SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) December 15, 1997
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DOMAIN ENERGY CORPORATION
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 1-12999 76-0526147
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(STATE OR OTHER (COMMISSION FILE NUMBER) (IRS EMPLOYER
JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION)
16801 Greenspoint Park Drive, Suite 2000, Houston, TX 77060
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code (281) 618-1800
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INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Pursuant to the terms of that certain Securities Purchase Agreement,
dated as of November 21, 1997 (the "Securities Purchase Agreement"), between
Domain Energy Corporation (the "Company") and Enron Finance Corp., a Delaware
corporation ("Enron") and the owner of a majority of the shares of capital stock
of Gulfstar Energy, Inc. ("Gulfstar"), on December 15, 1997, the Company
purchased all of the shares of capital stock of Gulfstar owned by Enron and all
of the indebtedness of Gulfstar to Enron held by Enron. In connection with the
execution of the Securities Purchase Agreement, the Company entered into that
certain Agreement and Plan of Merger, dated as of December 15, 1997 (the "Merger
Agreement"), among the Company, Domain Gulf Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of the Company, and Gulfstar pursuant
to which, upon consummation of the transactions contemplated by the Securities
Purchase Agreement, and subject to the receipt of Gulfstar stockholder approval
and the satisfaction of other conditions precedent, the remaining stockholders
of Gulfstar would receive a combination of cash and shares of common stock of
the Company in exchange for the shares of capital stock of Gulfstar owned by
such stockholders. The transactions contemplated by the Merger Agreement were
consummated on December 15, 1997, immediately following consummation of the
transactions contemplated by the Securities Purchase Agreement. As a result of
these transactions, Gulfstar became a wholly owned subsidiary of the Company.
The aggregate purchase price for all of the shares of capital stock of Gulfstar
and indebtedness of Gulfstar to Enron acquired by the Company pursuant to the
Securities Purchase Agreement and the Merger Agreement consisted of
approximately $8,000,000 in cash and 394,737 shares of common stock of the
Company.
The assets of Gulfstar consist of oil and gas reserves and leasehold
rights and associated exploration and production assets, including a database of
seismic information licensed to Gulfstar pursuant to various licensing
agreements.
The Merger Agreement provides that the Company will create one
additional seat on the Company's Board of Directors and will cause Michael L.
Harvey, an officer and director of Gulfstar, to be appointed to the Company's
Board of Directors after consummation of the merger contemplated thereby. In
addition, Gulfstar agreed to pay Mr. Harvey $200,000 upon consummation of such
merger, for which Gulfstar will be reimbursed by Enron. Upon consummation of
such merger, the Company agreed to grant to Mr. Harvey options to purchase up to
100,000 shares of common stock of the Company under the Company's Stock Purchase
and Option Plan, pursuant to a separate Non-Qualified Stock Option Agreement
between the Company and Mr. Harvey. The Company agreed to make available a loan
to Mr. Harvey in the amount of $250,000 to finance the purchase of common stock
of the Company by Mr. Harvey at a price of $19.00 per share.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
Exhibit Number Description
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2.1 Securities Purchase Agreement, dated as of
November 21, 1997, between Domain Energy
Corporation and Enron Finance Corp.
2.2 Agreement and Plan of Merger, dated as of
November 21, 1997, among Domain Energy
Corporation, Domain Gulf Acquisition Corp. and
Gulfstar Energy, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DOMAIN ENERGY CORPORATION
By: /s/ Rick G. Lester
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Name: Rick G. Lester
Title: Vice President, Chief Financial Officer
and Treasurer
Date: December 23, 1997
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EXHIBIT INDEX
Exhibit Number Description
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2.1 Agreement and Plan of Merger, dated as of
November 21, 1997, among Domain Energy
Corporation, Domain Gulf Acquisition Corp. and
Gulfstar Energy, Inc.
2.2 Securities Purchase Agreement, dated as of
November 21, 1997, between Domain Energy
Corporation and Enron Finance Corp.
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DOMAIN ENERGY CORPORATION,
DOMAIN GULF ACQUISITION CORP.
AND
GULFSTAR ENERGY, INC.
Dated as of November 21, 1997
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TABLE OF CONTENTS
Page
ARTICLE I THE MERGER............................................... 2
Section 1.1 The Merger................................... 2
Section 1.2 Effective Time............................... 2
Section 1.3 Effects of the Merger........................ 2
Section 1.4 Certificate of Incorporation and By-laws..... 2
Section 1.5 Directors and Officers....................... 3
Section 1.6 Additional Actions........................... 3
ARTICLE II CONVERSION OF SECURITIES........................... 3
Section 2.1 Conversion of Capital Stock.................. 3
Section 2.2 Exchange Ratio, Fractional Shares............ 4
Section 2.3 Exchange of Certificates..................... 5
(a) Exchange Agent..................................... 5
(b) Exchange Procedures................................ 5
(c) Distributions with Respect to Unexchanged Shares... 6
(d) No Further Ownership Rights in Company Capital Stock 6
(e) Termination of Exchange Fund....................... 6
(f) No Liability....................................... 6
(g) Investment of Exchange Fund........................ 7
(h) Restricted Securities.............................. 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB... 7
Section 3.1 Organization and Standing.................... 7
Section 3.2 Corporate Power and Authority................ 8
Section 3.3 Capitalization of Parent..................... 8
Section 3.4 Conflicts, Consents and Approvals............ 9
Section 3.5 Absence of Certain Changes................... 10
Section 3.6 Parent SEC Documents......................... 10
Section 3.7 Parent Disclosure Schedule................... 11
Section 3.8 Reliance..................................... 11
Section 3.9 Litigation................................... 11
Section 3.10 Liabilities.................................. 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE
COMPANY............................................ 12
Section 4.1 Organization and Standing.................... 12
Section 4.2 Subsidiaries................................. 12
Section 4.3 Corporate Power and Authority................ 13
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Section 4.4 Capitalization of the Company................ 13
Section 4.5 Conflicts; Consents and Approvals............ 14
Section 4.6 Absence of Certain Changes................... 15
Section 4.7 Taxes........................................ 15
Section 4.8 Compliance with Law.......................... 16
Section 4.9 Company Disclosure Schedule.................. 16
Section 4.10 Litigation................................... 16
Section 4.11 Brokerage and Finder's Fees.................. 16
Section 4.12 Employees; Employee Benefit Plans............ 17
Section 4.13 Contracts.................................... 17
Section 4.14 Permits...................................... 17
Section 4.15 Financial Statements......................... 18
Section 4.16 Liabilities.................................. 18
Section 4.17 Environmental Matters........................ 19
Section 4.18 Insurance.................................... 19
Section 4.19 Title to Assets and Related Matters.......... 20
Section 4.20 Patents and Other Intellectual Property...... 21
ARTICLE V COVENANTS OF THE PARTIES................................. 22
Section 5.1 Mutual Covenants............................. 22
(a) General............................................ 22
(b) Other Governmental Matters......................... 22
(c) Public Announcements............................... 22
(d) Access............................................. 22
(e) Consent Solicitation in Lieu of Stockholders Meetings 23
(f) Notification of Certain Matters.................... 23
Section 5.2 Covenants of Parent.......................... 23
(a) Conduct of Parent's Operations..................... 23
(b) Indemnification.................................... 24
(c) Directors of Parent................................ 25
Section 5.3 Covenants of the Company..................... 25
(a) Conduct of the Company's Operations................ 25
Section 5.4 No Solicitation.............................. 27
Section 5.5 Expenses..................................... 28
Section 5.6 Employee Matters............................. 28
ARTICLE VI CONDITIONS......................................... 29
Section 6.1 Mutual Conditions............................ 29
Section 6.2 Conditions to Obligations of the Company..... 30
Section 6.3 Conditions to Obligations of Parent and Sub.. 30
ARTICLE VII TERMINATION AND AMENDMENT.......................... 31
Section 7.1 Termination.................................. 31
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Section 7.2 Effect of Termination........................ 31
Section 7.3 Amendment.................................... 32
Section 7.4 Extension; Waiver............................ 32
ARTICLE VIII MISCELLANEOUS...................................... 32
Section 8.1 Survival of Representations and Warranties... 32
Section 8.2 Notices...................................... 32
Section 8.3 Interpretation............................... 34
Section 8.4 Counterparts................................. 34
Section 8.5 Entire Agreement............................. 34
Section 8.6 Third Party Beneficiaries.................... 35
Section 8.7 Governing Law................................ 35
Section 8.8 Specific Performance......................... 35
Section 8.9 Assignment................................... 35
Section 8.10 Expenses..................................... 35
Section 8.11 Incorporation of Disclosure Schedules........ 35
Section 8.12 Severability................................. 35
Section 8.13 Subsidiaries................................. 35
Section 8.14 Persons...................................... 36
Section 8.15 Arbitration.................................. 36
(a) Binding Arbitration................................ 36
(b) Governing Rules.................................... 36
(c) Arbitrators........................................ 36
(d) Conduct of Arbitration............................. 36
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PARENT DISCLOSURE SCHEDULE
Schedule 3.1 Parent Subsidiaries and Material Parent Subsidiaries
Schedule 3.3 Exceptions to Capitalization of Parent
Schedule 3.4 Exceptions to Conflicts, Consents and Approvals of Parent
Schedule 3.5 Exceptions to Absence of Changes in the Business of Parent
Schedule 3.9 Litigation
Schedule 3.10 Liabilities
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COMPANY DISCLOSURE SCHEDULE
Schedule 4.2 Company Subsidiaries and Capitalization of Company
Subsidiaries
Schedule 4.4 Exceptions to Capitalization of the Company
Schedule 4.5 Exceptions to Conflicts, Consents and Approvals of the
Company
Schedule 4.6 Exceptions to Absence of Changes in the Business of the
Company
Schedule 4.7 Exceptions to Tax Compliance
Schedule 4.10 Litigation
Schedule 4.11 Brokerage and Finder's Fee
Schedule 4.12 Benefits Plans
Schedule 4.13 Defaults under Contracts
Schedule 4.16 Liabilities
Schedule 4.17 Exceptions to Environmental Compliance
Schedule 4.18 Material Insurance Policies
Schedule 4.19 Oil and Gas Properties
Schedule 4.20 Intellectual Property
Schedule 5.6 Employment Agreements Assumed by Parent
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INDEX OF DEFINED TERMS
AAA............................................................... 8.15(b)
Action............................................................ 3.9
Agreement......................................................... Recitals
Applicable Law.................................................... 2.3(c)
Assets............................................................ 4.15
Certificate of Merger............................................. 1.2
Certificates...................................................... 2.3(b)
Class A Exchange Ratio............................................ 2.1(c)
Class B Exchange Ratio............................................ 2.1(b)
Closing........................................................... 1.2
Closing Date...................................................... 1.2
Code.............................................................. 1.1
Commission........................................................ 2.3(h)
Company........................................................... Recitals
Company Audited Financials........................................ 4.15
Company Capital Stock............................................. 4.4
Company Class A Common Stock...................................... 4.4
Company Common Stock.............................................. 4.4
Company Competing Transaction..................................... 5.4
Company Disclosure Schedules...................................... 4.2
Company Financial Statements...................................... 4.15
Company Stockholders.............................................. 2.3(a)
Company Subsidiaries.............................................. 4.2
Confidentiality Agreement......................................... 5.1(d)
Contract.......................................................... 4.13
Date of Incorporation............................................. 4.15
Delaware Secretary of State....................................... 1.2
DGCL.............................................................. 1.1
Dispute........................................................... 8.15(a)
ECT............................................................... 3.3
EFC............................................................... Recitals
Effective Time.................................................... 1.2
Equipment......................................................... 3.8
ERISA............................................................. 4.12(b)
Exchange Act...................................................... 3.6
Exchange Agent.................................................... 2.3(a)
Exchange Fund..................................................... 2.3(a)
GAAP.............................................................. 3.6
Governmental Authority............................................ 2.3(f)
Indemnified Parties............................................... 5.2(b)(i)
Intellectual Property............................................. 4.20
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Liabilities....................................................... 3.10
Material Parent Subsidiaries...................................... 3.1
Merger............................................................ Recitals
New Member........................................................ 5.2(c)
NYSE.............................................................. 5.1(c)
Oil and Gas Properties............................................ 4.19(a)
Parent............................................................ Recitals
Parent Balance Sheet.............................................. 3.10
Parent Common Stock............................................... 3.3
Parent Disclosure Schedules....................................... 3.1
Parent Preferred Stock............................................ 3.3
Parent SEC Documents.............................................. 3.6
Parent Subsidiaries............................................... 3.1
Permits........................................................... 4.14
Plan.............................................................. Recitals
Preferred Exchange Ratio.......................................... 2.1(d)
Registration Statement............................................ 3.6
Securities Act.................................................... 2.3(h)
Securities Purchase Agreement..................................... Recitals
Stock Purchase Agreement.......................................... 3.3
Sub............................................................... Recitals
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("this Agreement") dated as of
November 21, 1997, among Domain Energy Corporation, a Delaware corporation
("Parent"), Domain Gulf Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of Parent ("Sub"), and Gulfstar Energy, Inc., a Delaware
corporation (the "Company").
W I T N E S S E T H
WHEREAS, in accordance with a plan (the "Plan") arranged by Parent,
the Company and Enron Finance Corp., a Delaware corporation and a majority
stockholder of the Company ("EFC"), Parent will purchase, and EFC will sell, all
of EFC's interests in the Company pursuant to the terms of the Securities
Purchase Agreement dated November 21, 1997 by and between Parent and EFC (the
"Securities Purchase Agreement") and, immediately thereafter, Sub will be merged
with and into the Company, with the Company as the surviving corporation (the
"Merger"), pursuant to the terms of this Agreement;
WHEREAS, the intent of Parent, the Company and EFC in adopting the
Plan was to allow Domain to acquire (directly or indirectly) all of the
outstanding equity interests in the Company in a taxable transaction;
WHEREAS, pursuant to the Merger, each share of Company Capital Stock
(as defined in Section ) outstanding at the Effective Time (as defined in
Section ) will be converted into the right to receive (i) $.01 and (ii) shares
of Parent Common Stock (as defined in Section ) in a taxable transaction as more
fully provided herein;
WHEREAS, in accordance with the Plan and this Agreement, the Company
desires to become a wholly owned subsidiary of Parent; and
WHEREAS, the respective Boards of Directors of Sub and the Company
have determined that the Merger in the manner contemplated herein is fair to and
in the best interests of their respective stockholders and, by unanimous duly
adopted resolutions, have approved and adopted this Agreement.
NOW, THEREFORE, in consideration of these premises and the mutual
and dependent promises hereinafter set forth, the parties hereto agree as
follows:
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ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the provisions of the Delaware General
Corporation Law (the "DGCL"), Sub shall be merged with and into the Company as
soon as practicable following the satisfaction or waiver of the conditions set
forth in Article , but in no event later than two business days thereafter (the
date of such merger being referred to herein as the "Closing Date"). Following
the Merger, the separate corporate existence of Sub shall cease and the Company
shall continue its corporate existence under the laws of the State of Delaware.
The Company, in its capacity as the corporation surviving the Merger, is
hereinafter sometimes referred to as the "Surviving Corporation". The parties
agree the transactions set forth herein and in the Securities Purchase Agreement
will not constitute a "reorganization" as such term is defined by Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code").
Section 1.2 Effective Time. The Merger shall be consummated by filing in
the Office of the Secretary of State of the State of Delaware (the "Delaware
Secretary of State") a certificate of merger (the "Certificate of Merger") in
such form as is required by and executed in accordance with the DGCL. The Merger
shall become effective (the "Effective Time") when the Certificate of Merger has
been filed with the Delaware Secretary of State or at such later time as may be
agreed by Parent and the Company and specified in the Certificate of Merger.
Prior to the filing referred to in this Section , a closing (the "Closing")
shall be held at the offices of Weil, Gotshal & Manges LLP, 700 Louisiana, Suite
1600, Houston, Texas, or such other place as the parties may agree.
Section 1.3 Effects of the Merger. The Merger shall have the effects set
forth in the DGCL.
Section 1.4 Certificate of Incorporation and By-laws. The Certificate of
Incorporation of Sub, as in effect immediately prior to the Effective Time,
shall be the initial Certificate of Incorporation of the Surviving Corporation,
as the same may be amended and restated following the Merger in a manner
satisfactory to Parent. The By-laws of Sub, as in effect immediately prior to
the Effective Time, shall be the initial By-laws of the Surviving Corporation,
until duly amended in accordance with the terms thereof and the DGCL.
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Section 1.5 Directors and Officers. From and after the Effective Time, the
Persons set forth below the heading "Officers" automatically shall be appointed
to the office of the Surviving Corporation set forth opposite the name of each
respective Person and the Persons set forth below the heading "Directors"
automatically shall be the directors of the Surviving Corporation, in each case
until their respective successors are duly elected and qualified.
Officers:
Michael V. Ronca President & CEO
Herbert A. Newhouse Executive Vice President
Catherine L. Sliva Executive Vice President & Secretary
Rick G. Lester Vice President, CFO & Treasurer
Directors:
Michael V. Ronca, Chairman
Herbert A. Newhouse
Catherine L. Sliva
Rick G. Lester
Section 1.6 Additional Actions. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary or desirable to
carry out the provisions of this Agreement, the proper officers and directors of
Parent and the Company shall take all such necessary action.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, Sub or the Company:
(a) Each share of common stock, par value $.01 per share, of Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into one share of common stock of the Surviving Corporation.
Such shares shall thereafter constitute all of the issued and outstanding
capital stock of the Surviving Corporation.
