plan, policy,
indenture or other such arrangement not of the type covered by any of
the other items of this Section 5.1(k) which is not in the ordinary
course of business or which is material to the business, operations,
properties, financial condition or results of operations of the
Company, the Tenneco Entities or any of the Tenneco Entities'
Subsidiaries (as opposed to the prospects of the economy in general)
on a consolidated basis.
True, correct and complete copies of the written Contracts listed on
Schedule 5.1(k) hereto have been made available to the Buyer.
(l) Compliance with Contracts, Etc. The Company, the Tenneco Entities
and each of the Tenneco Entities' Subsidiaries is in material compliance
with all material terms and provisions of all Contracts listed in Schedule
5.1(k) and to the Knowledge of the Company, all such Contracts are valid
and binding in accordance with their terms and in full force and effect in
all material respects, and to the Knowledge of the Company, no material
breach or default by the Company, the Tenneco Entities or any of the
Tenneco Entities' Subsidiaries or event which, with notice or lapse of
time or both, could constitute a breach or default by the Company, the
Tenneco Entities or any of the Tenneco Entities' Subsidiaries, exists with
respect thereto, and no party thereto has given notice or asserted to the
Company, the Tenneco Entities or any of the Tenneco Entities' Subsidiaries
that the Company, the Tenneco Entities or any of the Tenneco Entities'
Subsidiaries is in default thereunder and, to the Knowledge of the
Company, no other party thereto is in material breach or default
thereunder.
(m) Litigation. Except as disclosed in Schedule 5.1(m), there are no
lawsuits, actions, arbitrations or legal or administrative or regulatory
proceedings, or investigations pending or, to the Knowledge of the
Company, threatened against the Company, the Tenneco Entities, any of the
Tenneco Entities' Subsidiaries, or, to the Knowledge of the Company, any
Investment. Neither the Company, the Tenneco Entities, any of the Tenneco
Entities' Subsidiaries, nor, to the Knowledge of the Company, any
Investments is a party to, nor are any of them or any of their respective
assets subject to or bound by, any order, judgment, injunction,
stipulation, order or decree (whether rendered by a court or
administrative agency or by
23
arbitration) which, if adversely determined, could, individually or in the
aggregate, have a Material Adverse Effect or materially adversely affect
the ability of the Company to sell the Company Shares to be sold by the
Company hereunder or to consummate the other transactions contemplated
hereby. There are no material citations, fines or penalties heretofore
asserted against the Company, the Tenneco Entities, the Tenneco Entities'
Subsidiaries, or, to the Knowledge of the Company, any Investments, under
any foreign, federal, state or local law that remain unpaid or that
otherwise bind any assets of the Company, the Tenneco Entities or any of
the Tenneco Entities' Subsidiaries or Investments.
(n) Compliance with Laws. None of the Company, the Tenneco Entities,
any of the Tenneco Entities' Subsidiaries or, to the Knowledge of the
Company, any of the Investments, has violated or failed to comply with any
applicable statute, law, ordinance, regulation, rule or order of any
Governmental Authority, or any judgment, decree or order of any court,
applicable to its business or operations, except where such violations or
failures would not, individually or in the aggregate, have a Material
Adverse Effect; and the conduct of the Company's, the Tenneco Entities',
the Tenneco Entities' Subsidiaries' and, to the Knowledge of the Company,
the Investments' businesses is in material conformity with all applicable
foreign, federal, state and local energy, public utility, health and
employee health and safety requirements and all other applicable foreign,
federal, state and local governmental and regulatory requirements, except
where the failures to be in such conformity would not, individually or in
the aggregate, have a Material Adverse Effect. The Company, the Tenneco
Entities, the Tenneco Entities' Subsidiaries and, to the Knowledge of the
Company, the Investments have all permits, licenses, authorizations,
consents, approvals and franchises from Governmental Authorities required
to conduct their respective businesses as they are now being and during
the past year have been conducted, and as they are planned to be
conducted, except where the failure to have any such permits, licenses,
authorizations, consents, approvals or franchises would not, individually
or in the aggregate, have a Material Adverse Effect.
(o) Employment Agreement and Related Matters.
(i) Each "employee benefit plan", as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (including each multiemployer plan within the meaning of
3(37) of ERISA), each bonus, fringe benefit, incentive, stock option,
deferred compensation, employment, consulting, severance and all
other employee benefit plans, programs, policies, agreements and
arrangements,
24
whether or not covered by ERISA under which the Company, the Tenneco
Entities or any of the Tenneco Entities' Subsidiaries has or could
have any present or future material obligation or liability
(collectively, the "Benefit Plans") are listed in Schedule 5.1(o).
The Company or the Tenneco Entities have delivered to the Buyer, to
the extent requested by the Buyer, current, correct and complete
copies of each Benefit Plan and any related agreements or funding
instruments (or, to the extent no such copy exists, a current,
correct and complete description thereof) and, to the extent
applicable, (A) the most recent summary plan description and Internal
Revenue Service determination letter, if any, relating to each
Benefit Plan and (B) for the two most recent plan years (I) the form
5500 and attached schedules; (II) audited financial statements; (III)
actuarial valuation reports; and (IV) attorney's response to an
auditor's request for information.
(ii) No Benefit Plan is a "multiemployer plan" as such term is
defined in Section 4001(a)(3) of ERISA ("Multiemployer Plan").
Neither the Company, the Tenneco Entities, nor any of the Tenneco
Entities' Subsidiaries nor any trade or business, whether or not
incorporated, which is under common control with the Company or the
Tenneco Entities within the meaning of Code Section 414(b), (c), (m)
or (o) or ERISA Section 4001 (excluding El Paso and its subsidiaries
other than the Tenneco Entities and the Tenneco Entities
Subsidiaries') (collectively, the "Controlled Group") have incurred
any liability in connection with a complete or partial withdrawal
from a Multiemployer Plan. To the Knowledge of the Company and the
Tenneco Entities, no such Multiemployer Plan is in "reorganization"
or is "insolvent"(as those terms are defined in Section 4241 and
Section 4245 of ERISA, respectively).
(iii) Each Benefit Plan, which is intended to be "qualified"
within the meaning of Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code") (a "Pension Plan"), is so qualified and
has received a favorable determination letter as to its
qualification, and nothing has occurred which would cause the loss of
such qualification, in each case except for such circumstances that,
individually or in the aggregate, would not have a Material Adverse
Effect.
(iv) Each Benefit Plan is intended by the Company and the
Tenneco Entities to have been, and to the Knowledge of the Company
has been, established, maintained and administered in all material
respects in accordance with its terms and the requirements of
25
applicable law, including without limitation ERISA and the Code.
There are not now, nor have there been, any "accumulated funding
deficiencies" as defined in Section 412 of the Code (whether or not
waived) with respect to any Benefit Plan which have not been fully
satisfied. No "reportable event" (as that term is defined in Section
4043(b) of ERISA) has occurred with respect to any Benefit Plan.
(v) No Pension Plan maintained by a member of the Controlled
Group which is subject to Title IV of ERISA has been terminated, in
whole or in part, and no proceedings to terminate a Benefit Plan
pursuant to Subtitle C of Title IV of ERISA have been instituted or,
to the Knowledge of the Company, threatened. As of the date of this
Agreement, there are no pending or threatened claims, actions, suits,
complaints or proceedings by or before any court, Governmental
Authority, administrative agency or commission alleging a breach or
breaches of fiduciary duties or violation of other applicable laws
with respect to such Benefit Plans, or otherwise involving the
Benefit Plans, which could result in material liability on the part
of the Company, the Tenneco Entities, any of the Tenneco Entities'
Subsidiaries or on a Benefit Plan or a Pension Plan maintained by a
member of the Controlled Group (other than benefit claims in the
ordinary course), nor, to the Knowledge of the Company, is there any
basis for any such claims, actions, suits, complaints or proceedings.
(vi) There has been no material adverse change in the funded
status of any Benefit Plan that is subject to Title IV of ERISA since
the most recent valuation date.