(b) Each share of Company Class A Common Stock (other than shares to
be canceled in accordance with Section and shares held by stockholders
exercising appraisal rights) issued and outstanding immediately prior to
the Effective
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Time shall be converted into the right to receive (i) $.01 and (ii) .343
shares of Parent Common Stock (the "Class A Exchange Ratio").
(c) Each share of Company Class B Common Stock (other than shares to
be canceled in accordance with Section and shares held by stockholders
exercising appraisal rights) issued and outstanding immediately prior to
the Effective Time shall be converted into the right to receive (i) $.01
and (ii) 1.512 shares of Parent Common Stock (the "Class B Exchange
Ratio").
(d) Each share of Company Preferred Stock (other than shares to be
canceled in accordance with Section and shares held by stockholders
exercising appraisal rights) issued and outstanding immediately prior to
the Effective Time shall be converted into the right to receive (i) $.01
and (ii) 3.172 shares of Parent Common Stock (the "Preferred Exchange
Ratio").
(e) Each share of capital stock of the Company held in the treasury
of the Company or held by Parent or any Parent Subsidiary (as such term is
defined in Section below) shall be canceled and retired and cease to exist
and no payment shall be made in respect thereof.
Section 2.2 Exchange Ratio, Fractional Shares. No certificates for
fractional shares of Parent Common Stock shall be issued as a result of the
conversion provided for in Section . To the extent that an outstanding share of
Company Capital Stock would otherwise have become a fractional share of Parent
Common Stock, the holder thereof, upon presentation to the Exchange Agent in
accordance with Section of such fractional interest represented by an
appropriate certificate for such Company Capital Stock shall be entitled to
receive a cash payment therefor in an amount equal to the product of $19.00
multiplied by such fractional interest. Such payment with respect to fractional
shares is merely intended to provide a mechanical rounding off of, and is not a
separately bargained for, consideration. If more than one certificate
representing shares of Company Capital Stock shall be surrendered for the
account of the same holder, the number of shares of Parent Common Stock for
which certificates have been surrendered shall be computed on the basis of the
aggregate number of shares represented by the certificates so surrendered. In
the event that prior to the Effective Time Parent or the Company shall declare a
stock dividend or other distribution payable in shares of its capital stock or
securities convertible into shares of its capital stock, or effect a stock
split, reclassification, combination or other change with respect to its capital
stock, the Class A Exchange Ratio, the Class B Exchange Ratio and the Preferred
Exchange Ratio, as applicable, shall be adjusted to reflect such dividend,
distribution, stock split, reclassification, combination or other change.
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Section 2.3 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Parent shall make
available to an exchange agent designated by Parent and reasonably acceptable to
the Company (the "Exchange Agent"), for the benefit of the holders of Company
Capital Stock (the "Company Stockholders"), for exchange in accordance with this
Section , certificates representing shares of Parent Common Stock issuable
pursuant to Section in exchange for outstanding shares of Company Capital Stock
and shall from time to time deposit cash in an amount reasonably expected to be
paid pursuant to Section and Section (such shares of Parent Common Stock and
cash, together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedures. Promptly after the Effective Time, Parent
shall cause the Exchange Agent to mail to each holder of record of a certificate
or certificates (the "Certificates") which immediately prior to the Effective
Time represented outstanding shares of Company Capital Stock whose shares were
converted into the right to receive $.01 per share in cash and shares of Parent
Common Stock pursuant to Section hereof (i) a letter of transmittal ("Letter of
Transmittal", which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in the form attached hereto as
Exhibit A) and (ii) instructions for effecting the surrender of the Certificates
in exchange for $.01 per share in cash and certificates representing shares of
Parent Common Stock. Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with a duly executed Letter of Transmittal, the holder
of such Certificate shall be entitled to receive in exchange therefor (x) a
check representing the amount of cash which such holder has the right to receive
pursuant to Section , (y) a certificate representing that number of shares of
Parent Common Stock which such holder has the right to receive pursuant to
Section and (z) a check representing the amount of cash in lieu of fractional
shares, if any, and unpaid dividends and distributions, if any, which such
holder has the right to receive pursuant to the provisions of this Article ,
after giving effect to any required withholding tax, and the shares represented
by the Certificate so surrendered shall forthwith be canceled and retired and
cease to exist. No interest will be paid or accrued on the cash to be paid
pursuant to Section and the cash in lieu of fractional shares, if any, and
unpaid dividends and distributions, if any, payable to holders of shares of
Company Capital Stock. In the event of a transfer of ownership of shares of
Company Capital Stock which is not registered on the transfer records of the
Company, a certificate representing the proper number of shares of Parent Common
Stock, together with a check for the cash to be paid pursuant to Section and the
cash to be paid in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, may be issued to such transferee if the Certificate
representing such shares of Company Capital Stock held by such transferee is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
, each Certificate shall be deemed at any time after the
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Effective Time to represent only the right to receive upon surrender a
certificate representing shares of Parent Common Stock, the cash payable
pursuant to Section and cash in lieu of fractional shares, if any, and unpaid
dividends and distributions, if any, as provided in this Article II.
(c) Distributions with Respect to Unexchanged Shares.
Notwithstanding any other provisions of this Agreement, no dividends or other
distributions declared or made after the Effective Time with respect to shares
of Parent Common Stock having a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate, and no cash payment in lieu
of fractional shares shall be paid to any such holder, until the holder shall
surrender such Certificate as provided in this Section 2.3(f). Subject to the
effect of all applicable laws, statutes, orders, rules, regulations, policies or
guidelines promulgated, or judgments, decisions or orders entered by any
Governmental Authority (as defined in Section ) (collectively, "Applicable
Law"), following surrender of any such Certificate, there shall be paid to the
holder of the certificates representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore payable with respect to such whole shares
of Parent Common Stock and not paid, less the amount of any withholding taxes
that may be required thereon, and (ii) at the appropriate payment date
subsequent to surrender, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Parent
Common Stock, less the amount of any withholding taxes that may be required
thereon.
(d) No Further Ownership Rights in Company Capital Stock. All shares
of Parent Common Stock issued upon surrender of Certificates in accordance with
the terms hereof (including cash paid pursuant to this Article ) shall be deemed
to have been issued in full satisfaction of all rights pertaining to such shares
of Company Capital Stock represented thereby, and from and after the Effective
Time there shall be no further registration of transfers on the stock transfer
books of the Company of shares of Company Capital Stock. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Section 2.3.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to Company Stockholders for six months after the
Effective Time shall be delivered to Parent or the Surviving Corporation, upon
demand thereby, and holders of shares of Company Capital Stock who have not
theretofore complied with this Section shall thereafter look only to Parent for
payment of any claim to shares of Parent Common Stock, cash payable pursuant to
Section or cash in lieu of fractional shares thereof, or dividends or
distributions, if any, in respect thereof.
(f) No Liability. None of Parent, the Surviving Corporation or the
Exchange Agent shall be liable to any Person (as defined in Section 8.14) in
respect of any
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shares of Company Capital Stock (or dividends or distributions with respect
thereto) or cash from the Exchange Fund delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law. If any
Certificates shall not have been surrendered prior to seven years after the
Effective Time (or immediately prior to such earlier date on which any cash, any
cash in lieu of fractional shares or any dividends or distributions with respect
to whole shares of Company Common Stock in respect of such Certificate would
otherwise escheat to or become the property of any United States federal, state
or local or any foreign government, governmental, administrative or regulatory
authority, agency or commission or any court, tribunal or judicial or arbitral
body ("Governmental Authority")), any such cash, dividends or distributions in
respect of such Certificate shall, to the extent permitted by Applicable Law,
become the property of Parent, free and clear of all claims or interest of any
Person previously entitled thereto.
(g) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by Parent, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Parent. In the event the Exchange Fund shall realize a loss on any such
investment, Parent shall promptly thereafter deposit, or cause to be deposited,
in such Exchange Fund on behalf of the Surviving Corporation cash in an amount
equal to such loss.
(h) Restricted Securities. The shares of Parent Common Stock to be
issued in the Merger will not be registered under the Securities Act of 1933, as
amended (the "Securities Act") or any state securities laws, and will be issued
under an exemption from the Securities Act's registration requirements provided
for in Regulation D promulgated by the Securities and Exchange Commission (the
"Commission") thereunder. Each certificate representing shares of Parent Common
Stock issued in the Merger will bear a legend to the foregoing effect, and to
the effect that such shares may not be transferred or sold absent registration
under the Securities Act, or an exemption therefrom.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
In order to induce the Company to enter into this Agreement, Parent
and Sub hereby represent and warrant to the Company that the statements
contained in this Article are true, correct and complete.
Section 3.1 Organization and Standing. Schedule 3.1 to the disclosure
schedules delivered by Parent to the Company pursuant to this Agreement
(collectively, the "Parent Disclosure Schedule") contains a complete list of all
the subsidiaries of Parent (the "Parent Subsidiaries") and those Parent
Subsidiaries that are material subsidiaries (the "Material Parent
Subsidiaries"). Each of Parent and the Material Parent Subsidiaries is a
corporation
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duly organized, validly existing and in good standing under the laws of its
state of incorporation with full power and authority to own, lease, use and
operate its properties and to conduct its business as and where now owned,
leased, used, operated and conducted. Each of Parent and the Parent Subsidiaries
is duly qualified to do business and in good standing in each jurisdiction in
which the nature of the business conducted by it or the property it owns, leases
or operates makes such qualification necessary, except where the failure to be
so qualified or in good standing in such jurisdiction would not have a material
adverse effect on Parent. The copies of the Certificate of Incorporation and
By-laws (or similar organizational documents) of Parent and each Material Parent
Subsidiary, which have previously been made available to the Company, are true,
complete and correct copies of such documents as in effect as of the date of
this Agreement.
Section 3.2 Corporate Power and Authority.
(a) Parent has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and each other agreement to be
executed pursuant to Section
by Parent and the consummation by Parent of the transactions contemplated
hereby and thereby have been duly and validly approved by the Board of Directors
of Parent and no other corporate proceedings on the part of Parent are necessary
to approve this Agreement or such other agreements and to consummate the
transactions contemplated hereby or thereby. This Agreement has been duly and
validly executed and delivered by Parent and constitutes a valid and binding
obligation of Parent, enforceable against Parent in accordance with its terms.
(b) Sub has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Sub and the consummation by Sub
of the transactions contemplated hereby have been duly and validly approved by
the Board of Directors of Sub and by Parent, as the sole stockholder of Sub, and
no other corporate proceedings on the part of Sub are necessary to consummate
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Sub and constitutes a valid and binding obligation of
Sub, enforceable against Sub in accordance with its terms.
Section 3.3 Capitalization of Parent. Parent's authorized capital stock
consists solely of (a) 25,000,000 shares of common stock, $.01 par value per
share ("Parent Common Stock"), and (b) 5,000,000 shares of preferred stock, $.01
par value per share ("Parent Preferred Stock"). As of November 4, 1997, (i)
14,610,121 shares of Parent Common Stock were issued of which 14,607,729 were
outstanding and 2,392 were held by Parent as treasury shares, (ii) 862,547
shares of Parent Common Stock were issuable upon the exercise or conversion of
options, warrants or convertible securities granted or issuable by Parent and
(iii) no shares of Parent Preferred Stock were issued and outstanding. Since
September 30, 1997, with the exception of the Parent Common Stock issued to EFC
pursuant to the Plan
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and the Securities Purchase Agreement and to Enron Capital & Trade Resources
Corp. ("ECT") pursuant to the Stock Purchase Agreement dated November 21, 1997
(the "Stock Purchase Agreement"), by and between Parent and ECT, Parent has not
issued any shares of its capital stock except upon the exercise of such options,
warrants or convertible securities. Each outstanding share of capital stock of
Parent is, and all shares of Parent Common Stock to be issued in connection with
the Merger will be when issued in accordance with Article II, duly authorized
and validly issued, fully paid and nonassessable and free of any preemptive
rights. As of the date hereof, other than as set forth above or on Schedule 3.3
to the Parent Disclosure Schedule, there are no outstanding shares of capital
stock or subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any type relating to
the issuance, sale or transfer by Parent of any securities of Parent, nor are
there outstanding any securities which are convertible into or exchangeable for
any shares of capital stock of Parent; and Parent has no obligation of any kind
to issue any additional securities, other than the Parent Common Stock to be
issued to EFC pursuant to the Plan and the Securities Purchase Agreement and to
ECT pursuant to the Stock Purchase Agreement or to pay for securities of Parent
or any predecessor. Parent has no outstanding bonds, debentures, notes or other
similar obligations the holders of which have the right to vote generally with
holders of Parent Common Stock.
Section 3.4 Conflicts, Consents and Approvals. Neither the execution and
delivery of this Agreement by Parent or Sub nor the consummation of the
transactions contemplated hereby will:
(a) conflict with, or violate any provision of the Certificate of
Incorporation or By-laws (or any similar organizational document) of
Parent or any Material Parent Subsidiary;
(b) conflict with, violate or result in a breach of any provision
of, or constitute a default (or an event which, with the giving of notice,
the passage of time or otherwise, would constitute a default) under, or
entitle any party (with the giving of notice, the passage of time or
otherwise) to terminate, accelerate, modify or call a default under, or
result in the termination, acceleration or cancellation of, or result in
the creation of any lien, security interest, charge or encumbrance upon
any of the properties or assets of Parent or any Material Parent
Subsidiary under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, contract, undertaking,
agreement, lease or other instrument or obligation to which Parent or any
Material Parent Subsidiary is a party or by which any of their respective
properties or assets may be bound;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation, applicable to Parent or any Material Parent Subsidiary or
their respective properties or assets; or
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(d) require any action or consent or approval of, or review by, or
registration or filing by Parent or any Material Parent Subsidiary with
any third party or any Governmental Authority, other than any actions
required under federal and state securities laws as are contemplated by
this Agreement;
except for any of the foregoing that are set forth in subsections (b), (c) or
(d) of Schedule 3.4 to the Parent Disclosure Schedule and, in the case of (b),
(c) or (d), for any of the foregoing that would neither, in the aggregate, have
a material adverse effect on Parent nor prevent or delay the consummation of the
transactions contemplated hereby.
Section 3.5 Absence of Certain Changes. Except as set forth in the
Parent SEC Documents filed with the Commission as of the date hereof or on
Schedule 3.5 to the Parent Disclosure Schedule, since December 31, 1996, (i)
each of Parent and its subsidiaries has conducted its business in the ordinary
course, consistent with past practice, (ii) no event has occurred which has or
which would reasonably be expected to have, in the aggregate, a material adverse
effect on Parent (but excluding for such purposes events that are generally
applicable in the domestic oil and gas exploration and production industry and
the United States economy), and (iii) neither Parent nor any of its subsidiaries
has taken any action which would be prohibited by Section 5.2(a).
Section 3.6 Parent SEC Documents. Each of Parent and the Material Parent
Subsidiaries has timely filed with the Commission all forms, reports, schedules,
statements, exhibits and other documents required to be filed by it since June
23, 1997, under the Securities Exchange Act of 1934, as amended (together with
the rules and regulations thereunder, the "Exchange Act") or the Securities Act
(such documents, as supplemented and amended since the time of filing, together
with Parent's Registration Statement on Form S-1 under the Securities Act, No.
333-24641 (the "Registration Statement"), collectively, the "Parent SEC
Documents"). The Parent SEC Documents, including, without limitation, any
financial statements or schedules included therein, at the time filed (and, in
the case of the Registration Statement, on the date of effectiveness thereof)
(a) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be. The
financial statements (including the related notes) of Parent included in the
Parent SEC Documents were prepared in accordance with generally accepted
accounting principles consistently applied ("GAAP") during the periods involved
(except as may be indicated in the notes thereto), and fairly present (subject
in the case of unaudited statements to the absence of notes and to normal,
recurring and year-end audit adjustments) the consolidated financial position of
Parent as of the dates thereof and the consolidated results of its operations
and cash flows for the periods then ended.
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Section 3.7 Parent Disclosure Schedule. As of the date hereof, none of the
information provided by Parent or any Material Parent Subsidiary for inclusion
in the Parent Disclosure Schedule contains any untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
Section 3.8 Reliance. Prior to executing this Agreement, Parent and Sub
have been afforded an opportunity to (i) examine the Oil and Gas Properties and
such materials as Parent has requested to be provided to it by the Company, (ii)
discuss with representatives of the Company such materials and the nature and
operation of the Oil and Gas Properties and (iii) investigate the condition,
including subsurface condition, of the Oil and Gas Properties and Contracts and
the condition of the equipment of the Company used in the operation of the Oil
and Gas Properties, including, without limitation, the platforms relating to the
Oil and Gas Properties (collectively, the "Equipment"). In entering into this
Agreement, Parent and Sub have relied solely on the express representations and
covenants of the Company in this Agreement, their independent investigation of,
and judgment with respect to, the Equipment and the Oil and Gas Properties and
the advice of their own legal, tax, economic, environmental, engineering,
geological and geophysical advisors and not on any comments or statements of any
representatives of, or consultants or advisors engaged by, the Company.
Section 3.9 Litigation. Except as set forth on Schedule 3.9 to the Parent
Disclosure Schedule, there is no lawsuit, claim, dispute or action (each, an
"Action") pending or, to the knowledge of Parent, threatened against Parent or
any Material Parent Subsidiary which, in the aggregate, could reasonably be
expected to have a material adverse effect on Parent. Neither Parent nor any
Material Parent Subsidiary is subject to any outstanding order, writ, injunction
or decree which, in the aggregate, could reasonably be expected to have a
material adverse effect on Parent.
Section 3.10 Liabilities. Except as set forth on Schedule 3.10 to the
Parent Disclosure Schedule, Parent has no consolidated liabilities,
indebtedness, obligations, expenses, claims, losses, damages, deficiencies,
guaranties or endorsements of or by any Person, absolute or contingent, accrued
or unaccrued, due or to become due, liquidated or unliquidated (collectively,
"Liabilities"), and no material consolidated assets of Parent are subject to any
Liabilities, except (a) to the extent specifically disclosed on or provided for
in Parent's interim balance sheet as of September 30, 1997 (the "Parent Balance
Sheet"); (b) Liabilities incurred since September 30, 1997, in the ordinary
course of its business; (c) Liabilities that were not required under GAAP to
have been specifically disclosed or reserved for on the Parent Balance Sheet;
and (d) Liabilities under or contemplated by this Agreement or disclosed
hereunder. All Liabilities required under GAAP to be specifically disclosed or
reserved for on the Parent Balance Sheet are disclosed or reserved for thereon.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce Parent and Sub to enter into this Agreement, the
Company hereby represents and warrants to Parent and Sub that the statements
contained in this Article are true, correct and complete.
Section 4.1 Organization and Standing. Each of the Company and the Company
Subsidiaries is a corporation or partnership duly organized or formed, validly
existing and in good standing under the laws of its state of incorporation or
formation with full power and authority to own, lease, use and operate its
properties and to conduct its business as and where now owned, leased, used,
operated and conducted. Each of the Company and the Company Subsidiaries is duly
qualified to do business and in good standing in each jurisdiction in which the
nature of the business conducted by it or the property it owns, leases or
operates makes such qualification necessary, except where the failure to be so
qualified or in good standing in such jurisdiction would not have a material
adverse effect on the Company. The copies of the Certificate of Incorporation
and By-laws (or similar organizational documents) of the Company and each of the
Company Subsidiaries, which have previously been made available to Parent, are
true, complete and correct copies of such documents as in effect as of the date
of this Agreement.
Section 4.2 Subsidiaries. As of the date hereof, other than immaterial
interests, the Company does not own, directly or indirectly, any equity or other
ownership interest in any corporation, partnership, joint venture or other
entity or enterprise, except as set forth on Schedule 4.2 (each, a "Company
Subsidiary" and collectively, the "Company Subsidiaries") to the disclosure
schedules delivered by the Company to Parent pursuant to this Agreement
(collectively, the "Company Disclosure Schedule"). Schedule 4.2 to the Company
Disclosure Schedule sets forth as to each Company Subsidiary: (i) its name and,
if applicable, jurisdiction of incorporation or organization, (ii) its
authorized capital stock or share capital, or similar information and (iii) the
number of issued and outstanding shares of its capital stock or share capital,
or similar information. Except as set forth on Schedule 4.2 to the Company
Disclosure Schedule, each of the outstanding shares of capital stock or other
equity interests of each of the Company Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable, and is owned, directly or indirectly, by
the Company free and clear of all liens, pledges, security interests, claims or
other encumbrances, other than liens imposed by law which could not reasonably
be expected to have, in the aggregate, a material adverse effect on the Company.
Other than as set forth on Schedule 4.2 to the Company Disclosure Schedule,
there are no outstanding shares of capital stock or subscriptions, options,
warrants, puts, calls, agreements, understandings, claims or other commitments
or rights of any type relating to the issuance, sale or transfer of any
securities of any Company Subsidiary, nor are there outstanding any securities
which are convertible into or exchangeable for any shares of capital stock of
any Company Subsidiary; and no Company Subsidiary has any obligation of
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any kind to issue any additional securities or to pay for securities of any
Company Subsidiary or any predecessor thereof. As used in this Section ,
"capital stock" shall include capital stock or other ownership interests having
by their terms ordinary voting power to elect directors or others performing
similar functions with respect to such entity.
Section 4.3 Corporate Power and Authority. The Company has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, subject to the approval of the Merger and the
adoption and authorization of this Agreement by the stockholders of the Company
in accordance with the DGCL and this Agreement. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly approved,
unanimously, by the Board of Directors of the Company. The Board of Directors of
the Company, unanimously, has directed that this Agreement and the transactions
contemplated hereby be submitted to the Company Stockholders for adoption by
written consent in lieu of a stockholders meeting and, except for the adoption
of this Agreement by the affirmative vote of the holders of (i) a majority of
shares of the Company Capital Stock entitled to vote thereon in accordance with
Applicable Law, voting together as a class, and (ii) seventy-five percent of the
shares of Company Class B Common Stock entitled to vote thereon in accordance
with Applicable Law, voting separately as a class, no other corporate
proceedings on the part of the Company are necessary to approve this Agreement
and to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by the Company and constitutes a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms.
Section 4.4 Capitalization of the Company. The Company's authorized
capital stock consists solely of (a) 700,000 shares of class A common stock,
$.10 par value per share ("Company Class A Common Stock"), (b) 41,500 shares of
class B common stock, $.10 par value per share ("Company Class B Common Stock"
and, together with Company Class A Common Stock, "Company Common Stock") and (c)
200,000 shares of preferred stock, $.10 par value per share ("Company Preferred
Stock" and, together with Company Common Stock, the "Company Capital Stock"),
all of which shares are designated as "12-1/2% Cumulative Preferred Stock,
Series 1". As of the date hereof, (i) 356,689 shares of Company Class A Common
Stock were issued and outstanding, (ii) 34,000 shares of Company Class B Common
Stock were issued and outstanding and (iii) 83,274 shares of Company Preferred
Stock were issued and outstanding. Each outstanding share of Company Capital
Stock is duly authorized and validly issued, fully paid and nonassessable and
free of any preemptive rights. As of the date hereof, other than as set forth
above, or on Schedule 4.4 to the Company Disclosure Schedule, there are no
outstanding shares of capital stock or subscriptions, options, warrants, puts,
calls, agreements, understandings, claims or other commitments or rights of any
type relating to the issuance, sale or transfer by the Company of any securities
of the Company, nor are there outstanding any securities which are convertible
into or exchangeable for any shares of capital stock of the Company; and the
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Company has no obligation of any kind to issue any additional securities or to
pay for securities of the Company or any predecessor. The Company has no
outstanding bonds, debentures, notes or other similar obligations the holders of
which have the right to vote generally with holders of Company Capital Stock.
Section 4.5 Conflicts; Consents and Approvals. Neither the execution and
delivery of this Agreement by the Company, nor the consummation of the
transactions contemplated hereby or by the Securities Purchase Agreement will:
(a) conflict with, or violate any provision of the Certificate of
Incorporation or By-laws (or any similar organizational document) of the
Company or any Company Subsidiary;
(b) conflict with, violate or result in a breach of any provision
of, or constitute a default (or an event which, with the giving of notice,
the passage of time or otherwise, would constitute a default) under, or
entitle any party (with the giving of notice, the passage of time or
otherwise) to terminate, accelerate, modify or call a default under, or
result in the termination, acceleration or cancellation of, or result in
the creation of any lien, security interest, charge or encumbrance upon
any of the properties or assets of the Company or any of the Company
Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, contract,
undertaking, agreement, lease or other instrument or obligation to which
the Company or any of the Company Subsidiaries is a party or by which any
of their respective properties or assets may be bound;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or any of the Company Subsidiaries or
any of their respective properties or assets; or
(d) require any action or consent or approval of, or review by, or
registration or filing by the Company or any of the Company Subsidiaries
with any third party or any Governmental Authority, other than (i)
authorization of the Merger and the transactions contemplated hereby by
the Company Stockholders and (ii) any actions required under federal and
state securities laws as are contemplated by this Agreement;
except for any of the foregoing that are set forth in Subsections (b), (c) or
(d) of Schedule 4.5 to the Company Disclosure Schedule and, in the case of
Subsections (b), (c) and (d), for any of the foregoing that would neither, in
the aggregate, have a material adverse effect on the Company nor prevent or
delay the consummation of the transactions contemplated hereby.
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Section 4.6 Absence of Certain Changes. Except as set forth on Schedule
4.6 to the Company Disclosure Schedule, since December 31, 1996, (i) each of the
Company and the Company Subsidiaries has conducted its business in the ordinary
course, consistent with past practice, (ii) no event has occurred which has or
which would reasonably be expected to have, in the aggregate, a material adverse
effect on the Company (but excluding for such purposes events that are generally
applicable in (A) the domestic oil and gas exploration and production industry,
including, without limitation, the results of the wells currently being drilled
or completed by the Company which wells were spudded after September 1, 1997,
and (B) the United States economy), and (iii) neither the Company nor any of the
Company Subsidiaries has taken any action that would be prohibited by Section
5.3(a).
Section 4.7 Taxes. Except as set forth on Schedule 4.7 to the Company
Disclosure Schedule, (i) each of the Company and the Company Subsidiaries has
duly filed or caused to have been filed all federal and state income tax returns
and all other material tax returns (including, but not limited to, those filed
on a consolidated, combined or unitary basis) required to have been filed by the
Company or any of the Company Subsidiaries prior to the date hereof and will
file, on or before the Effective Time, all such returns which are required to be
filed after the date hereof and on or before the Effective Time, (ii) all of the
foregoing returns and reports are true and correct in all material respects, and
each of the Company and the Company Subsidiaries has paid or, prior to the
Effective Time, will pay all taxes required to be paid in respect of the periods
covered by such returns or reports to any federal, state, foreign, local or
other taxing authority, (iii) each of the Company and the Company Subsidiaries
has paid or made adequate provision (in accordance with generally accepted
accounting principles) in the financial statements of the Company for all taxes
payable in respect of all periods ending on or prior to December 31, 1996, (iv)
neither the Company nor any of the Company Subsidiaries will have any material
liability for any taxes in excess of the amounts so paid or reserves so
established, (v) neither the Company nor any of the Company Subsidiaries is
delinquent in the payment of any material tax, assessment or governmental charge
and none of them has requested any extension of time within which to file any
returns in respect of any fiscal year which have not since been filed, (vi) no
deficiencies for any tax, assessment or governmental charge have been proposed,
asserted or assessed in writing (tentatively or definitely), in each case, by
any taxing authority, against the Company or any of the Company Subsidiaries for
which there are not adequate reserves in its financial statements (in accordance
with generally accepted accounting principles), (vii) as of the date of this
Agreement, there are no extensions or waivers or pending requests for extensions
or waivers of the time to assess or collect any such tax, (viii) the federal
income tax returns of the Company and the Company Subsidiaries have been audited
by the Internal Revenue Service through the fiscal year ending December 31,
1996, (ix) neither the Company nor any of the Company Subsidiaries is or has
been a party to any tax sharing agreement, (x) there are no liens for taxes on
any assets of the Company or any of the Company Subsidiaries (other than
statutory liens for taxes not yet due or liens for which adequate reserves have
been established in its financial statements in accordance with generally
accepted accounting principles), (xi) the Company and the Company Subsidiaries
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have withheld and paid (and until the Effective Time will withhold and pay) all
income, social security, unemployment, and all other material payroll taxes
required to be withheld (including, without limitation, pursuant to Sections
1441 and 1442 of the Code or similar provisions under foreign law) and paid in
connection with amounts paid to any employee, independent contractor,
stockholder, creditor or other third party, and (xii) the Company has not filed
an election under Section 341(f) of the Code to be treated as a consenting
corporation.
Section 4.8 Compliance with Law. With the exception of the Oil and Gas
Properties not operated by the Company (in which case the representations in
this Section 4.8 are limited to the knowledge of the Company and the Company
Subsidiaries), each of the Company and the Company Subsidiaries is in compliance
with, and at all times since November 7, 1990, has been in compliance with, all
Applicable Law relating to it or its business or the Oil and Gas Properties,
except for any such failures to be in compliance therewith which, in the
aggregate, would not have a material adverse effect on the Company.
Section 4.9 Company Disclosure Schedule. As of the date hereof, none of
the information provided by the Company or any of the Company Subsidiaries for
inclusion in the Company Disclosure Schedule or in connection with the
Securities Purchase Agreement contains any untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading.
Section 4.10 Litigation. Except as set forth on Schedule 4.10 to the
Company Disclosure Schedule, there is no Action pending or, to the knowledge of
the Company, threatened against the Company or any of the Company Subsidiaries
which, in the aggregate, could reasonably be expected to have a material adverse
effect on the Company. Neither the Company nor any of the Company Subsidiaries
is subject to any outstanding order, writ, injunction or decree which, in the
aggregate, could reasonably be expected to have a material adverse effect on the
Company.
Section 4.11 Brokerage and Finder's Fees. Except as set forth on Schedule
4.11 to the Company Disclosure Schedule, the Company has not incurred and will
not incur, directly or indirectly, any brokerage, finder's or similar fee in
connection with the transactions contemplated by this Agreement or by the
Securities Purchase Agreement. The Company is not aware of any claim for payment
of any finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiation of this Agreement or in connection with the
transactions contemplated hereby.
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Section 4.12 Employees; Employee Benefit Plans.
(a) The Company has provided to Parent a list of the names,
addresses, hire date, date of birth and a job description of all employees of
the Company, stating the rates of compensation including, if determined, bonuses
payable to each.
(b) The Company maintains no employee benefit plans, programs,
policies, practices, and other arrangements providing benefits to any employee
or former employee or beneficiary or dependent thereof, whether or not written,
and whether covering one Person or more than one Person, sponsored or maintained
by the Company or any of the Company Subsidiaries or to which the Company or any
of the Company Subsidiaries contributes or is obligated to contribute,
including, without limitation, any employee welfare benefit plans within the
meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974,
as amended (including the regulations thereunder, "ERISA") and all employee
pension benefit plans within the meaning of Section 3(2) of ERISA.
(c) Except as set forth on Schedule 4.12 to the Company Disclosure
Schedule and except for health continuation coverage as required by Section
4980B of the Code or Part 6 of Title I of ERISA, neither the Company nor any of
the Company Subsidiaries has any liability for life, health, medical or other
welfare benefits to former employees or beneficiaries or dependents thereof.
Section 4.13 Contracts. Except as set forth on Schedule 4.13 to the
Company Disclosure Schedule, none of the Company, nor any of the Company
Subsidiaries, or, to the knowledge of the Company, any other party thereto is in
violation of or in default in respect of, nor has there occurred an event or
condition which with the passage of time or giving of notice (or both) would
constitute a default by the Company under, any contract, agreement obligation,
undertaking, commitment or arrangement ("Contract") to which it is a party,
except such violations or defaults under such Contracts which, in the aggregate,
would not have a material adverse effect on the Company.
Section 4.14 Permits. Each of the Company and the Company Subsidiaries is
in possession of all permits, approvals, authorizations, licenses, variances or
permissions required from a Governmental Authority under any Applicable Law
("Permits") necessary to own, lease and, to the extent the Company is the named
operator, operate the Oil and Gas Properties and to carry on its business as it
is now being conducted, except for any such Permits the failure of which to
possess, in the aggregate, would not reasonably be expected to have a material
adverse effect on the Company.
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Section 4.15 Financial Statements. The Company has delivered to Parent the
audited financial statements of the Company as of and for the respective years
ended December 31, 1996, December 31, 1995 and December 31, 1994 (the "Company
Audited Financials") and the Company's unaudited financial statements consisting
of a balance sheet of the Company as of the end of the respective interim
periods ended June 30, 1996 and 1997 and the related statements of income,
retained earnings and cash flows for the periods then ended (the "Company
Interim Financials" and, together with the Company Audited Financials, the
"Company Financial Statements"). The Company Financial Statements fairly present
in conformity with GAAP applied on a consistent basis the financial position and
assets (collectively, the "Assets") and liabilities of the Company as of the
dates thereof and the Company's results of operations and cash flows for the
periods then ended (subject, in the case of any of the Company Interim
Financials, to the absence of notes and to normal, recurring year-end audit
adjustments). The balance sheet as of June 30, 1997, included as a part of the
Company Interim Financials is referred to herein as the "Company Balance Sheet",
and the date thereof is referred to herein as the "Company Balance Sheet Date".
The Company was incorporated on November 7, 1990 (the "Date of Incorporation")
and is not the successor to any entity which engaged in any operations prior to
that date.
Section 4.16 Liabilities. Except as set forth on Schedule 4.16 to
the Company Disclosure Schedule, the Company has no Liabilities, and no material
Assets of the Company are subject to any Liabilities, except (i) to the extent
specifically disclosed on or provided for in the Company Balance Sheet; (ii)
Liabilities incurred since the Company Balance Sheet Date in the ordinary course
of its business, including, without limitation, (A) those costs and expenses
owing by the Company under any authorization for expenditure for an operation on
the Oil and Gas Properties, signed by the Company prior to the date of this
Agreement, all of which are disclosed on Schedule 4.16 to the Company Disclosure
Schedule, (B) costs and expenses owing by the Company pursuant to the terms of
any operating agreement governing the operations of the Company's Oil and Gas
Properties and (C) liabilities for the payment of bonuses, rentals, purchase
obligations and other similar payments in connection with obtaining oil and gas
leases, seismic options or other similar rights; (iii) Liabilities that were not
required under GAAP to have been specifically disclosed or reserved for on the
Company Balance Sheet; (iv) Liabilities under or contemplated by this Agreement
or disclosed hereunder; (v) Liabilities incurred after the date of this
Agreement that are not prohibited by Section 5.3(a); and (vi) Liabilities
incurred since the Company Balance Sheet Date that are approved in writing by
Parent. All Liabilities required under GAAP to be specifically disclosed or
reserved for on the Company Balance Sheet are disclosed or reserved for thereon.
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Section 4.17 Environmental Matters.