(vii) No Benefit Plan exists which could result in the payment
by the Company, the Tenneco Entities, any of the Tenneco Entities'
Subsidiaries, any member of its Controlled Group or the Buyer of
money or any other property or rights, or accelerate or provide any
other rights or benefits, to any person as a result of the
Transactions, including without limitation the sale of Company Shares
hereunder, whether or not such payment would constitute a parachute
payment within the meaning of Section 280G of the Code, other than as
expressly provided for in the Transaction Documents.
(viii) The maximum liability under the obligations being assumed
by the Company under Section 9.04 of the Stock Purchase Agreement
does not exceed $1,400,000.
(p) Licenses and Government Approvals. Except as set forth on
Schedule 5.1(p), the Company does not have
26
Knowledge of any impediment to the renewal of any license, permit,
approval, consent, franchise and other authorization of any federal,
state, local or foreign Governmental Authority (collectively, "Licenses")
possessed by or granted to the Company, the Tenneco Entities or the
Tenneco Entities' Subsidiaries and material to their respective businesses
as currently and during the past year have been conducted. To the
Knowledge of the Company, all such Licenses are valid and in full force
and effect and no proceeding is pending or, to the Knowledge of the
Company, threatened seeking the suspension, modification, revocation or
limitation of any such License. The Company, the Tenneco Entities and the
Tenneco Entities' Subsidiaries have all the necessary Licenses that are
required to permit the continued operation after the date hereof of the
businesses of the Company, the Tenneco Entities and the Tenneco Entities'
Subsidiaries as they are now being and during the past year have been
conducted, with the exception of any change or changes in the operation of
such businesses as would not, individually or in the aggregate, have a
Material Adverse Effect. The Company, the Tenneco Entities and the Tenneco
Entities' Subsidiaries reasonably believe that, other than for such
exceptions that would not, individually or in the aggregate, have a
Material Adverse Effect: each of their Licenses will be timely renewed and
complied with, without material expense; and that any additional Licenses
that may be required of any of them to permit any of their operations as
planned will be timely obtained and complied with, without material
expense. Except as disclosed on Schedule 5.1(p) and except for the
expiration or termination of all applicable waiting periods under the HSR
Act, the execution, delivery and performance of this Agreement and the
other Transaction Documents and the consummation by the Company and the
Tenneco Entities of the transactions contemplated hereby and thereby
(including without limitation the sale of the Company Shares contemplated
hereby and the borrowings contemplated by the Credit Agreement) will not
require the consent, approval or authorization of any Governmental or
regulatory Authority or any other Person under any License, agreement,
indenture or other instrument to which the Company, the Tenneco Entities
or any of the Tenneco Entities' Subsidiaries is a party or to which any of
their respective properties are subject that have not already been
obtained, and no declaration, filing or registration with any Governmental
or regulatory Authority is required in connection with such transactions.
(q) Broker's or Finder's Fees. Except for PaineWebber Incorporated,
neither the Company or the Tenneco Entities nor any Affiliate or agent of
either of them have authorized any Person to act as a broker or finder or
in any similar capacity in connection with the transactions contemplated
by this Agreement. The Company has previously delivered to the Buyer a
true, correct and complete copy of all agreements,
27
arrangements and undertakings between the Company and PaineWebber
Incorporated.
(r) Transactions with Affiliates. Except as disclosed in Schedule
5.1(r), neither the Company, the Tenneco Entities nor any of the Tenneco
Entities' Subsidiaries has any outstanding contract, agreement or other
arrangement with the Company, the Tenneco Entities, or any of the
Affiliates of the Company or the Tenneco Entities (other than those to
which the only parties are the Company, the Tenneco Entities and/or the
Tenneco Entities' Subsidiaries). Except as disclosed in Schedule 5.1(r),
neither El Paso nor any of its Affiliates has issued any performance
bonds, payment bonds, bid bonds, letters of credit, guaranties or similar
instruments for the benefit of the Company, the Tenneco Entities, the
Tenneco Entities' Subsidiaries nor the Investments.
(s) Corporate Records. The books and records of the Company, the
Tenneco Entities and the Tenneco Entities' Subsidiaries are complete and
correct in all material respects and have been maintained in accordance
with good business practices.
(t) Labor Matters. Except as set forth in Schedule 5.1(t), neither
the Company, the Tenneco Entities, any of the Tenneco Entities'
Subsidiaries nor any member of the Controlled Group is subject to or a
party to any collective bargaining agreement, employment contract or
consulting agreement and no collective bargaining agreement, employment
agreement or consulting agreement is being negotiated. Except as disclosed
in Schedule 5.1(t), there are no strikes, slowdowns, work stoppages or
other material labor controversies pending or, to the Knowledge of the
Company, threatened against or otherwise affecting the Company, the
Tenneco Entities or the Tenneco Entities' Subsidiaries. Neither the
Company, the Tenneco Entities nor any of the Tenneco Entities'
Subsidiaries has experienced any labor strike, slowdown, work stoppage or
other material labor controversy within the past three years. Other than
certain severance payments and retention bonuses due to certain employees
of the Company which will be paid in due course, the Company, the Tenneco
Entities and the Tenneco Entities' Subsidiaries have paid in full to all
their respective employees all wages, salaries, commissions, bonuses,
benefits and other compensation due to such employees or otherwise arising
under any policy, agreement, program, statute or other law. Neither the
Company, the Tenneco Entities nor any of the Tenneco Entities'
Subsidiaries is a party to, or otherwise bound by, any consent decree
with, or citation by, any court or Governmental Authority relating to
employees or employment practices. To the Knowledge of the Company, during
the past three years none of the Company, the Tenneco Entities or any
28
of the Tenneco Entities' Subsidiaries has received any petition from any
employees to form, join, or assist labor organizations to bargain
collectively through representatives of the employees' choosing or has
received information about employees engaging in other concerted
activities for the purpose of collective bargaining.
(u) Tax Matters. Except as set forth in the last sentence of this
Section 4.1(u) and in Schedule 5.1(u):
(i) All Tax Returns (as hereinafter defined) required by law to
be filed (and/or maintained) on or prior to the date hereof by, or
with respect to the operations, activities or assets of the Company,
the Tenneco Entities or any of the Tenneco Entities' Subsidiaries
(other than any consolidated, combined or unitary income or franchise
tax returns filed by either Tenneco, Inc. or El Paso (as common
parent) on behalf of any of the Tenneco Entities or the Tenneco
Entities' Subsidiaries) have been properly and timely filed with the
appropriate governmental agencies (and/or maintained, as the case may
be), and all such Tax Returns are correct, accurate and complete in
all material respects. All Taxes (as hereinafter defined) shown as
due on such Tax Returns have been paid. For purposes of this
Agreement, "Tax" or "Taxes" will mean any and all federal, state,
local, foreign and other taxes and tax withholding obligations
(including interest, additions to tax, penalties and fines with
respect thereto) including, without limitation, taxes imposed on, or
measured by, income, franchise, profits, or gross receipts, and also
ad valorem, value added, sales, use, service, real or personal
property, capital stock, license, payroll, withholding, employment,
social security, workers' compensation, unemployment compensation,
utility, severance, production, excise, stamp, occupation, premium,
windfall profits, transaction, and joint taxes, and customs duties.
"Tax Return" or "Tax Returns" will mean any report, return or other
information, or any amendment thereof, filed or required to be filed,
maintained or supplied in connection with the calculation,
determination, assessment, collection or remittance of any Tax.
(ii) With respect to the Company, the Tenneco Entities and each
of the Tenneco Entities' Subsidiaries, except as set forth in
Schedule 5.1(u), (A) no audit of any Tax Return is in progress or
pending or, to the Knowledge of the Company, threatened, (B) no
waiver of any statute of limitations has been given and is in effect
with respect to the assessment of any Tax and (C) no deficiency has
been assessed for any Tax by any Governmental Authority.
29
(iii) Set forth in Schedule 5.1(u) is a list of all current
deficiencies asserted and assessments made by the IRS or the state
equivalent with respect to the Tenneco Entities and the Tenneco
Entities' Subsidiaries which deficiencies and assessments have not
been paid, settled, withdrawn, overturned or dismissed.
(iv) True, correct and complete copies of all notices of
deficiencies, assessments, audit reports, closing agreements with and
other notices from any taxing authority for all years with respect to
which the statute of limitations has not expired will be delivered to
the Buyer prior to the Initial Closing Date.
(v) Neither the Company, the Tenneco Entities nor any of the
Tenneco Entities' Subsidiaries has adopted a plan of complete
liquidation and no consent has been filed on behalf of the Company,
the Tenneco Entities or any of the Tenneco Entities' Subsidiaries
pursuant to Section 341(f) of the Code or any predecessor provision.
(vi) The Company, the Tenneco Entities and the Tenneco Entities'
Subsidiaries have collected all sales and use Taxes required to be
collected, and have remitted, or will remit on a timely basis, such
amounts to the appropriate Governmental Authorities where the failure
to collect or remit would in the aggregate have a Material Adverse
Effect, or have been furnished properly completed exemption
certificates for all exempt transactions. Each of the Company, the
Tenneco Entities and the Tenneco Entities' Subsidiaries has
maintained in its possession all records and supporting documents
required by applicable sales Tax statutes and regulations regarding
the collection and payment of all sales and use Taxes required to be
collected and paid over and regarding all exempt transactions for all
periods open under the applicable statutes of limitations as of the
Initial Closing Date.
(vii) The liabilities for Taxes reflected in the Balance Sheet
set forth on Schedule 5.1(f) are accurate and the amounts reflected
for Taxes therein are sufficient for the payment of all accrued,
unpaid or deferred Taxes of the Tenneco Entities and the Tenneco
Entities' Subsidiaries for all periods ended on or prior to December
31, 1995, whether or not disputed.
(viii) The Company (a) has not been a member of an affiliated
group filing a consolidated federal income Tax Return (other then a
group the common parent of which is the Company) and (b) has no
liability for Taxes of any Person (other than the Company, the
30
Tenneco Entities and the Tenneco Entities' Subsidiaries) under U.S.
Treasury regulation ss. 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract or
otherwise.
(ix) Neither the Company nor the Tenneco Entities is a United
States real property holding corporation within the meaning of
Section 897 of the Code, or will have been a U.S. real property
holding corporation within the five years preceding the date hereof
or the Initial Closing Date. The shares of capital stock of the
Tenneco Entities acquired by the Company pursuant to the Stock
Purchase Agreement are not United States real property interests
within the meaning of Section 897 of the Code.
(x) The Company and the Tenneco Entities will promptly notify or
arrange for the notification of the Buyer of any event materially
affecting the continuing accuracy of any representation in this
Section 5.1(u) between the date hereof and the Initial Closing Date.
The foregoing representations and warranties contained in this Section 4.1(u)
shall not apply to any Taxes attributable to any consolidated Tax Return filed
or required to be filed by El Paso or by Tenneco, Inc. as the common parent or
parent corporation of a group including the Tenneco Entities or the Tenneco
Entities' Subsidiaries.
(v) Environmental Matters. (i) Except as set forth on Schedule
5.1(v), other than exceptions to the following that, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect:
(A) The Company, the Tenneco Entities, the Tenneco Entities'
Subsidiaries and, to the Knowledge of the Company, the Investments
are in compliance with all applicable Environmental Laws; neither the
Company, the Tenneco Entities nor any of the Tenneco Entities'
Subsidiaries has received any written communication from any source
within any applicable limitations period that alleges that the
Company, the Tenneco Entities or any of the Tenneco Entities'
Subsidiaries is not in such compliance; and all Licenses required
pursuant to the Environmental Laws to operate the Company, the
Tenneco Entities and the Tenneco Entities' Subsidiaries any of the
Investments as they are now and during the past year have been
conducted have been obtained and are currently in force, and will be
timely renewed and complied with, without material expense; and any
additional such Licenses that may be required of any of them to
permit any of their operations as
31
planned will be timely obtained and complied with, without material
expense.
(B) There is no Environmental Claim against the Company, the
Tenneco Entities, any of the Tenneco Entities' Subsidiaries or, to
the Knowledge of the Company, any of the Investments which is pending
or, to the Knowledge of the Company, threatened against or involving
the Company, or, the Tenneco Entities or any of the Tenneco Entities'
Subsidiaries or, to the Knowledge of the Company, against any Person
whose liability for such claim the Company, the Tenneco Entities or
any of the Tenneco Entities' Subsidiaries has or may have retained or
assumed either contractually or by operation of law.
(C) There are no past or present actions, activities,
circumstances, conditions, events or incidents, including without
limitation the release, threatened release, emission, discharge or
disposal of any Material of Environmental Concern, that could form
the basis of any Environmental Claim (I) against the Company, the
Tenneco Entities, any of the Tenneco Entities' Subsidiaries or, to
the Knowledge of the Company, any of the Investments or (II) against
any person or entity whose liability for any Environmental Claim the
Company, the Tenneco Entities or any of the Tenneco Entities'
Subsidiaries may have retained or assumed either contractually or by
operation of law.
(ii) The Company has made available to the Buyer all written reports
evaluating issues of actual or potential noncompliance with, liability
under, or costs otherwise related to any Environmental Law that have been
prepared by or for the Company, the Tenneco Entities, any of the Tenneco
Entities' Subsidiaries or, to the Knowledge of the Company, any of the
Investments that are otherwise in any of their possession or control.
(w) Oil and Gas Reserve Information. Except as otherwise set forth in
Schedule 5.1(w) and except as would not, individually or in the aggregate,
have a Material Adverse Effect:
(i) None of the xxxxx included in the Oil and Gas Interests of
the Company, the Tenneco Entities and each of the Tenneco Entities'
Subsidiaries has been overproduced such that it is subject or liable
to being shut-in or to any other overproduction penalty;
(ii) There have been no changes proposed in the production
allowables for any xxxxx included in the Oil and Gas Interests of
Company, the Tenneco Entities and each of the Tenneco Entities'
Subsidiaries;
32
(iii) All xxxxx included in the Oil and Gas Interests of
Company, the Tenneco Entities and each of the Tenneco Entities'
Subsidiaries have been drilled and (if completed) completed,
operated, and produced in accordance with good oil and gas field
practices and in compliance in all material respects with applicable
Oil and Gas Leases and applicable laws, rules, and regulations;
(iv) Neither the Company, the Tenneco Entities nor each of the
Tenneco Entities' Subsidiaries has agreed to or is now obligated to
abandon any well included in the Oil and Gas Interests of the
Company, the Tenneco Entities and each of the Tenneco Entities'
Subsidiaries that is not or will not be abandoned and reclaimed in
accordance with the applicable laws, rules, and regulations and good
oil and gas industry practices;
(v) Proceeds from the sale of Hydrocarbons produced from the Oil
and Gas Interests of Company, the Tenneco Entities and each of the
Tenneco Entities' Subsidiaries are being received by Company, the
Tenneco Entities and each of the Tenneco Entities' Subsidiaries in a
timely manner and are not being held by third parties in suspense for
any reason (except for amounts, individually or in the aggregate, not
in excess of $1,000,000 and held in suspense in the ordinary course
of business); and
(vi) No person has any call on, option to purchase, or similar
rights with respect to the Oil and Gas Interests of the Company, the
Tenneco Entities and each of the Tenneco Entities' Subsidiaries or to
the production attributable thereto, and upon consummation of the
transactions contemplated by this Agreement, the Company, the Tenneco
Entities or the Tenneco Entities' Subsidiaries will have the right to
market production from the Oil and Gas Interests of Company, the
Tenneco Entities and each of the Tenneco Entities' Subsidiaries on
terms no less favorable than the terms upon which such company is
currently marketing such production.
(x) Engineering Reports. All information supplied to De Golver &
XxxXxxxxxxx and Netherland & Xxxxxx and Associates Ltd. (the "De Golver")
by or on behalf of the Tenneco Entities and the Tenneco Entities'
Subsidiaries that was material to such firm's review of the Tenneco
Entities and the Tenneco Entities' Subsidiaries estimates of oil and gas
reserves attributable to the Oil and Gas Interests of the Tenneco Entities
and the Tenneco Entities' Subsidiaries in connection with the preparation
of the oil and oil reserve engineering report concerning the Oil and Gas
Interests of the Tenneco Entities and the Tenneco Entities' Subsidiaries
as of July 1, 1996 by De Golver (the
33
"Engineering Report") was (at the time supplied or as modified or amended
prior to the issuance of the Engineering Report) true and correct in all
material respects. Except for changes in the classification or values of
oil and gas reserve or property interests that occurred in the ordinary
course of business since July 1, 1996, and except for changes (including
changes in commodity prices) generally affecting the oil and gas industry
on a nationwide basis, there has been no Material Adverse Effect in
respect of the Tenneco Entities or the Tenneco Entities' Subsidiaries
regarding the matters addressed in the Engineering Report.