(a) Except as set forth on Schedule 4.17 to the Company Disclosure
Schedule, and with the exception of the Oil and Gas Properties not operated by
the Company (in which case the representations in this Section are limited to
the knowledge of the Company and the Company Subsidiaries), there are, with
respect to the Company and the Company Subsidiaries, no past or present
violations of Environmental Laws (as hereafter defined), releases of any
materials into the environment, Actions, activities, circumstances, conditions,
events, incidents, or contractual obligations which may give rise to any common
law environmental liability or any liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or similar
federal, state, local or foreign laws, other than those which, in the aggregate,
would not reasonably be expected to have a material adverse effect on the
Company and none of the Company or the Company Subsidiaries has received any
notice with respect to any of the foregoing, nor is any Action pending or, to
the knowledge of the Company or the Company Subsidiaries, threatened in
connection with any of the foregoing that, if adversely determined, could
reasonably be expected to have a material adverse effect on the Company.
(b) Except as set forth on Schedule 4.17 to the Company Disclosure
Schedule, and with the exception of the Oil and Gas Properties not operated by
the Company (in which case the representations in this Section are limited to
the knowledge of the Company and the Company Subsidiaries), no Hazardous
Materials (as hereafter defined) are contained on any Oil and Gas Property (as
hereafter defined) currently owned, leased or used by the Company or any of the
Company Subsidiaries and no Hazardous Materials were released on any Oil and Gas
Property previously owned, leased or used by the Company or any of the Company
Subsidiaries during the period the property was so owned, leased or used, other
than those which, in the aggregate, would not reasonably be expected to have a
material adverse effect on the Company.
(c) For purposes of this Section , the term "Environmental Laws"
means all applicable laws, statutes, orders, rules, regulations, policies or
guidelines promulgated, or judgments, decisions or orders entered by any
Governmental Authority and binding on the Company relating to pollution or
protection of the environment as well as any principles of common law binding on
the Company under which the Company may be held liable for the release or
discharge of any materials into the environment. For purposes of this Section
4.17, the term "Hazardous Materials" means any substance, waste, material or
product defined as hazardous, radioactive, extremely hazardous or toxic under
any Environmental Law.
Section 4.18 Insurance. Schedule 4.18 to the Company Disclosure Schedule
contains a list of all material insurance policies currently in effect related
to the Company and the Company Subsidiaries.
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Section 4.19 Title to Assets and Related Matters.
(a) All of the Company's leasehold interests or operating rights
interests in oil and gas leases or other mineral interests, and all of the
Company's potential leasehold interests or operating rights interests under
farmout agreements, and the Company's "Net Revenue Interest" and "Working
Interest", or in the case of farmout agreements, the Company's potential "Net
Revenue Interest and Working Interest" therein, are set forth on Schedule 4.19
Part I and Part II (collectively, "Schedule 4.19") to the Company Disclosure
Schedule (collectively, the "Oil and Gas Properties") and the Company's interest
or potential interest in the Oil and Gas Properties is not subject to any
payout, back-in or other similar provisions except as noted on Schedule 4.19 to
the Company Disclosure Schedule. Except as disclosed on Schedule 4.19 to the
Company Disclosure Schedule, there are no Contracts to which the Company, and
Company Subsidiary or any of the Oil and Gas Properties are bound: (i) for the
sale, exchange or other disposition of any severed crude oil, natural gas,
casinghead gas, drip gasoline, natural gasoline, petroleum, natural gas liquids,
condensate, products, liquids and other hydrocarbons and other minerals or
materials of every kind and description produced from the Oil and Gas Properties
produced from the Oil and Gas Properties that is not cancelable without penalty
on not more than 120 days prior written notice; (ii) to sell, lease, farmout or
otherwise dispose of any of its or any Company Subsidiary's interests in any of
the Oil and Gas Properties other than conventional rights of reassignment; or
(iii) relating to operations to which the Company's interest in any of the Oil
and Gas Properties is subject. To the knowledge of the Company, all of the
Contracts listed on Schedule 4.19 to the Company Disclosure Schedule are in full
force and effect.
(b) The Company has title of record to the Oil and Gas Properties as
(i) will enable the Company to receive from a particular Oil and Gas Property at
least the "Net Revenue Interest" for each of the Oil and Gas Properties
identified on Schedule 4.19 Part I to the Company Disclosure Schedule, without
reduction, suspension or termination throughout the productive life of such Oil
and Gas Property, except for any reduction, suspension or termination (A) caused
by Parent, Sub, any of their affiliates, successors in title or assigns, (B)
caused by orders of the appropriate regulatory agency having jurisdiction over a
particular Oil and Gas Property that are promulgated after the Effective Time
and that concern pooling, unitization, communitization or spacing matters
affecting such Oil and Gas Property, (C) caused by any Contract containing a
sliding-scale royalty clause or other similar clause with respect to a
production burden associated with a particular Oil and Gas Property (all of
which Contracts are specifically disclosed on Schedule to the Company Disclosure
Schedule), (D) caused by minor imperfections in title or in instruments which do
not operate to materially reduce the "Net Revenue Interest" of the affected Oil
and Gas Property or (E) otherwise set forth on Schedule 4.19 Part I to the
Company Disclosure Schedule, (ii) will not obligate the Company to bear with
respect to a particular Oil and Gas Property a greater "Working Interest" than
the Working Interest for each of the Oil and Gas Properties identified on
Schedule 4.19 Part I to the Company Disclosure Schedule, without increase
throughout the productive life of such Oil and Gas Property, except for any
increase
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(A) caused by Parent, Sub, any of their affiliates, successors in title or
assigns, (B) that also results in the Net Revenue Interest associated with such
Oil and Gas Property being proportionately increased, (C) caused by orders of
the appropriate regulatory agency having jurisdiction over a particular Oil and
Gas Property that are promulgated after the Effective Time and that concern
pooling, unitization, communitization or spacing matters affecting such Oil and
Gas Property or (D) otherwise set forth on Schedule 4.19 Part I to the Company
Disclosure Schedule and (iii) is free and clear of all encumbrances, liens,
claims, easements, rights, agreements, rights, instruments, obligations and
burdens except for (A) liens for taxes not yet delinquent, (B) lessors'
royalties, overriding royalties, division orders, reversionary interests, and
similar burdens that do not operate to reduce the Net Revenue Interest of the
Company in any of the Oil and Gas Properties to less than the amount set forth
therefor on Schedule 4.19 Part I to the Company Disclosure Schedule, (C) the
consents and rights described on Schedule 4.5 to the Company Disclosure
Schedule, (D) caused by minor imperfections in title or in instruments which do
not operate to materially reduce the "Net Revenue Interest" of the affected Oil
and Gas Property or increase the "Working Interest" thereof without a
corresponding and proportional increase in the "Net Revenue Interest" and (E)
the Contracts, insofar as the Contracts do not operate to increase the "Working
Interest" of the Company set forth on Schedule 4.19 Part I to the Company
Disclosure Schedule for any of the Oil and Gas Properties without a
corresponding and proportional increase in the "Net Revenue Interest", or reduce
the "Net Revenue Interest" of the Company set forth on Schedule 4.19 Part I to
the Company Disclosure Schedule for any of the Oil and Gas Properties.
Section 4.20 Patents and Other Intellectual Property. Neither the Company
nor any Company Subsidiary uses as of the date of this Agreement, and has not
used prior to such date, in the operation of its business any patent, trademark,
tradename, service mark, copyright, or any trade secret, process or know-how in
which a third Person owns a legally protectable right (collectively,
"Intellectual Property") that is material to the business operations of the
Company, except for those disclosed on Schedule 4.20 to the Company Disclosure
Schedule, as to which the Company has obtained valid licenses. All of the
material Intellectual Property used by the Company and each Company Subsidiary
in its business operations is owned or otherwise lawfully used by the Company,
and to its knowledge neither the Company nor any Company Subsidiary infringes
upon or unlawfully or wrongfully uses any material Intellectual Property.
Neither the Company nor any Company Subsidiary is in default, and received any
notice of any claim of infringement or any other claim or proceeding, with
respect to any such Intellectual Property owned or claimed by another Person,
which infringement or claim, if proved, would have a material adverse effect on
the Company. To the Company's knowledge, no employee or consultant of the
Company or other Person has used in the course of his work for the Company any
information that is confidential and owned by any other Person in violation of
any confidentiality agreement to which the Company is a party.
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ARTICLE V
COVENANTS OF THE PARTIES
The parties hereto agree as follows with respect to the period from
and after the execution of this Agreement.
Section 5.1 Mutual Covenants.
(a) General. Each of the parties shall use its reasonable efforts to
take all action and to do all things necessary, proper or advisable to
consummate the Merger and the transactions contemplated by this Agreement as
promptly as possible (including, without limitation, using its reasonable
efforts to cause the conditions set forth in Article VI for which they are
responsible to be satisfied as soon as reasonably practicable and to prepare,
execute and deliver such further instruments and take or cause to be taken such
other and further action as any other party hereto shall reasonably request).
(b) Other Governmental Matters. Each of the parties shall use its
reasonable efforts to take any additional action that may be necessary, proper
or advisable in connection with any other notices to, filings with, and
authorizations, consents and approvals of any Governmental Authority that it may
be required to give, make or obtain.
(c) Public Announcements. Unless otherwise required by Applicable
Law or the rules of the New York Stock Exchange (the "NYSE"), at all times prior
to the earlier of the Effective Time or termination of this Agreement pursuant
to Section 7.1, Parent and the Company shall not issue any press or public
statement relating to the Merger (excluding any disclosure proposed to be made
in response to comments by the Commission regarding any filing by Parent with
the Commission) without the prior written consent of the other party, which
consent shall not be unreasonably withheld. With respect to any disclosure
required by Applicable Laws or the requirements of the NYSE, Parent and the
Company shall consult with each other before issuing any press release with
respect to the Merger and shall not issue any such press release prior to such
consultation and opportunity to comment.
(d) Access. Subject to Applicable Law, from and after the date of
this Agreement until the Effective Time (or the termination of this Agreement),
each of Parent and the Company shall permit representatives of the other to have
reasonable access to the other's officers, employees, premises, properties,
books, records, Contracts, tax records and documents. Information obtained by
Parent pursuant to this Section 5.1(d) shall be subject to the provisions of the
confidentiality agreement, dated September 17, 1997 (the "Confidentiality
Agreement"), among Parent, ECT and the Company which agreement remains in full
force and effect and shall survive execution and delivery of this Agreement.
After the date of execution hereof and prior to the Company obtaining material
"inside" information pursuant to this Section 5.1(d), the Company, on its own
behalf and on behalf of
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its affiliates, shall enter into a confidentiality agreement with Parent, which
agreement shall be substantially similar to the Confidentiality Agreement, but
in no event shall it have terms more onerous than the Confidentiality Agreement.
With respect to the access provided by Parent to the Company, the Company hereby
expressly waives and releases all claims against Parent and its agents for
injury to, or death of, persons or damage to property arising in any way from
the exercise of rights granted to the Company hereby or from the activities of
the Company or its employees, agents, or contractors (except for such injuries
or damages caused solely by the negligence or willful misconduct of Parent).
With respect to the access provided by the Company to Parent, Parent hereby
expressly waives and releases all claims against the Company and its agents for
injury to, or death of, persons or damage to property arising in any way from
the exercise of rights granted to Parent hereby or from the activities of Parent
or its employees, agents, or contractors (except for such injuries or damages
caused solely by the negligence or willful misconduct of the Company).
(e) Consent Solicitation in Lieu of Stockholders Meetings. The
Company shall duly solicit the written consent of each holder of Company Capital
Stock to approve this Agreement and the transactions contemplated hereby in lieu
of holding a meeting of its stockholders for such purpose. Sub shall duly
solicit the written consent of Parent, its sole stockholder, to approve this
Agreement and the transactions contemplated hereby in lieu of holding a meeting
for such purpose. Subject to its fiduciary duties under Applicable Law as
advised by counsel, the Board of Directors of each of Sub and the Company will
(i) recommend that its stockholders approve such matters and (ii) use reasonable
efforts to obtain any necessary approvals by its stockholders.
(f) Notification of Certain Matters. Each of Parent and the Company
shall give prompt notice to the other party of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would
cause any representation or warranty contained in this Agreement made by such
party to be untrue or inaccurate at or prior to the Effective Time or which,
with notice or lapse of time or both, would become a default hereunder, and (ii)
any material failure of such party to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section
5.1(f) shall not limit or otherwise affect the remedies available hereunder to
any party.
Section 5.2 Covenants of Parent.
(a) Conduct of Parent's Operations. During the period from the date
of this Agreement to the Effective Time, Parent shall, and shall cause the
Parent Subsidiaries to, conduct its operations in the ordinary course except as
expressly contemplated by this Agreement and the transactions contemplated
hereby and shall use its reasonable efforts to maintain and preserve its
business organization and its material rights and franchises and to retain the
services of its officers and key employees and maintain relationships with
customers, suppliers and other third parties to the end that their goodwill and
ongoing
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business shall not be impaired in any material respect. Without limiting the
generality of the foregoing, during the period from the date of this Agreement
to the Effective Time or the earlier termination of this Agreement pursuant to
Section 7.1, Parent shall not, and with respect to clauses (i) and (ii) below,
Sub shall not, and with respect to clause (iii) and (iv) below, Parent shall
cause each of the Parent Subsidiaries not to, except as otherwise expressly
contemplated by this Agreement and the transactions contemplated hereby, without
the prior written consent of the Company:
(i) do or effect any of the following actions with respect
to its securities: (A) adjust, split, combine or reclassify its capital
stock, or (B) make, declare or pay any dividend or distribution on, or
directly or indirectly redeem, purchase or otherwise acquire, any of its
securities (except in connection with the use of shares of capital stock
of Parent to pay the exercise price or tax withholding in connection with
stock-based employee benefit plans of Parent);
(ii) make or propose any material change in its Certificate
of Incorporation, By-laws or other organizational documents;
(iii) conduct its business in a manner or take, or cause to
be taken, any other action that would or might reasonably be expected to
prevent or materially delay Parent or Sub from consummating the
transactions contemplated by this Agreement (unless such action is
otherwise permitted or not prohibited hereunder), including without
limitation, any action that may materially limit or delay the ability of
Parent or Sub to consummate the transactions contemplated by this
Agreement as a result of antitrust or securities laws or other regulatory
concerns; or
(iv) agree to take any action prohibited by the foregoing.
(b) Indemnification.
(i) From and after the Effective Time, Parent shall, and
shall cause the Surviving Corporation to, indemnify, defend and hold
harmless to the fullest extent permitted under Applicable Law each Person
who is now, or has been at any time prior to the date hereof, or who
becomes prior to the Effective Time, an officer, director or employee of
the Company (or any subsidiary or division thereof), including, without
limitation, each Person controlling any of the foregoing Persons (each, an
"Indemnified Party" and collectively, the "Indemnified Parties"), against
all losses, claims, damages, liabilities, costs or expenses (including
attorneys' fees), judgments, fines, penalties and amounts paid in
settlement in connection with any Action (and shall pay expenses for legal
fees in advance of the final disposition of any such Action to each
Indemnified Party to the fullest extent permitted under Delaware law,
provided that the Indemnified Party agrees that, in the event that it is
ultimately determined that such Indemnified Party is not entitled to the
payment of such
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expenses, for any reason, such Indemnified Party shall reimburse Parent or
the Surviving Corporation for such expenses paid in advance) arising, in
whole or in part, out of or pertaining to acts or omissions, or alleged
acts or omissions, by them in their capacities as such, whether commenced,
asserted or claimed at or before the Effective Time and including, without
limitation, liabilities arising in connection with the Merger; provided
that Parent and the Surviving Corporation shall pay for only one law firm
(in addition to local counsel) for all Indemnified Parties, unless the use
of one law firm for all Indemnified Parties would present such law firm
with a conflict of interest. Parent shall cause the Surviving Corporation
to keep in effect the Company's current provisions in its Restated
Certificate of Incorporation and By-laws providing for exculpation of
director and officer liability and indemnification of the Indemnified
Parties to the fullest extent permitted under the DGCL. In the event of
any actual or threatened Action in respect of such acts or omissions,
Parent and the Surviving Corporation shall cooperate in the defense of any
such Action; provided, however, that neither Parent nor the Surviving
Corporation shall be liable for any settlement effected without its
written consent (which consent shall not be unreasonably withheld). Parent
shall cause the Surviving Corporation to maintain the Company's existing
indemnification provisions.
(ii) Survival; Inurement. This Section shall survive the
consummation of the Merger. The provisions of this Section are intended to
be for the benefit of, and shall be enforceable by, each Indemnified
Party, his heirs and his representatives. The rights provided Indemnified
Parties shall be in addition to and not in lieu of any rights to indemnity
which such parties may have under the Restated Certificate of
Incorporation or By-Laws of the Company or the Certificate of
Incorporation or By-Laws of the Surviving Corporation or any other
agreements.
(c) Directors of Parent. Immediately after the Effective Time,
Parent will take such action as may be necessary to create one additional seat
on the Board of Directors of Parent and to cause Michael L. Harvey (the "New
Member") to be elected to the Board of Directors of Parent. For a period of two
years following the Effective Time, Parent shall take, or cause to be taken, all
action necessary to nominate the New Member for election to the Board of
Directors of Parent and, in accordance with its normal solicitation efforts,
solicit proxies for his election to such Board of Directors.
Section 5.3 Covenants of the Company.