(y) Not Subject to Utility Regulatory Authorities. Neither the
Company, the Tenneco Entities nor any of the Tenneco Entities'
Subsidiaries owns or has any interest in as owner, operator or otherwise
in any properties, businesses, entities or operations that are subject to
regulation as a utility by federal, state or local utility regulatory
authorities.
(z) Worker's Compensation and Occupational Disease Reserve. There are
no presently pending claims against the Company, the Tenneco Entities or
any of the Tenneco Entities' Subsidiaries not fully covered by insurance
for workers' compensation benefits and for federal and state occupational
disease benefits. To the Knowledge of the Company, the Company, the
Tenneco Entities, the Tenneco Entities' Subsidiaries, their respective
insurers or the funds listed in the preceding sentence have timely paid in
full all such benefits due.
(aa) Omissions. To the Knowledge of the Company, no representation or
warranty of the Company contained in this Agreement contains any untrue
statement of a material fact or omits to state a material fact necessary
in order to make the statements herein or therein, when read together, not
materially misleading in light of the circumstances under which they were
made.
With respect to any Oil and Gas Interest, including the xxxxx
thereon, not operated by Ventures, it is understood and agreed that the
representations and warranties set forth above in Sections 5.1(j) (to the
extent the operator carries insurance for the joint account), 5.1(n) and
5.1(p) are understood to be made to the Knowledge of the Company only.
5.2. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Company as follows:
(a) Due Organization and Power of the Buyer. The Buyer is a limited
partnership duly organized, validly existing and in good standing under
the laws of the state of its organization and has all requisite power and
authority to execute and deliver this Agreement and the
34
Securityholders Agreement and to perform its obligations hereunder and
thereunder.
(b) Authorization and Validity of Agreement. The execution, delivery
and performance by the Buyer of this Agreement and the Securityholders
Agreement and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized, and no other action on the
part of the Buyer or its partners is necessary for the execution, delivery
and performance by the Buyer of this Agreement and the Securityholders
Agreement and the consummation by it of the transactions contemplated
hereby and thereby. This Agreement and the Securityholders Agreement have
been duly executed and delivered by the Buyer and, assuming due
authorization, execution and delivery by the parties other than the Buyer
hereto and thereto, constitute the legal, valid and binding obligation of
the Buyer, enforceable against the Buyer in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability.
(c) No Conflict. Neither the execution and delivery of this Agreement
and the Securityholders Agreement nor the performance by the Buyer of the
transactions contemplated hereby and thereby, including without limitation
the purchase of the Company Shares hereunder, will: (i) violate or
conflict with any provision of the Articles of Limited Partnership or
limited partnership agreement of the Buyer; (ii) require any consent or
approval of, or filing with or notice to, any Governmental or regulatory
Authority under any provision of any law applicable to the Buyer, except
for the expiration or termination of all applicable waiting periods under
the HSR Act; (iii) result in any violation of or default under any
provision of any law, rule, regulation, order, judgment or decree to which
the Buyer is a party or by which the Buyer is bound; or (iv) with or
without the giving of notice or the lapse of time or both, violate or
constitute a default under, or result in the acceleration of or entitle
any party to accelerate (whether after the giving of notice or lapse of
time or both) any obligation under any mortgage, indenture, deed of trust,
lease, contract, agreement, license or other instrument or violate any
provision of any law, order, judgment, decree, restriction or ruling of
any Governmental Authority to which the Buyer or by which any of the
Buyer's assets is bound or encumbered.
(d) Purchase for Investment. The Buyer acknowledges that the Company
Shares purchased hereunder have not been registered or qualified under the
Securities Act of 1933, as amended or any state securities law and may be
sold or otherwise disposed of in the absence of such registration
35
only pursuant to an exemption from such registration and any other
applicable securities laws. The Buyer is purchasing the Company Shares
solely for its own account for the purpose of investment and not with a
view to or for sale in connection with any disposition thereof, and has no
present intention or plan to effect any resale, assignment or distribution
of any of the Company Shares. The Buyer acknowledges that it has such
knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of purchasing the Company
Shares, making an informed investment decision and of bearing the economic
risk of the purchase of the Company Shares.
(e) Litigation. No action, claim, suit or legal proceeding is now
pending, or, to the knowledge of the Buyer, threatened, against the Buyer
at law, in equity or otherwise, before any court, board, commission,
agency or instrumentality of any Federal, state or local government or of
any agency or subdivision thereof, or before any arbitrator or panel of
arbitrators, which would adversely affect the Buyer's ability to perform
the obligations under this Agreement, the Securityholders Agreement and
other documents related hereto and thereto to which the Buyer is a party.
(f) Ownership of Buyer Subordinated Note. On the date of any
Subsequent Closing, the Buyer will own the Buyer Subordinated Note free
and clear of all Liens and upon the delivery of the Buyer Subordinated
Note to the Company in accordance with Section 1.2(b) and the issuance and
delivery to the Buyer of the Option Shares, the Company will acquire all
right, title and interest of the Buyer in the Buyer Subordinated Note,
free and clear of all Liens other than Liens arising out of the actions of
the Company.
(g) Omissions. To the knowledge of the Buyer, no representation or
warranty of the Buyer contained in this Agreement contains any untrue
statement of a material fact or omits to state a material fact necessary
in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading.
5.3. Limitations on Survival. Each of the representations and
warranties made by the Company in Section 5.1(u) of this Agreement (including
the Schedules, insofar as the Schedules relate to such representations and
warranties) and in the certificates delivered pursuant to Section 7.1(a)(ii)
(insofar as they relate to such representations and warranties) shall survive
the Initial Closing to and until the date on which the statute of limitations
(taking into account any tolling agreements with respect thereto) with respect
to enforcement of any relevant sections of the Code and the regulations
promulgated thereunder against the Company, its subsidiaries and Affiliates
36
has expired (at which time they will terminate). Each of the representations
and warranties made by the Company in Section 5.1(v) of this Agreement
(including the Schedules, insofar as the Schedules relate to such
representations and warranties) and in the certificates delivered pursuant to
Section 7.1(a)(ii) (insofar as they relate to such representations and
warranties) shall survive the Initial Closing to and until the first to occur
of: (i) the completion of a Qualified Public Offering (as such term is defined
in the Securityholders Agreement) and (ii) the date which is two years after
the Initial Closing Date (at which time they will terminate). Each of the
representations and warranties made by the Company in Sections 5.1(a), (b)(i),
(d) and (e)(iv) of this Agreement (including the Schedules, insofar as the
Schedules relate to such representations and warranties) and in the
certificates delivered pursuant to Section 7.1(b) (insofar as they relate to
such representations and warranties) and by the Buyer in Sections 5.2(a), (b),
(c), (d) and (f) and the certificate delivered pursuant to Section 7.2(b)
(insofar as they relate to such representations and warranties) shall survive
the Initial Closing to and until the first to occur of: (x) the completion of
a Qualified Public Offering (as such term is defined in the Stockholders
Agreement) and (y) the date which is twelve months after the Subsequent
Closing Date or, if the Option is not exercised prior to the end of the
Exercise Period, the day after the expiration of the Exercise Period (at which
time they will terminate). All other representations and warranties made by
the parties in Article V of this Agreement (including the Schedules, insofar
as the Schedules relate to such representations and warranties) and in the
certificates delivered pursuant to Sections 7.1(a)(ii) and 7.2(b) (insofar as
they relate to such representations and warranties) shall survive the Initial
Closing to and until the first to occur of: (i) the completion of a Qualified
Public Offering (as such term is defined in the Securityholders Agreement) and
(ii) the date which is twelve months after the Initial Closing Date (at which
time they will terminate).
ARTICLE VI COVENANTS
6.1. Conduct of Business Pending the Initial Closing Date. The
Company agrees that, prior to the Initial Closing, unless specifically
provided for herein, unless expressly contemplated in any of the other
Transaction Documents or unless the Buyer has specifically given its prior
written consent:
(a) The business of the Company, the Tenneco Entities and the Tenneco
Entities' Subsidiaries will be conducted only in the ordinary course in
compliance with applicable laws, regulations and contractual obligations;
(b) No change will be made in the certificate of incorporation or the
by-laws of the Company, the Tenneco Entities or any of the Tenneco
Entities' Subsidiaries;
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(c) No change will be made in the authorized, issued or outstanding
capital stock of the Company, the Tenneco Entities or any of the Tenneco
Entities' Subsidiaries, no additional shares of such capital stock will be
issued and no subscriptions, options, rights, warrants, claims,
commitments or agreements relating to the authorized, issued or
outstanding capital stock of the Company, the Tenneco Entities or any of
the Tenneco Entities' Subsidiaries will be issued, granted, created or
entered into;
(d) No dividend or other distribution or payment will be declared,
set aside, paid or made in respect of shares of the capital stock of the
Company, the Tenneco Entities or the Tenneco Entities' Subsidiaries, nor
will the Company, the Tenneco Entities or the Tenneco Entities'
Subsidiaries, directly or indirectly, redeem, retire, purchase or
otherwise acquire any of such capital stock;
(e) Neither the Company, the Tenneco Entities nor any of the Tenneco
Entities' Subsidiaries will merge, amalgamate or consolidate with any
other corporation or acquire all or any substantial part of the business
or assets of any other Person, or acquire ownership or control of any
capital stock, bonds, or other securities of, or any property interest in,
any Person or acquire control of the management or policies thereof.
Neither the Company, the Tenneco Entities nor any of the Tenneco Entities'
Subsidiaries will enter into any negotiations with respect to any of the
actions described in this subsection (e);
(f) Neither the Company, the Tenneco Entities nor any of the Tenneco
Entities' Subsidiaries will, except as may be expressly contemplated in
any of the Transaction Documents and (other than with respect to clause
(i) below) except in the ordinary course of business:
(i) amend, supplement or otherwise modify any Transaction
Document or waive any condition to the Company's obligations under
the Stock Purchase Agreement;
(ii) except for transactions reflected in the Shareholder
Advance Account (as such term is defined in the Stock Purchase
Agreement), enter into, create or assume: (A) any obligation for
borrowed money; or (B) any security agreement, Lien, encumbrance,
mortgage, deed of trust, pledge, conditional sale or other title
retention agreement; or (C) any Lien upon any of its properties or
assets whether now owned or hereafter acquired;
(iii) assume, guarantee, endorse or otherwise become liable with
respect to the obligations of any Person;
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(iv) make any loan or advance to, or assume, guarantee, endorse
or otherwise become liable with respect to the capital stock or
dividends of, any Person;
(v) except for the Employment Agreement, enter into any
transaction with or for the benefit of, or create or assume any
obligation or liability to, any Affiliate (other than the Tenneco
Entities and the Tenneco Entities' Subsidiaries);
(vi) effect any increase in salaries, bonuses, commissions or
wages payable;
(vii) cancel or compromise any debt or claim or waive any rights
of substantial value; or
(viii) make any Tax election or settle or compromise any
material federal, state, local or foreign Tax liability.
(g) Other than in the ordinary course of business as heretofore
conducted, neither the Company, the Tenneco Entities nor any of the
Tenneco Entities' Subsidiaries will sell, lease, abandon, exchange,
assign, transfer, license or otherwise dispose of any property, intangible
assets or any machinery, equipment or other operating property or tangible
assets;
(h) Neither the Company, the Tenneco Entities nor any of the Tenneco
Entities' Subsidiaries will enter into or assume any contract, agreement
or commitment which, by reason of its size, term or other factor, is not
in the ordinary course of business as heretofore conducted;
(i) The Company will use all reasonable efforts to preserve the
business organization of the Tenneco Entities and the Tenneco Entities'
Subsidiaries intact and to keep available the services of the present
employees and agents of the Tenneco Entities and the Tenneco Entities'
Subsidiaries and to preserve the good will of customers, suppliers,
employees, agents and sales representatives, distributors and others
having business relations with the Tenneco Entities and the Tenneco
Entities' Subsidiaries and no change will be made in existing practices
relating to profit sharing, bonuses or commissions;
(j) Each of the Company, the Tenneco Entities and the Tenneco
Entities' Subsidiaries will maintain all assets owned, leased or regularly
used by it in operable condition and repair, ordinary wear and tear
excepted, and will maintain existing insurance coverage on such assets as
well as other existing insurance coverage; and
39
(k) Each of the Company, the Tenneco Entities and the Tenneco
Entities' Subsidiaries will maintain its books, accounts and records in
the usual and ordinary manner, on a basis consistent with prior years.
With respect to the covenants set forth in Section 5.1, to the extent
such covenants pertain to the Tenneco Entities or the Tenneco Entities'
Subsidiaries, it is understood that the Company's obligation with respect
thereto is only to use all reasonable efforts to cause El Paso to cause the
Tenneco Entities and the Tenneco Entities' Subsidiaries to observe and comply
with such covenants.
6.2. Access to Information Concerning Properties and Records;
Confidentiality. (a) During the period commencing on the date hereof and
ending on the Initial Closing Date, the Company will, and will use all
reasonable efforts to cause El Paso and its Affiliates to, and to cause the
Tenneco Entities and the Tenneco Entities' Subsidiaries to, upon reasonable
request, afford to the Buyer, its counsel, accountants and other professional
advisers reasonable access during normal business hours to the offices,
plants, properties, contracts, books and records of the Company, the Tenneco
Entities and the Tenneco Entities' Subsidiaries (and permit the Buyer and its
counsel, accountants and other authorized representatives to make copies of
such contacts, books and records at their own expense), in order that the
Buyer may have the full opportunity to make such reasonable investigations as
it desires to make of the affairs of the Company, the Tenneco Entities and the
Tenneco Entities' Subsidiaries, provided that no investigation pursuant to
this Section 7.2 will affect any representations or warranties or the
conditions to the obligations of the parties hereto to consummate the purchase
of the Company Shares as contemplated hereby or the other transactions
contemplated hereby. The Company agrees that it will, and will cause the
Tenneco Entities and the Tenneco Entities' Subsidiaries and their respective
officers, accountants and other professional advisers, to, furnish to the
Buyer such additional information as the Buyer may from time to time
reasonably request.
(b) The Buyer agrees that it will, and will cause its officers,
employees, advisors and representatives to, hold in strict confidence all data
and information obtained from the Company, the Tenneco Entities or any of the
Tenneco Entities' Subsidiaries or on their behalf (other than information
which (i) is or becomes publicly available or (ii) which was already in the
possession of the Buyer, in each case other than as a result of a breach by
the Buyer or any of its officers, employees, advisors and representatives of
this covenant or other confidentiality agreement or legal or fiduciary
obligation of secrecy to the Company, the Tenneco Entities or any of the
Tenneco Entities' Subsidiaries) and will not, and will insure that such other
persons do not, disclose such data and information to others without the prior
written consent of the Company, except that the
40
Buyer may provide such data and information in response to legal process or
applicable governmental regulations, but only that portion of the data and
information which, in the opinion of counsel for the Buyer, is legally
required to be furnished, and provided that the Buyer notifies the Company in
writing of its obligation to provide such confidential data and information
and fully cooperate with the Company to protect the confidentiality of such
data and information.
6.3. Releases. Each party hereto agrees that it will not, without the
consent of the Buyer and the Company, issue any press release or make any
other public statement or disclosure with respect to the transactions
contemplated hereby or their terms.
6.4. Further Actions. Subject to the terms and conditions contained
herein, each of the parties hereto agrees to use all reasonable efforts
promptly to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement, including using its
reasonable efforts to satisfy the conditions precedent to the obligations of
the parties hereto, to obtain all necessary waivers, consents and approvals,
to effect all necessary registrations and filings and to proceed with the
Initial Closing as expeditiously as practicable; provided that this obligation
will not require any party to take any action materially adverse to such
party, including, without limitation, agreeing to divest or hold separate any
assets, and provided further that no contract or other agreement will be
amended to increase the amount payable thereunder or to otherwise modify the
terms thereof in a manner adverse to the Company, the Tenneco Entities or any
of the Tenneco Entities' Subsidiaries in order to obtain any such consent,
approval, authorization or otherwise without first obtaining the written
approval of the Buyer.