(a) Conduct of the Company's Operations. During the period from the
date of this Agreement to the Effective Time, the Company shall, and shall cause
each of the Company Subsidiaries to, conduct its operations in the ordinary
course except as expressly contemplated by this Agreement and the transactions
contemplated hereby and shall use its reasonable efforts to maintain and
preserve its business organization and its material rights and franchises and to
retain the services of its officers and key employees and maintain
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relationships with customers, suppliers and other third parties to the end that
their goodwill and ongoing business shall not be impaired in any material
respect. Without limiting the generality of the foregoing, during the period
from the date of this Agreement to the Effective Time or the earlier termination
of this Agreement pursuant to Section 7.1, the Company shall not, and shall
cause each of the Company Subsidiaries not to, except as otherwise expressly
contemplated by this Agreement and the transactions contemplated hereby, without
the prior written consent of Parent:
(i) do or effect any of the following actions with respect
to its securities: (A) adjust, split, combine or reclassify its capital
stock, (B) make, declare or pay any dividend or distribution on, or
directly or indirectly redeem, purchase or otherwise acquire any of its
securities (except in connection with the use of shares of capital stock
of the Company to pay the exercise price or tax withholding in connection
with stock-based employee benefit plans of the Company or any of its
subsidiaries), (C) grant any Person any right or option to acquire any of
its securities, (D) issue, deliver or sell or agree to issue, deliver or
sell any additional securities or amend the terms of any of its
securities, or (E) enter into any agreement, understanding or arrangement
with respect to the sale or voting of its capital stock;
(ii) with the exception of the assignments under the
various participation agreements listed on Schedule 4.19 for Block 206,
West Cameron Area, sell, transfer, lease, pledge, mortgage, encumber or
otherwise dispose of any of its property or assets which are material, in
the aggregate, other than in the ordinary course of business consistent
with past practice;
(iii) make or propose any changes in its Certificate of
Incorporation, as amended, or By-laws, as amended, or other organizational
documents;
(iv) merge or consolidate with any other Person or acquire
a material amount of assets or capital stock of any other Person or enter
into any confidentiality agreement with any Person, other than in
connection with this Agreement and the transactions contemplated hereby;
(v) incur, create, assume or otherwise become liable for
indebtedness for borrowed money, other than in the ordinary course of
business consistent with past practice, or assume, guarantee, endorse or
otherwise as an accommodation become responsible or liable for obligations
of any other individual, corporation or other entity;
(vi) except with respect to the $200,000 bonus payable to
Michael L. Harvey upon consummation of the transactions provided for
herein, enter into or modify any employment, severance, termination or
similar agreements or arrangements with, or grant any bonuses, salary
increases, severance or termination
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pay to, any officer, director, consultant or employee other than salary
increases and bonuses granted in the ordinary course of business
consistent with past practice, or otherwise increase the compensation or
benefits provided to any officer, director, consultant or employee except
as may be required by Applicable Law, this Agreement, any applicable
collective bargaining agreement or a binding written Contract in effect on
the date of this Agreement, or adopt any new employee benefit plan;
(vii) materially change its method of doing business or
materially change any method or principle of accounting in a manner that
is inconsistent with past practice;
(viii) settle any Actions, whether now pending or hereafter
made or brought involving, in any Action or related series of Actions, an
amount in excess of $10,000;
(ix) modify, amend or terminate, or waive, release or
assign any material rights or claims with respect to, any material
Contract to which the Company is a party or any confidentiality agreement
to which the Company is the "protected party";
(x) incur or commit to any capital expenditures,
obligations or liabilities in respect thereof, other than in the ordinary
course of business consistent with past practice;
(xi) conduct its business in a manner or take, or cause to
be taken, any other action that would or would reasonably be expected to
prevent or materially delay the Company from consummating the transactions
contemplated by this Agreement (regardless of whether such action would
otherwise be permitted or not prohibited hereunder), including without
limitation, any action that may materially limit or delay the ability of
the Company to consummate the transactions contemplated by this Agreement
as a result of antitrust or securities laws or other regulatory concerns;
or
(xii) agree to take any action prohibited by the foregoing.
Section 5.4 No Solicitation. The Company agrees that, during the term of
this Agreement, it shall not, and shall not authorize or permit any of the
Company Subsidiaries or any of its or their respective directors, officers,
employees, agents or representatives, directly or indirectly, to (i) solicit,
initiate, encourage or facilitate, or furnish or disclose information in
furtherance of, any inquiries or the making of any proposal with respect to any
recapitalization, merger, consolidation or other business combination involving
the Company, or acquisition of any capital stock or any material portion of the
assets of the
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Company (except for acquisition of assets in the ordinary course of business
consistent with past practice), or any combination of the foregoing (a "Company
Competing Transaction"), (ii) negotiate, explore or otherwise engage in
discussions with any Person (other than Parent, Sub or their respective
directors, officers, employees, agents and representatives) with respect to any
Company Competing Transaction or (iii) enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions contemplated by this Agreement. The Company
will immediately cease all existing activities, discussions and negotiations
with any parties conducted heretofore with respect to any Company Competing
Transaction. From and after the execution of this Agreement, the Company shall
immediately advise Parent orally, to be followed by a confirmation in writing,
of the receipt, directly or indirectly, of any inquiries, discussions,
negotiations, or proposals relating to a Company Competing Transaction
(including the status and a summary of the general terms thereof) and promptly
furnish to Parent a copy of any such proposal or inquiry in addition to any
information provided to or by any third party relating thereto.
Section 5.5 Expenses. The Company shall pay all of the legal, accounting
and other expenses incurred by the Company and the holders of the Company
Capital Stock in connection with the Merger.
Section 5.6 Employee Matters.
(a) Parent will cause service with the Company and its predecessors
prior to the Effective Time to be taken into account for eligibility and vesting
purposes in connection with any benefit or payroll plan, practice, policy or
agreement of Parent or any of its affiliates in which any employee of the
Company may become entitled to participate at or after the Effective Time.
(b) Parent hereby assumes and agrees to perform and pay or cause to
be performed and paid all of the Company's duties and obligations (with the
Company remaining jointly and severally liable) under the employment agreements
listed on Schedule to the Company Disclosure Schedule, to the extent they have
not been terminated prior to the Effective Time.
(c) The obligations of Parent under Sections 5.6(a) and 5.6(b) are
intended to benefit, and be enforceable against Parent directly by, the parties
(other than the Company) to such agreements and the participants or former
participants in such plans and their respective beneficiaries and other
successors in interest, and shall be binding on all successors of Parent.
(d) Parent shall take all actions required, if any, to cause the
shares of Parent Common Stock to be issued in the Merger to be listed on the
NYSE and shall give such notice as may be required to the NYSE with respect to
the Merger.
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ARTICLE VI
CONDITIONS
Section 6.1 Mutual Conditions. The obligations of the parties hereto to
consummate the Merger shall be subject to fulfillment of the following
conditions:
(a) No temporary restraining order, preliminary or permanent
injunction or other order or decree which prevents the consummation of the
Merger shall have been issued and remain in effect, and no statute, rule
or regulation shall have been enacted by any Governmental Authority which
prevents the consummation of the Merger.
(b) All Permits required to be obtained prior to the Effective Time
in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby shall have been
obtained.
(c) This Agreement and the transactions contemplated hereby shall
have been approved and adopted by the affirmative vote of the holders of
(i) a majority of the Company Capital Stock entitled to vote thereon in
accordance with Applicable Law, voting together as a class, and (ii)
seventy-five percent of the shares of Company Class B Common Stock
entitled to vote thereon, in accordance with Applicable Law, voting
separately as a class pursuant to written consents in lieu of a Company
stockholders' meeting.
(d) No Action shall have been instituted by any Governmental
Authority which seeks to prevent consummation of the Merger or which seeks
material damages in connection with the transactions contemplated hereby,
which Action continues to be outstanding.
(e) All consents, waivers and approvals of third parties and
Governmental Authorities required in connection with the transactions
contemplated hereby shall have been obtained, except where the failure to
obtain such consents, waivers or approvals, in the aggregate, would not
reasonably be expected to result in a material adverse effect on Parent or
the Company, as the case may be, provided that a party which has not used
all reasonable efforts to obtain a consent, approval or waiver may not
assert this condition with respect to such consent, approval or waiver.
(f) The transactions contemplated by the Securities Purchase
Agreement and the transactions contemplated by the Stock Purchase
Agreement shall have been consummated, or shall be consummated
simultaneously with the consummation of the Merger.
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(g) Each stockholder of the Company and ECT shall have executed and
delivered the Release and Settlement Agreement for the benefit of each
other stockholder of the Company, in the form attached hereto as Exhibit
B.
Section 6.2 Conditions to Obligations of the Company. The obligations of
the Company to consummate the Merger and the transactions contemplated hereby
shall be subject to the fulfillment of the following conditions unless waived by
the Company:
(a) The representations and warranties of each of Parent and Sub
shall be true and correct on the date hereof and on and as of the Closing
Date as though made on and as of the Closing Date (except for
representations and warranties made as of a specified date, which need be
true and correct only as of the specified date).
(b) Each of Parent and Sub shall have performed in all respects each
obligation and agreement and shall have complied in all respects with each
covenant to be performed and complied with by it hereunder at or prior to
the Effective Time.
(c) The Company shall have received an opinion dated as of the
Closing Date of Weil, Gotshal & Manges LLP, in form reasonably acceptable
to the Company and its counsel. In rendering such opinion, Weil, Gotshal &
Manges LLP may require and rely on representations contained in
certificates of Parent, the Company, Sub and others, as deemed reasonably
appropriate.
Section 6.3 Conditions to Obligations of Parent and Sub. The obligations
of Parent and Sub to consummate the Merger and the other transactions
contemplated hereby shall be subject to the fulfillment of the following
conditions unless waived by each of Parent and Sub:
(a) The representations and warranties of the Company shall be true
and correct on the date hereof and on and as of the Closing Date as though
made on and as of the Closing Date (except for representations and
warranties made as of a specified date, which need be true and correct
only as of the specified date).
(b) The Company shall have performed in all respects each obligation
and agreement and shall have complied in all respects with each covenant
to be performed and complied with by it hereunder at or prior to the
Effective Time.
(c) Parent and Sub shall have received an opinion dated as of the
Closing Date of Bracewell & Patterson, L.L.P., in form reasonably
acceptable to Parent and its counsel. In rendering such opinion, Bracewell
& Patterson, L.L.P. may require and rely on representations contained in
certificates of Parent, the Company, Sub and others, as deemed reasonably
appropriate.
30
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ARTICLE VII
TERMINATION AND AMENDMENT
Section 7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval and adoption of
this Agreement by Company Stockholders:
(a) by mutual consent of Parent and the Company;
(b) by either Parent or the Company if any permanent injunction or
other order or decree of a court or other competent Governmental Authority
preventing the consummation of the Merger shall have become final and
nonappealable;
(c) by either Parent or the Company if the Merger shall not have
been consummated before December 15, 1997, unless extended by the Boards
of Directors of both Parent and the Company (provided that the right to
terminate this Agreement under this Section 7.1(c) shall not be available
to any party whose failure to perform any material covenant or obligation
under this Agreement has been the cause of or resulted in the failure of
the Merger to occur on or before such date);
(d) by Parent or the Company if written consents representing the
requisite vote of the Company Stockholders to approve this Agreement and
the transactions contemplated hereby shall not have been received by the
Company on or before December 15, 1997; or
(e) by Parent or the Company (provided that the terminating party is
not then in material breach of any representation, warranty, covenant or
other agreement contained herein) if there shall have been a material
breach of any of the covenants or agreements or any of the representations
or warranties set forth in this Agreement on the part of the other party,
which breach either (i) is not cured within 30 days following written
notice given by the terminating party to the party committing such breach,
or (ii) by its nature, cannot be cured prior to December 15, 1997, but
only if such breach would constitute a failure of a condition contained in
Section 6.2 or Section 6.3, as applicable.
Section 7.2 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 7.1, this Agreement, except for the
provisions of the second sentence of Section 5.1(d) and the provisions of
Sections 7.1 and 8.10, shall become void and have no effect, without any
liability on the part of any party or its directors, officers, employees or
stockholders. Notwithstanding the foregoing, nothing in this Section 7.2 shall
relieve any party to this Agreement of liability for a material breach of any
provision of this Agreement.
31
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Section 7.3 Amendment. This Agreement may be amended by the parties
hereto, at any time before or after adoption of this Agreement by the Company
Stockholders, but after such approval or authorization, no amendment shall be
made which by law requires further approval or authorization by the Company
Stockholders, without such further approval or authorization. Notwithstanding
the foregoing, this Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 7.4 Extension; Waiver. At any time prior to the Effective Time,
Parent (with respect to the Company) and the Company (with respect to Parent and
Sub) may, to the extent legally allowed, (i) extend the time for the performance
of any of the obligations or other acts hereunder, (ii) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto and (iii) waive compliance with any of the agreements
or conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Survival of Representations and Warranties. The
representations and warranties made herein by the parties hereto shall not
survive the Effective Time. This Section shall not limit any covenant or
agreement of the parties hereto, which by its terms contemplates performance
after either the Effective Time or the termination of this Agreement.
Section 8.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given upon receipt if delivered personally,
telecopied (which is confirmed) or dispatched by a nationally recognized
overnight courier service to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Parent or Sub:
Domain Energy Corporation
16801 Greenspoint Park Drive, Suite 2000
Houston, Texas 77060
Attention: Michael V. Ronca
President and CEO
Telecopy No.: (281) 618-1977
32
<PAGE>
with a copy to
James L. Rice III, Esq.
Weil, Gotshal & Manges LLP
700 Louisiana, Suite 1600
Houston, Texas 77002-2784
Telecopy No.: (713) 224-9511
(b) if to the Company:
Gulfstar Energy, Inc.
1010 Lamar, Suite 900
Houston, Texas 77002
Attention: Michael L. Harvey
President
Telecopy No.: (713) 655-7301
with a copy to
William S. Moss, Jr., Esq.
817 Kuhlman Road
Houston, Texas 77024
Telecopy No.: (713) 758-2520
and
c/o Enron Capital & Trade Resources Corp.
1400 Smith Street
Houston, Texas 77002
Attention: Donna W. Lowry
Telecopy No.: (713) 646-4039 or (713) 646-4946
and
Enron Capital & Trade Resources Corp.
1400 Smith Street
Houston, Texas 77002
Attention: W. Lance Schuler
Telecopy No.: (713) 646-3393
33
<PAGE>
and
John L. Keffer
Bracewell & Patterson, L.L.P.
711 Louisiana, Suite 2900
Houston, Texas 77002
Telecopy No.: (713) 221-1212
and
W. McIlwaine Thompson, Jr.
Woods, Rogers and Hazlegrove, P.L.C.
250 West Main Street, Suite 300
P.O. Box 2964
Charlottesville, Virginia 22902-2694
Telecopy No.: (804) 295-3390
and
David L. Gardner
445 Park Avenue
New York, New York 10022
Telecopy No.: (212) 838-6835
Section 8.3 Interpretation. When a reference is made in this Agreement to
an Article or Section, such reference shall be to an Article or Section of this
Agreement unless otherwise indicated. The headings and the table of contents
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. For the purposes of
this Agreement, a "material adverse effect" shall mean, as to any party, a
material adverse effect on the assets, liabilities, results of operations,
business or financial condition of such party and its subsidiaries, taken as a
whole, or on such party's ability to consummate the transactions contemplated
hereby.
Section 8.4 Counterparts. This Agreement may be executed in counterparts,
which together shall constitute one and the same Agreement. The parties may
execute more than one copy of this Agreement, each of which shall constitute an
original.
Section 8.5 Entire Agreement. This Agreement (including the documents and
the instruments referred to herein) and the Confidentiality Agreement constitute
the entire agreement among the parties and supersede all prior agreements and
understandings, agreements or representations by or among the parties, written
and oral, with respect to the subject matter hereof and thereof.
34
<PAGE>
Section 8.6 Third Party Beneficiaries. Nothing in this Agreement,
express or implied, is intended or shall be construed to create any third party
beneficiaries, except for the provisions of Sections 5.2(b) and 5.6, which may
be enforced by the beneficiaries thereof.
Section 8.7 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without regard to
principles of conflicts of law.
Section 8.8 Specific Performance. The transactions contemplated by this
Agreement are unique and monetary damages would not be an adequate remedy for a
breach hereof. Accordingly, each of the parties acknowledges and agrees that, in
addition to all other remedies to which it may be entitled, each of the parties
hereto is entitled to a decree of specific performance, provided that such party
is not in material default hereunder.
Section 8.9 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
Section 8.10 Expenses. Parent and the Company, as the Company's expenses
are more fully set forth in Section 5.5, shall pay their own costs and expenses
associated with the transactions contemplated by this Agreement. The Company
shall pay EFC's costs and expenses incurred in connection with the Securities
Purchase Agreement.
Section 8.11 Incorporation of Disclosure Schedules. The Company Disclosure
Schedule and the Parent Disclosure Schedule are hereby incorporated herein and
made a part hereof for all purposes as if fully set forth herein.
Section 8.12 Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
Section 8.13 Subsidiaries. As used in this Agreement, the word
"subsidiary" when used with respect to any party means any corporation or other
organization, whether incorporated or unincorporated, of which such party
directly or indirectly owns or controls at least a majority of the securities or
other interests having, in each case, by their terms ordinary voting power to
elect a majority of the board of directors or others performing
35
<PAGE>
similar functions with respect to such corporation or other organization, or any
organization of which such party is a general partner.
Section 8.14 Persons. As used in this Agreement, the word "Person" means
any individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, institution, entity or
Governmental Authority.
Section 8.15 Arbitration.
(a) Binding Arbitration. On the request of any party hereto, whether
made before or after the institution of any legal proceeding, any Action,
dispute, claim or controversy of any kind now existing or hereafter arising
between any of the parties hereto in any way arising out of, pertaining to or in
connection with this Agreement (a "Dispute") shall be resolved by binding
arbitration in accordance with the terms hereof. Any party hereto may, by
summary proceedings, bring an Action in court to compel arbitration of any
Dispute.