6.5. Application of Proceeds. The payments to be made by the Buyer
pursuant to Section 1.2 shall be used by the Company exclusively for the
purpose of paying a portion of the purchase price for the shares of the
Tenneco Entities pursuant to the Stock Purchase Agreement.
6.6. Option Shares. At all times prior to the earlier of the
expiration of the Exercise Period without the Option having been exercised or
the issuance of the Option Shares, the Company shall reserve and keep
available for issuance pursuant to the Option a number of duly authorized
shares of Common Stock equal to the number of Option Shares.
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ARTICLE VII CONDITIONS PRECEDENT
7.1. Conditions Precedent to Obligations of the Buyer.
(a) The obligation of the Buyer to consummate the purchase of the
Firm Common Shares at the Initial Closing is subject to the satisfaction
at or prior to the Initial Closing of each of the following conditions:
(i) No preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or by any Governmental
Authority nor any statute, rule, regulation or executive order
promulgated or enacted by any Governmental Authority which restrains,
enjoins or otherwise prohibits any of the Transactions shall be in
effect.
(ii) (A) The representations and warranties of the Company
contained herein will be true and correct in all material respects on
and as of the Initial Closing Date, with the same force and effect as
though made on and as of the Initial Closing Date, except to the
extent that any representation or warranty is made as of a specified
date, in which case such representation or warranty will be true and
correct in all material respects as of such date, and (B) the Buyer
shall have received a certificate signed on behalf of the Company by
the chief executive officer and the chief financial officer of the
Company to such effect.
(iii) (A) The Company shall have performed in all material
respects all obligations and agreements, and complied in all material
respects with all covenants and conditions, contained in this
Agreement and the other Transaction Documents to be performed or
complied with by it prior to or on the Initial Closing Date (provided
that the provisions of Section 5.1 shall have been complied with in
all material respects without giving effect to the last sentence of
Section 5.1), and (B) the Buyer shall have received a certificate
signed on behalf of the Company by the chief executive officer and
the chief financial officer of the Company to such effect.
(iv) The Company and all other securityholders of the Company
each shall have executed and delivered the Securityholders Agreement.
(v) The Credit Agreement will be in full force and effect, will
not have been breached in any material respect by any of the parties
thereto, and all of the conditions precedent to the initial
borrowings thereunder (other than the receipt by the Company of the
proceeds of the issuance of stock pursuant to this
42
Agreement) shall have been satisfied or waived. The Company shall
have delivered a certificate from its chief financial officer stating
that the conditions under this subsection (v) have been satisfied.
(vi) The Stock Purchase Agreement will be in full force and
effect, will not have been breached in any material respect by any of
the respective parties thereto, all conditions to the obligation of
the Company to purchase the stock (as defined in the Stock Purchase
Agreement) shall have been satisfied in full and all conditions to
the obligations of El Paso to sell the Stock shall have been
satisfied or waived.
(vii) The Buyer shall have received evidence satisfactory to the
Buyer that all obligations of the Company set forth in Section 5.03
of the Stock Purchase Agreement will be satisfied in full at or prior
to the Initial Closing.
(viii) The Employment Agreement will be in full force and
effect, will not have been breached in any material respect by any of
the parties thereto.
(ix) The Buyer shall have received a legal opinion from Weil,
Gotshal & Xxxxxx LLP dated the Initial Closing Date, substantially in
the form attached hereto as Exhibit D.
(b) The obligation of the Buyers to purchase Option Shares following
the Buyer's exercise of the Option is subject to the satisfaction at or
prior to the Subsequent Closing of such purchase of each of the following
additional conditions:
(i) No preliminary or permanent injunction or other order issued
by any federal or state court of competent jurisdiction in the United
States or by any United States federal or state governmental or
regulatory body nor any statute, rule, regulation or executive order
promulgated or enacted by any United States federal or state
governmental authority which restrains, enjoins or otherwise
prohibits the purchase of the Option Shares shall be in effect.
(ii) (A) The representations and warranties of the Company
contained in paragraphs 5.1(a), 5.1(b)(i), 5.1(d) and 5.1(e)(iv)
shall be true and correct in all material respects on and as of the
Subsequent Closing Date, with the same force and effect as though
made on and as of the Subsequent Closing Date, and (B) the Buyer
shall have received a certificate signed on behalf of the Company by
the chief executive officer
43
and the chief financial officer of the Company to such effect.
(iii) (A) The Company shall have performed all obligations and
agreements, and complied with all covenants and conditions, contained
in this Agreement to be performed or complied with by it prior to or
on the Subsequent Closing Date, and (B) the Buyer shall have received
a certificate signed on behalf of the Company by the chief executive
officer and the chief financial officer of the Company to such
effect.
(iv) All consents, approvals, authorizations or permits of,
actions by, or filings with or notifications to, and all expirations
of waiting periods imposed by, any Governmental Authority which are
necessary for the consummation of the Option Purchase shall have been
fulfilled, occurred or obtained, as applicable, on terms reasonably
satisfactory to the Buyer and shall be in full force and effect.
7.2. Conditions Precedent to Obligations of the Company. The
obligation of the Company to consummate the transactions contemplated by this
Agreement is subject to the satisfaction at or prior to the Initial Closing of
each of the following additional conditions:
(a) No preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or by any Governmental Authority nor
any statute, rule, regulation or executive order promulgated or enacted by
any Governmental Authority which restrains, enjoins or otherwise prohibits
any of the Transactions shall be in effect.
(b) (A) The representations and warranties of the Buyer contained
herein shall be true and correct in all material respects on and as of the
Initial Closing Date, with the same force and effect as though made on and
as of the Initial Closing Date, except to the extent that any
representation or warranty is made as of a specified date, in which case
such representation or warranty will be true and correct in all material
respects as of such date, and (B) the Company shall have received a
certificate signed on behalf of the Buyer by the Managing General Partner
of the Buyer to such effect.
(c) (A) The Buyer shall have performed all obligations and
agreements, and complied with all covenants and conditions, contained in
this Agreement to be performed or complied with by it prior to or on the
Initial Closing Date, and (B) the Company shall have received a
certificate signed on behalf of the Buyer by the Managing General Partner
of the Buyer to such effect.
44
(d) The Buyer shall have executed and delivered the Securityholders
Agreement.
(e) The Credit Agreement will be in full force and effect, will not
have been breached in any material respect by any of the parties thereto
other than the Company, and all of the conditions precedent to the initial
borrowings thereunder (other than the receipt by the Company of the
proceeds of the issuance of stock pursuant to this Agreement) shall have
been satisfied or waived.
(f) The Stock Purchase Agreement will be in full force and effect and
will not have been breached in any material respect by any of the
respective parties thereto.
ARTICLE VIII INDEMNIFICATION
8.1. Indemnification by the Company. Subject to the limitations set
forth in Sections 8.6(a) and (b), the Company hereby agrees to indemnify the
Buyer and its Affiliates, and each of their respective officers, directors,
employees and representatives (each a "Buyer Indemnified Party" and
collectively the "Buyer Indemnified Parties") against, and agrees to protect,
save and keep harmless the Buyer Indemnified Parties from payment, and hereby
assumes liability for the payment, of any and all liabilities (including
liabilities for Taxes), obligations, losses, damages, penalties, claims,
actions, suits, judgments or settlements of any nature or kind, whether known
or unknown, absolute or contingent, accrued or unaccrued, realized or
unrealized, direct or indirect, liquidated or unliquidated and including all
costs, expenses and disbursements (including reasonable cost of investigation
by, and reasonable attorneys', accountants' and expert witnesses' fees and
expenses payable to, third parties) (collectively, "Loss" or "Losses"),
arising out of, resulting from or in connection with (a) any breach by the
Company of a representation or warranty contained herein or in any certificate
delivered pursuant to Section 7.1 or (b) any failure by the Company to perform
any agreement or covenant contained herein.