(b) Governing Rules. Any arbitration shall be administered by the
American Arbitration Association (the "AAA") in accordance with the terms of
this Section 8.15, the Commercial Arbitration Rules of the AAA, and, to the
maximum extent applicable, the Federal Arbitration Act. Judgment on any award
rendered by an arbitrator may be entered in any court having jurisdiction.
(c) Arbitrators. Any arbitration shall be conducted before a three
person panel of neutral arbitrators. Such panel shall consist of one person from
each of the following categories: (i) an attorney who has practiced in the area
of commercial law for at least ten years or a retired judge at the Texas or
United States District Court or an appellate court level; (ii) a person with at
least ten years' experience in mergers and acquisitions; and (iii) a person with
at least ten years' experience in the petroleum industry (collectively, the
"Arbitrators". The AAA shall submit a list of persons meeting the criteria
outlined above for each category of arbitrator, and the parties shall select one
person from each category in the manner established by the AAA. If the parties
cannot agree on an arbitrator within 30 days after the request for an
arbitration, then any party may request the AAA to select an arbitrator. The
Arbitrators may engage engineers, accountants or other consultants that the
arbitrator deems necessary to render a conclusion in the arbitration proceeding.
(d) Conduct of Arbitration. To the maximum extent practicable, an
arbitration proceeding hereunder shall be concluded within 180 days of the
filing of the Dispute with the AAA. Arbitration proceedings shall be conducted
in Houston, Texas. Arbitrators shall be empowered to impose sanctions and to
take such other actions as the arbitrators deem necessary to the same extent a
judge could impose sanctions or take such other actions pursuant to the Federal
Rules of Civil Procedure and applicable law. At the conclusion of any
arbitration proceeding, the Arbitrators shall make specific written findings
36
<PAGE>
of fact and conclusions of law. The Arbitrators shall have the power to award
recovery of all costs and fees to the prevailing party. The parties hereto each
agrees to keep all Disputes and arbitration proceedings strictly confidential
except for disclosure of information required by Applicable Law or the rules of
the NYSE. It is expressly agreed that the Arbitrators shall have no authority to
award treble, exemplary or punitive damages of any type under any circumstances
regardless of whether such damages may be available under Delaware law, the
parties hereby waiving their right, if any, to recover treble, exemplary or
punitive damages in connection with any Dispute.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
37
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have signed this
Agreement as of the date first written above.
DOMAIN ENERGY CORPORATION
By:
-----------------------------------
Michael V. Ronca
President and CEO
DOMAIN GULF ACQUISITION CORP.
By:
-----------------------------------
Michael V. Ronca
President and CEO
GULFSTAR ENERGY, INC.
By:
-----------------------------------
Michael L. Harvey
President
38
EXHIBIT 2.2
SECURITIES PURCHASE AGREEMENT
BETWEEN
ENRON FINANCE CORP.
AND
DOMAIN ENERGY CORPORATION
November 21, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. PURCHASE AND SALE OF THE GULFSTAR
HOLDINGS..................................... 2
1.1 Purchase and Sale of the Gulfstar Holdings......... 2
1.2 Consideration...................................... 2
1.3 Alternate Consideration............................ 2
ARTICLE II. CLOSING...................................... 2
2.1 Closing............................................ 2
ARTICLE III. REPRESENTATIONS AND WARRANTIES............... 3
3.1 Representations and Warranties of EFC.............. 3
(a) Ownership of Gulfstar Holdings............... 3
(b) Organization and Standing.................... 4
(c) Corporate Power and Authority................ 4
(d) Conflicts; Consents and Approvals............ 4
(e) Brokers...................................... 5
(f) No Litigation................................ 5
(g) Disclosure of Agreements..................... 5
(h) Certain RIMCO Agreement Conditions........... 6
(i) Investment Intent............................ 6
(j) Disclosure of Information.................... 6
(k) Investment Experience........................ 6
(l) Restricted Securities........................ 7
(m) Legends...................................... 7
(n) Disclosure................................... 7
(o) Certain Defined Terms........................ 7
3.2 Representations and Warranties of Domain........... 7
(a) Organization and Standing.................... 7
(b) Capitalization of Domain........................
(c) Corporate Power and Authority................ 9
(d) Conflicts; Consents and Approvals............ 9
(e) Domain Shares................................ 10
(f) Investment Purpose........................... 10
(g) Brokers...................................... 10
(h) Litigation................................... 11
(i) Financial Statements......................... 11
(j) Liabilities.................................. 11
(k) No Default................................... 12
(l) Disclosure................................... 12
(m) Domain SEC Documents......................... 12
ARTICLE IV. ADDITIONAL AGREEMENTS, COVENANTS AND
REPRESENTATIONS.............................. 13
4.1 Reasonable Business Efforts........................ 13
4.2 Confidentiality.................................... 13
4.3 Certain Prohibited Actions......................... 14
i
<PAGE>
4.4 Mutual Representation.............................. 14
4.5 Further Assurances................................. 15
4.6 Registration Rights Agreement...................... 15
4.7 Voting Matters..................................... 15
4.8 Domain Shares....................................... 16
ARTICLE V. INDEMNIFICATION.............................. 17
5.1 Indemnification by Domain.......................... 17
5.2 Indemnification by EFC............................. 17
5.3 Defense of Third Party Claims...................... 17
5.4 Survival of Representations and Warranties......... 18
ARTICLE VI. CONDITIONS TO CLOSING........................ 18
6.1 Conditions to the Obligation of Domain............. 18
6.2 Conditions to the Obligation of EFC................ 20
ARTICLE VII. TERMINATION.................................. 21
7.1 Events of Termination.............................. 21
7.2 Effect of Termination.............................. 22
ARTICLE VIII. MISCELLANEOUS................................ 22
8.1 Waiver and Amendment............................... 22
8.2 Assignment......................................... 23
8.3 Notices............................................ 23
8.4 Governing Law...................................... 24
8.5 Severability....................................... 24
8.6 Counterparts....................................... 24
8.7 Headings........................................... 24
8.8 Entire Agreement; Third Party Beneficiaries........ 24
8.9 Arbitration........................................ 25
(a) Binding Arbitration.......................... 25
(b) Governing Rules.............................. 25
(c) Arbitrators.................................. 25
(d) Conduct of Arbitration....................... 26
ii
<PAGE>
EFC DISCLOSURE SCHEDULES
3.1(a) Ownership of Gulfstar Holdings
3.1(g) EFC/Gulfstar Agreements
DOMAIN DISCLOSURE SCHEDULES
3.2(b) Capitalization
3.2(g) Domain Brokers
3.2(h) Litigation
EXHIBITS
Exhibit A Form of Assignment and Assumption Agreement
Exhibit B Form of Assignment of Liens and Security Interests
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Letter Agreement between the Company and Fairfield Industries
Incorporated
Exhibit E Form of Letter Agreement between Domain and Cheyenne Petroleum Company
iii
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INDEX OF DEFINED TERMS
AAA............................................................ 8.9(b)
affiliate...................................................... 3.1(a)
Agreement...................................................... Recitals
Arbitrators.................................................... 8.9(c)
Cash Consideration............................................. 1.2
Closing........................................................ 2.1
Closing Date................................................... 2.1
Commission..................................................... 3.1(i)
Common Stock................................................... Recitals
Company........................................................ Recitals
Completion Cost Notes.......................................... Recitals
controls....................................................... 3.1(a)
Dispute........................................................ 8.9(a)
Domain......................................................... Recitals
Domain Assets.................................................. 3.2(i)
Domain Audited Financials...................................... 3.2(i)
Domain Common Stock............................................ 1.2
Domain Disclosure Schedules.................................... 3.2(b)
Domain Financial Statements.................................... 3.2(i)
Domain Preferred Stock......................................... 3.2(b)
Domain SEC Documents........................................... 3.2(m)
Domain Shares.................................................. 1.3
Domain Sub..................................................... Recitals
Domain's Related Persons....................................... 5.2
ECT............................................................ 3.2(b)
EFC............................................................ Recitals
EFC Disclosure Schedules....................................... 3.1(a)
EFC's Related Persons.......................................... 5.1
Exchange Act................................................... 3.2(m)
GAAP........................................................... 3.2(i)
General Obligation Notes....................................... Recitals
Governmental Authority......................................... 3.1(d)(iv)
IPO Prospectus................................................. 3.1(j)
Liens.......................................................... 3.1(a)
Main Domain Shares............................................. 1.2
Merger......................................................... 4.7(a)
Merger Agreement............................................... Recitals
NYSE........................................................... 4.8
Other Rights................................................... Recitals
Override Notes................................................. Recitals
Plan........................................................... Recitals
Preferred Stock................................................ Recitals
Registration Rights Agreement.................................. 4.6
Registration Statement......................................... 3.2(m)
RIMCO Agreement................................................ 3.1(h)
Securities Act................................................. 3.1(i)
Special Meeting................................................ 4.7(a)
Stock Purchase Agreement....................................... 3.2(b)
iv
<PAGE>
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement ("this Agreement") is made and
entered into as of November 21, 1997, by and between Enron Finance Corp., a
Delaware corporation ("EFC"), and Domain Energy Corporation, a Delaware
corporation ("Domain").
WHEREAS, EFC holds, in the aggregate, (i) 279,008 shares of Series A
Common Stock and 22,244 shares of Series B Common Stock (together, the "Common
Stock"), of Gulfstar Energy, Inc. (the "Company"), (ii) 55,796 shares of the
Company's 12-1/2% Cumulative Preferred Stock, Series 1 (the "Preferred Stock"),
(iii) those three certain Secured Limited Recourse Notes made by the Company and
dated November 14, 1996, in the respective face amounts of $1,520,000,
$2,470,000 and $1,010,000 (collectively, the "Completion Cost Notes"), (iv)
those three certain promissory notes made by the Company and dated May 30, 1995,
in the respective face amounts of $135,850, $83,600, and $55,550 (the "Override
Notes"), (v) those three certain notes made by the Company and dated May 30,
1995, in the respective face amounts of $1,782,960, $2,897,310 and $1,184,730
(the "General Obligation Notes"), and (vi) certain other rights and interests to
be conveyed to Domain pursuant to the Assignment and Assumption Agreement
attached hereto as Exhibit A and the Assignment of Liens and Security Interests
attached hereto as Exhibit B (collectively, the "Other Rights"); the Completion
Cost Notes, the Override Notes and the General Obligation Notes are hereinafter
referred to collectively as the "Notes", and the Notes, the Common Stock, the
Preferred Stock and the Other Rights are hereinafter referred to collectively as
the "Gulfstar Holdings";
WHEREAS, in accordance with a plan arranged by Domain, EFC and the
Company (the "Plan"), Domain will purchase, and EFC will sell, the Gulfstar
Holdings pursuant to the terms of this Agreement and, immediately thereafter, a
wholly-owned subsidiary of Domain will be merged with and into the Company
pursuant to that certain Agreement and Plan of Merger dated November 21, 1997
(the "Merger Agreement"), by and among Domain, the Company and Domain Gulf
Acquisition Corp., a Delaware corporation ("Domain Sub").
WHEREAS, the intent of Domain, EFC and the Company in adopting the
Plan was to allow Domain to acquire (directly or indirectly) all of the
outstanding equity interests in the Company in a taxable transaction;
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WHEREAS, the parties hereto desire to set forth certain
representations and warranties made by each to the other as an inducement to the
consummation of the purchase and sale of the Gulfstar Holdings.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations and warranties contained herein and for other consideration as
set forth below, the parties hereto hereby agree as follows:
ARTICLE I.
PURCHASE AND SALE OF THE GULFSTAR HOLDINGS
1.1 Purchase and Sale of the Gulfstar Holdings. Pursuant to the
terms of this Agreement, on the Closing Date (as hereinafter defined), Domain
will purchase from EFC, and EFC will sell, transfer and assign to Domain, the
Gulfstar Holdings.
1.2 Consideration. On the terms and subject to the conditions of
this Agreement, on the Closing Date, Domain will purchase the Gulfstar Holdings
for (i) $7,900,000 in cash, payable in immediately available funds to an account
or accounts designated by EFC (the "Cash Consideration") and (ii) 263,158 shares
(the "Main Domain Shares") of the common stock, $.01 par value per share, of
Domain ("Domain Common Stock").
1.3 Alternate Consideration. By written notice to Domain given not
later than three (3) business days prior to the Closing Date, EFC may elect to
alter the composition of the Cash Consideration by causing Domain to purchase
the Gulfstar Holdings for (i) $7,400,000 in cash, payable in immediately
available funds to an account or accounts designated by EFC and (ii) a number of
shares of the Domain Common Stock equal to the quotient of (x) $500,000 divided
by (y) the last sale price of Domain Common Stock as reported on the New York
Stock Exchange Composite Tape on the third business day immediately preceding
the Closing Date, rounded up or down to the nearest whole share (the "Alternate
Domain Shares" and, together with the Main Domain Shares, the "Domain Shares").
ARTICLE II.
CLOSING
2.1 Closing. Subject to the satisfaction or waiver of the conditions
to closing set forth in Article VI,
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<PAGE>
the closing ("Closing") of the acquisition of the Gulfstar Holdings contemplated
hereby shall be held at the offices of Weil, Gotshal & Manges LLP, 700
Louisiana, Suite 1600, Houston, Texas, on December 10, 1997, or such other
place, date and time as may be mutually agreed upon by the parties hereto (the
"Closing Date").
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of EFC. EFC hereby represents and
warrants as of the date hereof and as of the Closing Date to Domain that:
(a) Ownership of Gulfstar Holdings. EFC owns beneficially the
Gulfstar Holdings. Except as set forth on Schedule 3.1(a) to the disclosure
schedules delivered by EFC to Domain pursuant to this Agreement (collectively,
the "EFC Disclosure Schedules"), neither EFC nor any affiliate of EFC, directly
or indirectly, of record or beneficially, owns or has any right or obligation to
acquire, or has any proxy or power of attorney or other right or power to vote
or otherwise control, any securities or obligations, whether debt or equity, of
the Company. Except as set forth on Schedule 3.1(a) to the EFC Disclosure
Schedules, EFC has full lawful right, power, authority and capacity to sell,
transfer, assign and convey to Domain the Gulfstar Holdings, free and clear of
all liens, claims, charges, pledges, security interests, rights, encumbrances,
rights of first refusal or other restrictions of any kind or nature (including
any restriction on the right to vote, sell or otherwise dispose of the Gulfstar
Holdings but excluding all liens being assigned or transferred to Domain
pursuant to Exhibits A and B) (collectively, "Liens"). On the Closing Date,
Domain will acquire good and marketable title to the Gulfstar Holdings, free and
clear of all Liens. For purposes of this Agreement "affiliate" means, with
respect to any person, any person that directly or indirectly through one or
more intermediaries, controls, or is controlled by, or is in common control with
such person. For purposes of this Agreement "controls" (including the terms
"controlled by" and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of a person whether through the ownership of voting stock or any
equity interest, by contract or otherwise; and "person" means any individual,
partnership, joint venture, corporation, limited liability company, trust,
3
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unincorporated organization, government or other department or agency thereof or
other entity.
(b) Organization and Standing. EFC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with full power and authority to own, lease, use and operate its
properties and to conduct its business as and where now owned, leased, used,
operated and conducted. EFC is duly qualified to do business and in good
standing in each jurisdiction in which the nature of the business conducted by
it or the property it owns, leases or operates makes such qualification
necessary, except where the failure to be so qualified or in good standing in
such jurisdiction would not have a material adverse effect on EFC.
(c) Corporate Power and Authority. EFC has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by EFC and the consummation by EFC of the transactions contemplated hereby have
been duly and validly approved by the Board of Directors of EFC and no other
corporate proceedings on the part of EFC are necessary to approve this Agreement
and to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by EFC and constitutes a valid and
binding obligation of EFC, enforceable against EFC in accordance with its terms.
(d) Conflicts; Consents and Approvals. Neither the execution
and delivery of this Agreement by EFC, nor the consummation of the transactions
contemplated hereby will:
(i) conflict with, or violate any provision of the Certificate
of Incorporation or By-laws (or any similar organizational document) of
EFC;
(ii) conflict with, violate or result in a breach of any
provision of, or constitute a default (or an event which, with the giving of
notice, the passage of time or otherwise, would constitute a default) under, or
entitle any party (with the giving of notice, the passage of time or otherwise)
to terminate, accelerate, modify or call a default under, or result in the
termination, acceleration or cancellation of, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of EFC under, any of the terms, conditions or provisions of any note,
bond, mortgage,
4
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indenture, deed of trust, license, contract, undertaking, agreement, lease or
other instrument or obligation to which EFC is a party or by which any of its
properties or assets may be bound;
(iii) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to EFC or any of its properties or assets; or
(iv) require any action or consent or approval of, or review
by, or registration or filing by EFC with any third party or any United States
federal, state or local or any foreign government, governmental, administrative
or regulatory authority, agency or commission or any court, tribunal or judicial
or arbitral body (each, a "Governmental Authority") other than any actions
required under federal and state securities laws as are contemplated by this
Agreement;
except in the case of clauses (ii), (iii) and (iv) above, for any of the
foregoing that would neither, in the aggregate, have a material adverse effect
on EFC nor prevent or delay the consummation of the transactions contemplated
hereby.
(e) Brokers. Neither EFC, nor any of its affiliates, nor any
of its or their respective directors, officers, stockholders or employees, on
behalf of EFC or its board of directors, has employed any financial advisor,
broker or finder or incurred any liability for any financial advisory, brokerage
or finders' fees or commissions in connection with the transactions contemplated
hereby. EFC is not aware of any claim against EFC for payment of any finder's
fees, brokerage or agent's commissions or other like payments in connection with
the negotiation of this Agreement or in connection with the transactions
contemplated hereby.
(f) No Litigation. There are no claims, actions, suits,
investigations or proceedings pending or, to the knowledge of EFC threatened,
that challenges the validity or legality of this Agreement or the transactions
contemplated hereby.
(g) Disclosure of Agreements. Schedule 3.1(g) to the EFC
Disclosure Schedules is a complete and accurate listing of all documents and
agreements (i) between EFC or any of its subsidiaries, directors or officers, on
the one hand, and the Company or any of its subsidiaries, directors (other than
employment agreements or indemnity
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agreements between such directors and EFC) or officers, on the other hand, or
(ii) to which any of the Company's properties are subject and to which EFC is a
party.
(h) Certain RIMCO Agreement Conditions. In connection with the
consummation of the transactions contemplated by the Securities Purchase
Agreement dated May 15, 1997 among EFC and RIMCO Partners, L.P., et al. (the
"RIMCO Agreement"), all of the conditions precedent to the obligations of EFC
set forth in Sections and of the RIMCO Agreement and all of the conditions
precedent to the obligations of RIMCO Partners, L.P., et al. set forth in
Sections and of the RIMCO Agreement were satisfied completely and in full in
accordance with their terms, and none of such conditions was waived or
unsatisfied, in whole or in part.
(i) Investment Intent. EFC is an accredited investor as
defined under the Securities Act of 1933, as amended (the "Securities Act"), and
will acquire the Domain Shares for its own account to hold and maintain for
investment and not with a view to, or for sale or other disposition in
connection with, any distribution of all or any part of such shares, except for
a sale thereof (i) in an offering covered by a registration statement filed with
the Securities and Exchange Commission (the "Commission") under the Securities
Act, covering such shares or (ii) pursuant to an applicable exemption under the
Securities Act.
(j) Disclosure of Information. EFC has received all the
information it considers necessary or appropriate for deciding whether to accept
the Domain Shares pursuant to this Agreement. EFC hereby acknowledges that it
has been furnished with (i) Domain's Prospectus dated June 23, 1997 relating to
Domain's initial public offering of 6,000,000 shares of its Common Stock (the
"IPO Prospectus") and (ii) Domain's Form 10-Q for the quarters ended June 30,
1997 and September 30, 1997. EFC further represents that it has had an
opportunity to ask questions of and receive answers from Domain regarding Domain
and its operations and plan of business and the terms and conditions of the
issuance of the Domain Shares.
(k) Investment Experience. EFC acknowledges that it is able to
fend for itself, can bear the economic risk of its investment in the Domain
Shares and has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of the investment in the
Domain Shares. EFC represents it has not been organized for the purpose of
acquiring such shares.
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(l) Restricted Securities. EFC understands that the Domain
Shares will not have been registered pursuant to the Securities Act or any
applicable state securities or Blue Sky law, that such securities will be
characterized as "restricted securities" under the federal securities laws and
that under such laws and applicable regulations such securities cannot be sold
or otherwise disposed of without registration under the Securities Act or an
exemption therefrom. In this connection, EFC represents that it is familiar with
Rule 144, as currently in effect, and understands the resale limitations imposed
thereby and by the Securities Act. Stop transfer instructions may be issued to
the transfer agent for the Domain Shares or a notation may be made in the
appropriate records of Domain in connection with the Domain Shares.
(m) Legends. It is agreed and understood that the certificate
representing the Domain Shares shall conspicuously set forth on the face or back
thereof a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED UNLESS SUCH SHARES ARE FIRST REGISTERED UNDER
THAT ACT OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
(n) Disclosure. EFC has fully provided Domain with all the
information that Domain has specifically requested from EFC in writing for
deciding whether to purchase the Gulfstar Holdings pursuant to this Agreement.
All such written information has been prepared by EFC in good faith, and to
EFC's knowledge such information does not contain any untrue statement of a
material fact or omit to state therein a material fact necessary to make the
statements made therein not misleading.
(o) Certain Defined Terms. For purposes of the representations
and warranties of EFC set out in Section , the Company and each subsidiary of
the Company shall be deemed not to be affiliates or subsidiaries of EFC.
3.2 Representations and Warranties of Domain. Domain hereby
represents and warrants as of the date hereof and as of the Closing Date to EFC
that:
(a) Organization and Standing. Domain is a corporation duly
organized, validly existing and in good
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standing under the laws of the State of Delaware with full power and authority
to own, lease, use and operate its properties and to conduct its business as and
where now owned, leased, used, operated and conducted. Domain is duly qualified
to do business and in good standing in each jurisdiction in which the nature of
the business conducted by it or the property it owns, leases or operates makes
such qualification necessary, except where the failure to be so qualified or in
good standing in such jurisdiction would not have a material adverse effect on
Domain. The copies of the Certificate of Incorporation and By-laws of Domain
which have previously been made available to EFC are true, complete and correct
copies of such documents as in effect as of the date of this Agreement.
(b) Capitalization of Domain. Domain's authorized capital
stock consists solely of (a) 25,000,000 shares of common stock, $.01 par value
per share, and (b) 5,000,000 shares of preferred stock, $.01 par value per share
("Domain Preferred Stock"). As of November 4, 1997, (i) 14,610,121 shares of
Domain Common Stock were issued of which 14,607,729 were outstanding and 2,392
were held by Domain as treasury shares, (ii) 862,547 shares of Domain Common
Stock were issuable upon the exercise or conversion of options, warrants or
convertible securities granted or issuable by Parent and (iii) no shares of
Domain Preferred Stock were issued and outstanding. Since September 30, 1997,
with the exception of the Domain Common Stock issued to EFC pursuant hereto and
to Enron Capital & Trade Resources Corp. ("ECT") pursuant to the Stock Purchase
Agreement dated November 21, 1997 (the "Stock Purchase Agreement"), by and
between Domain and ECT, Domain has not issued any shares of its capital stock
except upon the exercise of such options, warrants or convertible securities.
Each outstanding share of capital stock of Domain is, and all shares of Domain
Common Stock to be issued pursuant hereto will be when issued in accordance with
the terms hereof, duly authorized and validly issued, fully paid and
nonassessable and free of any preemptive rights. As of the date hereof, other
than as set forth above or on Schedule 3.2(b) to the disclosure schedules
delivered by Domain to EFC pursuant to this Agreement (collectively, the "Domain
Disclosure Schedules"), there are no outstanding shares of capital stock or
subscriptions, options, warrants, puts, calls, agreements, understandings,
claims or other commitments or rights of any type relating to the issuance, sale
or transfer by Domain of any securities of Domain, nor are there outstanding any
securities which are convertible into or exchangeable for any shares of capital
stock of Domain; and Domain has no
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obligation of any kind to issue any additional securities, other than the Domain
Common Stock to be issued to EFC pursuant hereto and to ECT pursuant to the
Stock Purchase Agreement or to pay for securities of Domain or any predecessor.
Domain has no outstanding bonds, debentures, notes or other similar obligations
the holders of which have the right to vote generally with holders of Domain
Common Stock.
(c) Corporate Power and Authority. Domain has full corporate
power and authority to execute and deliver this Agreement and the Registration
Rights Agreement and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Registration
Rights Agreement by Domain and the consummation by Domain of the transactions
contemplated hereby and thereby have been duly and validly approved by the Board
of Directors of Domain and no other corporate proceedings on the part of Domain
are necessary to approve this Agreement and the Registration Rights Agreement,
and to consummate the transactions contemplated hereby or thereby. This
Agreement has been, and upon execution and delivery the Registration Rights
Agreement will have been, duly and validly executed and delivered by Domain and
constitute (and in the case of the Registration Rights Agreement will upon such
delivery constitute) the valid and binding obligations of Domain, enforceable
against Domain in accordance with their terms.
(d) Conflicts; Consents and Approvals. Neither the execution
and delivery of this Agreement or the Registration Rights Agreement by Domain,
nor the consummation of the transactions contemplated hereby or
thereby will:
(i) conflict with, or violate any provision of the Certificate
of Incorporation or By-laws of Domain or any subsidiary of Domain;
(ii) conflict with, violate or result in a breach of any
provision of, or constitute a default (or an event which, with the giving
of notice, the passage of time or otherwise, would constitute a default)
under, or entitle any party (with the giving of notice, the passage of
time or otherwise) to terminate, accelerate, modify or call a default
under, or result in the termination, acceleration or cancellation of, or
result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Domain or any
subsidiary of Domain under, any
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of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, contract, undertaking, agreement, lease
or other instrument or obligation to which Domain or any subsidiary of
Domain is a party or by which any of their respective properties or assets
may be bound;
(iii) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Domain or any subsidiary of Domain or any
of their respective properties or assets; or
(iv) require any action or consent or approval of, or review
by, or registration or filing by Domain with any third party or any
Governmental Authority, other than any actions required under federal and
state securities laws as are contemplated by this Agreement;
except in the case of clauses (ii), (iii) and (iv) above, for any of the
foregoing that would neither, in the aggregate, have a material adverse effect
on Domain nor prevent or delay the consummation of the transactions contemplated
hereby.
(e) Domain Shares. The Domain Shares to be issued to EFC
pursuant to Section 1.2 and, if elected by EFC, Section have been duly
authorized for such issuance pursuant to this Agreement and, when issued and
delivered by Domain upon EFC's transfer of the Gulfstar Holdings to Domain in
accordance with this Agreement, will be validly issued, fully paid and
nonassessable. The issuance of the Domain Shares under this Agreement is not
subject to any preemptive rights.
(f) Investment Purpose. Domain is an accredited investor as
defined under the Securities Act, and will acquire the Gulfstar Holdings for its
own account to hold and maintain for investment and not with a view to, or for
sale or other disposition in connection with, any distribution of all or any
part of the Gulfstar Holdings, except for a sale thereof (i) in an offering
covered by a registration statement filed with the Commission under the
Securities Act covering the Gulfstar Holdings or (ii) pursuant to an applicable
exemption under the Securities Act.
(g) Brokers. Except as disclosed on Schedule 3.2(g) to the
Domain Disclosure Schedules, neither Domain nor any of its directors, officers,
stockholders or
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employees, on behalf of Domain or its board of directors, has employed any
financial advisor, broker or finder or incurred any liability for any financial
advisory, brokerage or finders' fees or commissions in connection with the
transactions contemplated hereby. Domain is not aware of any claim against
Domain for payment of any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiation of this Agreement or in
connection with the transactions contemplated hereby.
(h) Litigation. Except as disclosed on Schedule 3.2(h) to the
Domain Disclosure Schedules, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of Domain threatened, against Domain
before any Governmental Authority which, individually or in the aggregate, would
have a material adverse effect on Domain or a material adverse effect on the
ability of Domain to consummate the transactions contemplated by this Agreement.
Except as disclosed on Schedule 3.2(h) to the Domain Disclosure Schedules,
Domain is not subject to any outstanding order, writ, injunction or decree
which, individually or in the aggregate, would have a material adverse effect on
Domain or a material adverse effect on the ability of Domain to consummate the
transactions contemplated hereby.
(i) Financial Statements. Domain has delivered to EFC the
audited financial statements of Domain and its predecessor as of and for the
respective years ended December 31, 1996, December 31, 1995 and December 31,
1994 (the "Domain Audited Financials") and Domain's unaudited financial
statements consisting of a balance sheet as of the end of the respective interim
periods ended March 31, 1997, June 30, 1997 and September 30, 1997 and the
related statements of income, retained earnings and cash flows for the periods
then ended (the "Domain Interim Financials" and, together with the Domain
Audited Financials, the "Domain Financial Statements"). The Domain Financial
Statements fairly present in conformity with generally accepted accounting
principles consistently applied ("GAAP") the financial position and assets
(collectively, the "Domain Assets") and liabilities of Domain as of the dates
thereof and Domain's results of operations and cash flows for the periods then
ended (subject, in the case of any of the Domain Interim Financials, to the
absence of notes and to normal, recurring year-end adjustments). The balance
sheet as of September 30, 1997, included as a part of the Domain Interim
Financials is referred to herein as the "Domain Interim Balance Sheet", and the
date thereof is referred to herein as the "Domain Interim Balance Sheet Date".
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(j) Liabilities. Domain has no Liabilities, and no material
Domain Assets are subject to any Liabilities, except (a) to the extent
specifically disclosed on or provided for in the Domain Interim Balance Sheet;
(b) Liabilities incurred since the Domain Interim Balance Sheet Date in the
ordinary course of its business; (c) Liabilities that were not required under
GAAP to have been specifically disclosed or reserved for on the Domain Interim
Balance Sheet; and (d) Liabilities under or contemplated by this Agreement or
disclosed hereunder. All Liabilities required under GAAP to be specifically
disclosed or reserved for on the Domain Interim Balance Sheet are disclosed or
reserved for thereon. For purposes of this Section , "Liability" means any
direct liability, indebtedness, obligation, expense, claim, loss, damage,
deficiency, guaranty or endorsement of or by any Person, absolute or contingent,
accrued or unaccrued, due or to become due, liquidated or unliquidated.
(k) No Default. Domain is not in default, and no notice of
alleged default has been received by Domain, under any material contract or
agreement to which Domain is a party, no other party to any such contract or
agreement is in default to the knowledge of Domain, and there exists no
condition or event that, after notice or lapse of time or both, would constitute
a default by Domain under any such contract or agreement, in each case which
default would have a material adverse effect on the business, properties or
financial condition of Domain and its subsidiaries, taken as a whole.
(l) Disclosure. Domain has fully provided EFC with all the
information that EFC has specifically requested from Domain in writing for
deciding whether to accept the Domain Shares pursuant to this Agreement. All
such written information has been prepared in good faith by Domain and does not
contain any untrue statement of a material fact or omit to state therein a
material fact (other than those facts EFC recognizes to be industry risks
normally associated with the oil and gas exploration and production business)
necessary to make the statements made therein not misleading.
(m) Domain SEC Documents. Each of Domain and its material
subsidiaries has timely filed with the Commission all forms, reports, schedules,
statements, exhibits and other documents required to be filed by it since June
23, 1997 under the Securities Exchange Act of 1934, as amended (together with
the rules and regulations thereunder, the "Exchange Act") or the Securities Act
(such
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documents, as supplemented and amended since the time of filing, together with
Domain's Registration Statement on Form S-1 under the Securities Act, No.
333-24641 (the "Registration Statement"), collectively, the "Domain SEC
Documents"). The Domain SEC Documents, including, without limitation, any
financial statements or schedules included therein, at the time filed (and, in
the case of the Registration Statement, on the date of effectiveness thereof)
(a) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be. The
financial statements (including the related notes) of Domain included in the
Domain SEC Documents were prepared in accordance with GAAP during the periods
involved (except as may be indicated in the notes thereto), and fairly present
(subject in the case of unaudited statements to the absence of notes and to
normal, recurring and year-end audit adjustments) the consolidated financial
position of Domain as of the dates thereof and the consolidated results of its
operations and cash flows for the periods then ended.
ARTICLE IV.
ADDITIONAL AGREEMENTS, COVENANTS AND REPRESENTATIONS
4.1 Reasonable Business Efforts. EFC and Domain shall use their
reasonable business efforts to (i) obtain all approvals and consents required by
or necessary for the transactions contemplated by this Agreement and (ii) ensure
that all of the conditions to the respective obligations of EFC and Domain
contained in Article VI are satisfied timely.
4.2 Confidentiality. After the Closing Date, EFC shall not, directly
or indirectly, use or provide to, and shall not permit any affiliate, directly
or indirectly, to use or provide to any other person, other than Domain and its
affiliates any information concerning the business or operations (financial or
other) of the Company or the terms of the transactions contemplated hereby,
except as on the advice of counsel is required in governmental filings or
judicial, administrative or arbitration proceedings; provided, that EFC shall be
permitted to provide such information (i) to any of its affiliates (it being
understood and agreed that EFC will be responsible for compliance by EFC's
affiliates with the terms of this Section 4.2) and (ii) so long as such
information is not (A)
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proprietary or technical (including without limitation geological, geophysical
or seismic data or interpretations, maps, graphs and similar data), (B)
information concerning oil and gas reserve quantities, reserve reports,
projections, economic analyses or drilling and/or acquisition opportunities or
(C) customarily confidential to customers of EFC or its affiliates, to
companies, partnerships or other business entities with whom EFC or an affiliate
(excluding Enron Oil & Gas Company) is proposing to engage in a financing
transaction in which EFC believes in good faith that disclosure of information
about the Company permitted to be disclosed hereunder is necessary to further a
legitimate business interest of EFC in connection with such proposed financing;
and provided, further, that the foregoing covenant shall not be applicable to
any information of the Company that is public (other than as a consequence of
disclosure by EFC or any affiliate of EFC in violation of the terms of this
Section 4.2).
4.3 Certain Prohibited Actions. From the execution hereof through
the Closing, unless this Agreement is earlier terminated and except as otherwise
provided herein, EFC shall not:
(a) offer to sell, sell, pledge or otherwise dispose of or
transfer any interest in or encumber with any Lien any of the Gulfstar Holdings;
(b) acquire any securities or debt obligations of the Company;
(c) deposit any of the Common Stock or the Preferred Stock
into a voting trust, enter into a voting agreement or arrangement with respect
to any of the Common Stock or the Preferred Stock (except as provided for in
this Agreement) or grant any proxy or power of attorney with respect to any of
the Gulfstar Holdings other than pursuant to this Agreement; or
(d) enter into any contract, option or other arrangement or
undertaking with respect to the direct or indirect acquisition or sale,
assignment or other disposition of or transfer of any interest in or the voting
of any securities or obligations of the Company.