8.2. Indemnification by the Buyer. Subject to the limitations set
forth in Sections 8.6(a) and (b), the Buyer hereby agrees to indemnify the
Company and its officers, directors, and employees, and their Affiliates and
representatives (each a "Company Indemnified Party" and collectively the
"Company Indemnified Parties") against, and agrees to protect, save and keep
harmless the Company Indemnified Parties from payment, and hereby assumes
liability for the payment, of any or all Losses or Loss arising out of or
resulting from (a) any breach by the Buyer of a representation or warranty
contained herein or in any certificate delivered pursuant to Section 7.2 or
(b) any failure by the Buyer to perform any agreement or covenant contained
herein.
45
8.3. Procedure for General Claims. (a) General Claims by the Buyer.
The Buyer will give prompt written notice to the Company of any claim or event
other than a Third Party Claim (as defined in Section 8.4) with respect to
which the Buyer believe it is or may be entitled to indemnification pursuant
to Section 8.1 hereof (a "Notice of Claim"), provided that the failure to
provide a Notice of Claim shall not relieve the Company of its obligations
under this Section 8 except to the extent the Company is actually prejudiced
thereby. The Notice of Claim will state the nature and basis of such claim or
event, the amount thereof to the extent known and the basis of the Buyer's
belief that a Buyer Indemnified Party is or may be entitled to indemnification
with respect thereto. The Company shall be entitled, at its option, to satisfy
its indemnification obligations with respect to any claim under this Section
8.3(a) either (i) in cash, (ii) in shares of Common Stock or (iii) with an
Indemnification Note, provided that as long as any amounts remain outstanding
under the Credit Agreement, the Company shall satisfy its indemnity
obligations in Common Stock. If the Company elects to satisfy its obligations
in shares of Common Stock, the number of shares of Common Stock to be
delivered in satisfaction of such indemnification obligation shall be equal to
the dollar amount of the Loss or Losses divided by the Fair Market Value per
Share as of the date the Notice of Claim is delivered. For the purposes of
this Section 8.3(a), the "Fair Market Value per Share" shall be the Fair
Market Value (as such term is defined in the Securityholders Agreement) per
share of Common Stock. If the Company and such Buyer Indemnified Party are
unable to reach an agreement on a Fair Market Value per Share within 30 days
following the receipt by the Company of the Notice of Claim, the Company and
such Buyer Indemnified Party shall engage a nationally-recognized investment
banking firm familiar with the oil and gas industry in the Gulf Coast/U.S.
Gulf of Mexico and as mutually agreed by them to determine as expeditiously as
possible the aggregate fair market value of all outstanding shares of Common
Stock as if the entire Company were being sold in a private sale and such
aggregate market value for all outstanding shares of Common Stock divided by
the number of shares of Common Stock outstanding immediately prior to the
issuance of shares under this Section 8.3(a) shall be the Fair Market Value
per Share. The fees of such investment banking firm shall be paid by the
Company.
(b) General Claims by the Company. The Company will give prompt
written notice to the Buyer with respect to any claim or event with respect to
which the Company believes a Company Indemnified Party is or may be entitled
to indemnification pursuant to Section 8.2 hereof. The notice will state the
nature and basis of said claim or event, the amount thereof to the extent
known, and the basis of the Company's belief that a Company Indemnified Party
is or may be entitled to indemnification with respect thereto.
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8.4. Procedure for Third Party Claims.
(a) Claims by the Buyer and the Company. The Buyer, on behalf of
itself or any Buyer Indemnified Party, on the one hand, or the Company, on
behalf of itself or any Company Indemnified Party on the other hand (the
"Indemnified Party"), will give prompt written notice to the party from whom
indemnification is sought (the "Indemnifying Party") pursuant to Section 8.1
or Section 8.2 hereof of any and all Losses or Loss arising out of or
resulting from any claim, action, suit or proceeding brought by any third
party relating to litigation, administrative proceedings or similar actions
(collectively, "Third Party Claims") with respect to which such Indemnified
Party believes it is entitled to indemnification hereunder, together with an
estimate of the amount in dispute thereunder and a copy of any claim, process,
legal pleadings or correspondence with respect thereto received by the
Indemnified Party. In connection with any such Third Party Claim, the
Indemnifying Party may, at its election and expense, participate in the
defense of such Third Party Claim and no such Third Party Claim will be
settled without the consent of the Indemnifying Party, which will not be
unreasonably withheld. With respect to any Third Party Claim relating solely
to the payment of money damages and which will not result in the Indemnified
Party becoming subject to injunctive or other equitable relief, within 30 days
of receipt of notice of such Third Party Claim, the Indemnifying Party may, by
written notice to the Indemnified Party, assume the defense of such Third
Party Claim through counsel of its own choosing which is reasonably acceptable
to the Indemnified Party, which will not be unreasonably withheld, and with
all expenses thereof to be paid by the Indemnifying Party, in which event the
Indemnifying Party will control the defense of such Third Party Claim and the
Indemnified Party may participate in the defense thereof with all expenses
thereof to be paid by such Indemnified Party, provided that such Indemnified
Party will have the right to employ separate counsel to represent such
Indemnified Party if, in such Indemnified Party's reasonable judgment, a
conflict of interest between the Indemnifying Party and such Indemnified Party
exists with respect to such Third Party Claim in which event all reasonable
expenses of such separate counsel will be paid by the Indemnifying Party. If
the Indemnifying Party fails to assume the defense of such Third Party Claim
by delivering a written notice of the Indemnifying Party's intention to assume
such defense within 30 days of receipt of the initial notice thereof, or
thereafter abandons or fails to diligently pursue such defense, the
Indemnified Party may assume such defense. In the event the Indemnifying Party
exercises its right to undertake the defense against any such Third Party
Claim as provided above, the Indemnified Party will cooperate with the
Indemnifying Party in such defense and make available to the Indemnifying
Party all pertinent records, materials and information in its possession or
under its control relating thereto as is reasonably required by the
Indemnifying Party, with all expenses incurred in connection therewith to be
paid by the Indemnifying Party. Similarly, in
47
the event the Indemnified Party is, directly or indirectly, conducting the
defense against any such Third Party Claim as provided above, the Indemnifying
Party will cooperate with the Indemnified Party in such defense and make
available to the Indemnified Party all such records, materials and information
in the Indemnifying Party's possession or under the Indemnifying Party's
control relating thereto as is reasonably required by the Indemnified Party,
with all expenses incurred in connection therewith to be paid by the
Indemnifying Party. Notwithstanding anything in this Section 8.4 to the
contrary, however, in the event of a claim with respect to which the
Indemnifying Party has agreed to assume the defense thereof, the Indemnifying
Party will not thereafter be entitled to dispute, and hereby agrees not to
dispute, the Indemnified Party's right to indemnification therefor pursuant to
Section 8.1 or Section 8.2 hereof or any subsequent claims of the Indemnified
Party with respect to such Third Party Claim.
(b) Settlement or Decision of Third Party Claims. The Indemnifying
Party will not, without the written consent of the Indemnified Party, (i)
settle or compromise any Third Party Claim or consent to the entry of any
judgment which does not include as an unconditional term thereof the delivery
by the claimant or plaintiff to the Indemnified Party of a written release
from all liability in respect of such Third Party Claim or (ii) settle or
compromise any Third Party Claim in any manner that may, in the reasonable
judgment of the Indemnified Party, adversely affect the Indemnified Party
(including without limitation any settlement or compromise that includes any
admission of negligence or other malfeasance on the part of the Indemnified
Party). Similarly, no Third Party Claim which is being defended in good faith
by the Indemnified Party in accordance with the terms of this Agreement will
be settled by the Indemnified Party without the written consent of the
Indemnifying Party, which consent will not be unreasonably withheld. Upon the
settlement or compromise of any Third Party Claim, the order of a court of
competent jurisdiction or arbitrator with respect thereto or the final,
non-appealable order of any appellate court with respect thereto, as the case
may be, any resulting settlement, award, damages or judgment will be paid (i)
in the case of any such Third Party Claim with respect to which the
Indemnifying Party is the Buyer, by the Buyer and (ii) in the case of any such
Third Party Claim with respect to which the Company is the Indemnifying Party,
by the Company.
8.5. Indemnification Matters. In cases where any Indemnified Party
has made a prior payment with respect to any liability that is the subject of
indemnification under Section 8.1 or 8.2 hereof, the Indemnifying Party will
also pay interest on such funds at a rate per annum equal to the published
prime rate of The Chase Manhattan Bank in effect from time to time during the
relevant period, such interest to be due from the date of such prior payment
to the date of payment of any such funds by the Indemnifying Party. The
parties agree that payments by an
48
Indemnifying Party made under Section 8.1 or 8.2 hereof will be treated as an
adjustment to the Purchase Price for Tax purposes. The provisions of this
Article VII will not be deemed to be a limitation or waiver of any other
remedy afforded by law to the Buyer or the Company for indemnification under
Section 8.1 or 8.2 hereof.
8.6. General Provisions.
(a) Limitations on Indemnification. (i) Notwithstanding anything in
this Article VII to the contrary other than the next succeeding sentence, an
Indemnifying Party will be required to indemnify and hold harmless an
Indemnified Party under Section 8.1 or Section 8.2 hereof with respect to any
Loss or Losses incurred by any such Indemnified Party only to the extent that
the aggregate amount of all Losses of the applicable Indemnified Parties (that
is, either the Buyer Indemnified Parties or the Company Indemnified Parties,
as the case may be) exceeds $2,000,000 in the aggregate, in which event the
Indemnifying Party will only be liable for the excess of such Loss or Losses
over $2,000,000. The foregoing limitations will not be applicable to any
willful breach by any party of any representation, warranty, covenant or
agreement hereunder.
(ii) With respect to any claim by the Buyer Indemnified Parties,
Losses (a) will include any Loss or Losses incurred by the Buyer which arises
from or relates to the diminution in the value per share of Common Stock
caused by any breach by the Company of a representation or warranty contained
herein and (b) will fully take into account the diminution in value of the
Company Shares held by the Buyer Indemnified Parties in the aggregate
(determined by reference to the number of shares of Common Stock outstanding
on a fully diluted basis) resulting from the indemnification payment made by
the Company (whether made in cash, in stock or in the form of a note). As an
example of the operation of clause (b) of the preceding sentence, if the
Losses suffered by the Buyer Indemnified Parties prior to the operation of
clause (b) were $100,000 and the Buyer Indemnified Parties in the aggregate
owned 90% of the total issued and outstanding Common Stock at the time of
delivery of their Notice of Claim, the indemnification payment made by the
Company pursuant to this Article VII would be $1 million (or its equivalent in
stock if paid in stock pursuant to Section 8.3). Notwithstanding anything to
the contrary in this Section 8.6, for the purpose of determining whether a
Loss or Losses to a Buyer Indemnified Party resulting from a diminution in the
value per share of Common Stock exceeds $2,000,000, such Loss or Losses shall
be measured as the amount of such Loss or Losses without giving effect to
clause (b) of this Section 8.6(a)(ii). As an example of the operation of the
preceding sentence, total Losses to the Company of $1,800,000 would not be
indemnifiable by the Company to the Buyer Indemnified Parties despite the fact
that the operation of clause (b) of this Section 8.6(a)(ii) would
49
otherwise have caused the indemnification payment to exceed $2,000,000.
(b) Termination of Indemnification. The obligations to indemnify and
hold harmless an Indemnified Party pursuant to Sections 8.1 and 8.2 will
terminate with respect to any theretofore unasserted claim when the applicable
representation or warranty terminates pursuant to Section 5.3; provided,
however, that such obligations to indemnify and hold harmless will not
terminate with respect to any item as to which the Person to be indemnified
will have, before the expiration of the applicable period, previously made a
claim by delivering a notice pursuant to Section 8.3 or Section 8.4 hereof to
the Indemnifying Party.
ARTICLE IX MISCELLANEOUS
9.1. Termination and Abandonment. (a) General. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned at any
time, but not later than the Initial Closing Date:
(i) by mutual consent of the parties hereto;
(ii) by the Buyer or the Company, if any court of competent
jurisdiction or any Governmental Authority will have issued an order,
decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated hereby or with respect
to any of the other Transactions and such order, decree, ruling or other
action will have become final and nonappealable; or
(iii) if the Initial Closing will not have occurred by January 31,
1997, despite the reasonable efforts of the parties hereto to close.
(b) Procedure Upon Termination. In the event of the termination and
abandonment of this Agreement, written notice thereof will promptly be given
to the other parties hereto and this Agreement will terminate and the
transactions contemplated hereby will be abandoned without further action by
any of the parties hereto.
9.2. Fees and Expenses. If the transactions contemplated hereby are
consummated, the Company shall pay all fees and expenses incident to the
negotiation, preparation and execution of this Agreement and all other
Transaction Documents and consummation of transactions contemplated hereby,
including attorneys' fees and expenses and other reasonable out of pocket
expenses.
9.3. Transfer Taxes. The Company will be responsible for the payment
of any and all sales, use, transfer, recording or
50
similar taxes required to be paid in connection with the consummation of the
transactions contemplated by this Agreement.
9.4. Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement will be
in writing and will be deemed to have been duly given (i) when delivered by
hand, (ii) two business days after being mailed, certified or registered mail,
return receipt requested, with postage prepaid, (iii) when sent by telegram or
telecopy (the receipt of which is confirmed) or (iv) one business day after
being sent by Express Mail, Federal Express or other courier service, as
follows:
(a) if to the Company, to it at:
0000 Xxxxxxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Telecopy: (000) 000-0000
with a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxx III
Telecopy: 000-000-0000
(b) if to the Buyer, to it at:
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Telecopy: 000-000-0000
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx
Telecopy: 000-000-0000
or to such other persons or addresses as any party will specify as to itself
by notice in writing to the other parties.
9.5. Binding Effect; Benefit. This Agreement will inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
51
9.6. Assignability. Without the prior written consent of the other
parties hereto no party to this Agreement may assign any of its or his rights
or obligations hereunder to any other person. Notwithstanding the foregoing,
the Buyer may assign any of its rights or obligations hereunder to any
Affiliate but no such assignment will release the Assignor of any obligations
hereunder. This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors in interest and assigns.
9.7. Amendment and Modification; Waiver. Subject to applicable law,
this Agreement may be amended, modified and supplemented by a written
instrument authorized and executed on behalf of the parties at any time prior
to the Initial Closing Date with respect to any of the terms contained herein.
No waiver by any party of any of the provisions hereof will be effective
unless explicitly set forth in writing and executed by the party so waiving.
Except as provided in the preceding sentence, no action taken pursuant to this
Agreement, including without limitation any investigation by or on behalf of
any party, will be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained herein, and in any documents delivered or to be delivered
pursuant to this Agreement and in connection with the Initial and the
Subsequent Closing hereunder. The waiver by any party hereto of a breach of
any provision of this Agreement will not operate or be construed as a waiver
of any other or subsequent breach.
9.8. Section Headings. The section headings contained in this
Agreement are inserted for reference purposes only and will not affect the
meaning or interpretation of this Agreement.
9.9. Arbitration. Any controversy, dispute or claim arising out of,
in connection with, or in relation to, the interpretation, performance or
breach of this Agreement, including without limitation the validity, scope and
enforceability of this Section 8.9, may at the election of any of the parties
hereto be solely and finally settled by arbitration conducted in accordance
with the then existing rules for commercial arbitration of the American
Arbitration Association, or any successor organization. Judgement upon any
award rendered by the arbitrator(s) may be entered by the State or Federal
Court having jurisdiction thereof. Any of the parties may demand arbitration
by written notice to the others and to the American Arbitration Association
("Demand for Arbitration"). Any Demand for Arbitration pursuant to this
Section 8.9 will be made within one year from the date that the dispute upon
which the demand is based arose. The parties intend that this agreement to
arbitrate be valid, enforceable and irrevocable.
9.10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an
52
original, and all of which together will be deemed to be one and the same
instrument.
9.11. GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
DOMAIN ENERGY CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President and Chief Executive
Officer
FIRST RESERVE FUND VII, LIMITED
PARTNERSHIP
By: FIRST RESERVE CORPORATION,
its managing general partner
By: /s/ Xxxxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Managing Director