4.4 Mutual Representation. Domain has had access to all books and
records of the Company which it has deemed desirable or appropriate to examine;
EFC has had access to all books and records of Domain which it has deemed
desirable or appropriate to examine; and they have each made
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all additional inquiries and investigations of the Company and Domain,
respectively, which each has deemed desirable or appropriate for purposes of the
transactions contemplated by this Agreement. Except for the representations and
warranties of Domain set forth in Section 3.2 of this Agreement and of EFC set
forth in Section 3.1 of this Agreement and in Exhibits A and B hereto, neither
Domain nor EFC is making, in this Agreement or otherwise, any representations or
warranties to the other.
4.5 Further Assurances. From time to time after the Closing, EFC
will execute and deliver, or cause to be executed and delivered, without further
consideration, such other instruments of conveyance, assignment, transfer and
delivery and will take such other actions as Domain may reasonably request in
order to more effectively transfer, convey, assign and deliver to Domain, and to
place Domain in possession and control of, the Gulfstar Holdings and to enable
Domain to exercise and enjoy all rights and benefits of EFC with respect
thereto.
4.6 Registration Rights Agreement. Domain and EFC hereby agree to
enter into a registration rights agreement, in substantially the form set forth
as Exhibit C hereto (the "Registration Rights Agreement"), at (and subject to
the occurrence of) the Closing pursuant to which Domain will agree to register
under the Securities Act the Domain Shares upon the terms and subject to the
conditions contained in the Registration Rights Agreement.
4.7 Voting Matters.
(a) EFC hereby agrees that in connection with the solicitation
of any written consent of any holders of shares of capital stock of the Company
or at any special meeting of stockholders of the Company (the "Special Meeting")
called to consider and vote upon the Merger Agreement, any adjournment thereof
or any other meeting of the holders of shares of capital stock of the Company,
however called, EFC shall vote, and cause to be voted, all shares of Common
Stock and Preferred Stock (i) in favor of the Merger Agreement and the
transactions contemplated thereby (the "Merger"), and any actions required in
furtherance thereof or (ii) against any other action which is intended, or could
reasonably be expected, to impede, interfere with, delay, postpone, or
materially adversely affect the Merger Agreement and/or the Merger contemplated
thereby. In furtherance thereof, EFC hereby irrevocably appoints Domain Sub, its
officers, agents and nominees, with full power of substitution, as proxy, being
an appointment
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coupled with an interest, to vote the Common Stock and the Preferred Stock for
and in the name, place and stead of EFC at the Special Meeting or at any
adjournment thereof or any other meeting of the holders of shares of capital
stock of the Company, however called, or pursuant to any consent in lieu of a
meeting, or otherwise, in favor of the Merger Agreement and the Merger. This
proxy shall be irrevocable, it being coupled with an interest sufficient in law
to support an irrevocable proxy. Except as expressly provided in this Agreement,
the Common Stock and the Preferred Stock shall be voted by and in the manner
determined by EFC in its sole and absolute discretion. EFC shall not enter into
any agreement or understanding with any person the effect of which would be
inconsistent or violative of the provisions and agreements contained in this
Section 4.7.
(b) The proxy granted pursuant to Section 4.7 above shall
expire upon the earliest to occur of (i) the Closing and (ii) the termination of
the Merger Agreement.
(c) EFC hereby revokes any and all previous proxies given by
it with respect to the Common Stock.
(d) EFC hereby agrees to permit Domain (i) to publish and
disclose in the Information Memorandum/Consent Solicitation to be furnished to
holders of shares of capital stock of the Company or (ii) with the consent of
EFC, which such consent shall not be unreasonably withheld, to disclose in any
press release or other public announcement related to the Merger, the identity
of, and ownership of Common Stock and Preferred Stock by, EFC and the nature of
the commitments, arrangements and understandings of EFC under this Agreement,
unless such disclosure is (A) necessary to comply with applicable laws or New
York Stock Exchange requirements, in which case Domain shall provide the text of
such disclosure to EFC before the disclosure and permit EFC to comment on such
disclosure or (B) proposed to be made in response to comments by the Commission
regarding any filing by Domain with the Commission.
Section 4.8 Domain Shares.
Domain shall take all actions required, if any, to cause the Domain
Shares to be listed on the New York Stock Exchange (the "NYSE") and shall give
such notice as may be required to the NYSE with respect to the transactions
contemplated hereby.
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ARTICLE V.
INDEMNIFICATION
5.1 Indemnification by Domain. Domain agrees to indemnify, defend
and hold harmless, EFC and its directors, officers, employees, agents,
representatives and controlled and controlling persons (hereinafter,
collectively "EFC's Related Persons"), from and against all Claims asserted
against, relating to, imposed upon or incurred by EFC or EFC's Related Persons,
directly or indirectly, by reason of, arising out of, or resulting from (i) the
inaccuracy or breach of any covenant, representation or warranty of Domain
contained in this Agreement or (ii) the Agreement from EFC in favor of I.S.S.
Compression, Inc., which Agreement provides assurances from EFC with respect to
the Company's performance under, and was executed in connection with, the
Amendment to Lease Rental Agreements made and entered into as of September 1,
1997, between I.S.S. Compression, Inc. and the Company. As used in this Article
V, the term "Claim" shall include (x) all debts, liabilities and obligations;
(y) all losses, damages, costs and expenses (including, without limitation,
prejudgment interest in any litigated matter), penalties, court costs and
reasonable attorneys' fees and expenses; and (z) all demands, claims, actions,
costs of investigation, causes of action, proceedings, arbitrations, judgments,
settlements and assessments, whether or not ultimately determined to be valid,
with the exception of punitive or exemplary damages not sustained in an action
by a third party.
5.2 Indemnification by EFC. EFC hereby agrees to indemnify, defend
and hold harmless Domain, and its directors, officers, employees, agents,
representatives and controlled and controlling persons (hereinafter,
collectively "Domain's Related Persons"), from and against all Claims asserted
against, relating to, imposed upon or incurred by Domain or Domain's Related
Persons, directly or indirectly, by reason of, arising out of, or resulting from
the inaccuracy or breach of any covenant, representation or warranty of EFC
contained in this Agreement.
5.3 Defense of Third Party Claims. In the event any Claim is
asserted against any indemnified party by a third party, the indemnified party
shall with reasonable promptness notify the indemnifying party of such Claim.
Pursuant to its defense obligation provided in Section 5.1 or Section 5.2, the
indemnifying party shall employ counsel satisfactory to the indemnified party
and shall take such
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other steps as are reasonably necessary or appropriate to defend the indemnified
party against such Claim.
5.4 Survival of Representations and Warranties. All representations
and warranties contained in this Agreement shall survive the Closing hereunder
and shall remain in full force and effect through the date that is one year
after the Closing Date, except as to any matters with respect to which a bona
fide written Claim shall have been made or an action at law or in equity shall
have commenced before such date, in which event survival shall continue until
the final resolution of such Claim or action, including all applicable periods
for appeal.
ARTICLE VI.
CONDITIONS TO CLOSING
6.1 Conditions to the Obligation of Domain. The obligation of Domain
to proceed with the Closing contemplated hereby is subject to the satisfaction
on or prior to the Closing Date of all of the following conditions, any one or
more of which may be waived in writing, in whole or in part, by Domain:
(a) EFC shall have complied in all respects with each of its
covenants and agreements contained herein and each of its representations and
warranties contained in this Agreement shall have been true and correct as of
the date hereof and shall be deemed to have been made again at and as of the
Closing Date and shall then be true and correct in all respects.
(b) Domain shall have received a certificate, dated as of the
Closing Date, of an executive officer of EFC certifying as to the matters
specified in Section hereof.
(c) Domain shall have received from Bracewell & Patterson,
L.L.P., counsel to EFC, an opinion dated the Closing Date in form reasonably
acceptable to Domain and its counsel.
(d) EFC shall have delivered resignations, effective as of the
Closing Date, of each of its representatives on the board of directors of the
Company.
(e) As of the Closing, there shall not be any pending or
threatened litigation or proceeding to restrain or prohibit or otherwise
materially interfere with
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the consummation of the transactions contemplated by this Agreement or the
ownership of the Gulfstar Holdings by Domain after the Closing Date or to obtain
material damages or other relief in connection with the consummation of the
transactions contemplated by this Agreement.
(f) EFC shall have delivered to Domain (a) certificates
representing the Common Stock and the Preferred Stock (together with stock
powers duly endorsed by EFC so that the Common Stock and the Preferred Stock may
be duly registered in Domain's name), and (b) the original Notes, each duly
endorsed to Domain.
(g) EFC shall have executed and delivered to Domain an
Assignment and Assumption Agreement in the form attached as Exhibit A for the
purpose of assigning to Domain all of the right, title, and interest of EFC in
and to the agreements listed in such Assignment and Assumption Agreement or on
an exhibit attached thereto.
(h) EFC shall have executed and delivered to Domain an
Assignment of Liens and Security Interests substantially in the form attached as
Exhibit B for the purpose of assigning to Domain all of the right, title, and
interest of EFC in, to and under each mortgage and each security agreement
listed in the Assignment of Liens and Security Interests or on an exhibit
attached thereto, in each case with corresponding UCC-3 financing statements
evidencing such assignment, in form and substance reasonably satisfactory to
Domain.
(i) The transactions contemplated by the Stock Purchase
Agreement shall have been consummated, or shall by consummated simultaneously
with the Closing hereunder.
(j) The Board of Directors of the Company shall have duly
called and noticed the Special Meeting, or completed the successful solicitation
of written consents in lieu thereof.
(k) The transactions contemplated by the Merger Agreement
shall not have been terminated.
(l) The condition precedent to Domain's and Domain Sub's
obligations to consummate the Merger set forth in Section 6.3(a) of the Merger
Agreement shall have been fulfilled.
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(m) The Company and Fairfield Industries Incorporated shall
have executed and delivered the letter agreement in the form attached as Exhibit
D.
(n) Domain and Cheyenne Petroleum Company shall have executed
and delivered the letter agreement in the form attached as Exhibit E.
6.2 Conditions to the Obligation of EFC. The obligation of EFC to
proceed with the Closing contemplated hereby is subject to the satisfaction on
or prior to the Closing Date of all of the following conditions, any one or more
of which may be waived in writing, in whole or in part, by EFC:
(a) Domain shall have complied in all respects with each of
its covenants and agreements contained herein, including, without limitation,
the execution and delivery of the Registration Rights Agreement, and each of its
representations and warranties contained in this Agreement shall have been true
and correct as of the date hereof and shall be deemed to have been made again at
and as of the Closing Date and shall then be true and correct in all respects.
(b) EFC shall have received a certificate, dated the Closing
Date, of an executive officer of Domain certifying as to the matters specified
in Section hereof.
(c) EFC shall have received from Weil, Gotshal & Manges LLP,
counsel to Domain, an opinion dated the Closing Date in form reasonably
acceptable to EFC and its counsel.
(d) As of the Closing, there shall not be any pending or
threatened litigation or proceeding to restrain or prohibit or otherwise
materially interfere with the consummation of the transactions contemplated by
this Agreement or the ownership of the Gulfstar Holdings by Domain after the
Closing Date or to obtain material damages or other relief in connection with
the consummation of the transactions contemplated by this Agreement.
(e) The transactions contemplated by the Stock Purchase
Agreement shall have been consummated, or shall by consummated simultaneously
with the Closing hereunder.
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(f) The Board of Directors of the Company shall have duly
called and noticed the Special Meeting, or completed the successful solicitation
of written consents in lieu thereof.
(g) The transactions contemplated by the Merger Agreement
shall not have been terminated.
(h) EFC shall have received a stock certificate in the name of
EFC or its designee representing all of the Domain Shares.
ARTICLE VII.
TERMINATION
7.1 Events of Termination. Notwithstanding any other provisions
hereof, this Agreement shall terminate upon the occurrence of any of the
following events:
(a) The written consent of Domain and EFC;
(b) By Domain in writing, if EFC shall materially breach any
of its representations, warranties or covenants contained herein, which failure
or breach is not cured within ten (10) days after Domain shall have notified EFC
of Domain's intent to terminate this Agreement pursuant to this subparagraph
(b);
(c) By EFC in writing, if Domain shall materially breach any
of its representations, warranties or covenants contained herein, which failure
or breach is not cured within ten (10) days after EFC has notified Domain of
EFC's intent to terminate this Agreement pursuant to this subparagraph (c);
(d) By either Domain or EFC in writing, if there shall be any
order, writ, injunction or decree of any court or governmental or regulatory
agency binding on Domain or EFC, which prohibits or restrains Domain or EFC from
consummating the transactions contemplated hereby, provided that Domain and EFC
shall have used their reasonable best efforts to have any such order, writ,
injunction or decree lifted and the same shall not have been lifted within
thirty (30) days after entry by any such court or governmental or regulatory
agency;
(e) By either Domain or EFC, in writing, if for any reason the
Closing has not occurred by December 15, 1997;
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(f) By Domain in writing, if the unanimous approval of the
Merger Agreement and the Merger by the Company's Board of Directors and their
unanimous recommendation thereof to the holders of shares of capital stock of
the Company shall be modified or rescinded, or such Board of Directors shall
have resolved to do so, or any member thereof shall have proposed in writing
that the Company's Board of Directors do any of the foregoing; or
(g) By either Domain or EFC, in writing, if the Merger
Agreement is terminated.
7.2 Effect of Termination. The following provisions apply in the
event of a termination of this Agreement:
(a) If this Agreement is terminated by Domain or by EFC not as
the result of the negligent or willful failure of any party to perform its
obligations hereunder, such termination shall be without liability to any party
to this Agreement or any shareholder, affiliate, director, officer, partner,
employee, agent or representative of such party.
(b) EFC and Domain acknowledge that the Gulfstar Holdings are
not readily available in the open market, are unique, and are specifically
identifiable. Accordingly, EFC and Domain further agree and stipulate that if
the Closing does not occur because of the negligent or willful failure of
Domain, on the one hand, or EFC, on the other hand, to perform their respective
obligations hereunder, (i) monetary damages and any other remedy at law will not
be adequate, (ii) the non-defaulting party shall be entitled to specific
performance as the remedy for such breach, (iii) each party hereto agrees to
waive any objection to the remedy of specific performance, (iv) each party
agrees that the granting of specific performance by any court will not be deemed
to be harsh or oppressive to the party who is ordered specifically to perform
its obligations under this Agreement, and (v) in connection with any action for
specific performance, the prevailing party shall be entitled to reasonable
attorneys' fees and other costs of prosecuting or defending such action.
(c) The right to seek specific performance hereunder shall not
preclude any party from seeking any other remedy at law or in equity.
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ARTICLE VIII.
MISCELLANEOUS
8.1 Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits thereof by
giving written notice of such waiver to the other party. This Agreement may not
be amended or supplemented at any time, except by an instrument in writing
signed on behalf of each party hereto. The waiver by any party hereto of any
condition or of a breach of another provision of this Agreement shall not
operate or be construed as a waiver of any other condition or subsequent breach.
8.2 Assignment. This Agreement shall inure to the benefit of and
will be binding upon the parties hereto and their respective legal
representatives, successors and permitted assigns.
8.3 Notices. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing, and shall be deemed to have been duly given if (i)
delivered in person or by courier, (ii) sent by telecopy or facsimile
transmission, answer back requested, or (iii) mailed, certified first class
mail, postage prepaid, return receipt requested, to the parties hereto at the
following addresses:
if to Domain Energy Corporation:
Domain Energy Corporation
16801 Greenspoint Park Drive, Suite 2000
Houston, Texas 77060
Telecopy: (281) 618-1977
Attention: Michael V. Ronca
President and CEO
with a copy to:
James L. Rice III
Weil, Gotshal & Manges LLP
700 Louisiana, Suite 1600
Houston, Texas 77002
Telecopy: (713) 224-9511
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if to EFC:
c/o Enron Capital & Trade Resources Corp.
1400 Smith Street
Houston, Texas 77002
Phone: (713) 853-1939
Telecopy: (713) 646-4039 or (713) 646-4946
Attention: Donna W. Lowry
with a copy to:
Enron Capital & Trade Resources Corp.
1400 Smith Street
Houston, Texas 77002
Phone: (713) 853-5419
Telecopy: (713) 646-3393
Attention: W. Lance Schuler
and:
John L. Keffer
Bracewell & Patterson, L.L.P.
711 Louisiana, Suite 2900
Houston, Texas 77002
Telecopy: (713) 221-1212
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 8.3. Such notices shall be
effective, (i) if delivered in person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when the
answer back is received, or (iii) if mailed, upon the earlier of five days after
deposit in the mail and the date of delivery as shown by the return receipt
therefor.
8.4 Governing Law. This Agreement shall be governed by and construed
in accordance with the law of Texas without giving effect to the principles of
conflicts of law thereof.
8.5 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall continue in full force and effect and shall
in no way be affected, impaired or invalidated.
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8.6 Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
8.7 Headings. The Section headings herein are for convenience only
and shall not affect the construction hereof.
8.8 Entire Agreement; Third Party Beneficiaries. This Agreement and
the other written agreements contemplated hereby or specifically referred to
herein constitute the entire agreement and supersede all other prior agreements
and understandings, both oral and written, among the parties or any of them,
relating to the subject matter hereof. There are no oral agreements between the
parties hereto relating to the subject matter hereof. Neither this nor any
document delivered in connection with this Agreement confers upon any person not
a party hereto any rights or remedies hereunder except as provided in Article V.
8.9 Arbitration.
(a) Binding Arbitration. On the request of any party hereto,
whether made before or after the institution of any legal proceeding, any
action, dispute, claim or controversy of any kind now existing or hereafter
arising between any of the parties hereto in any way arising out of, pertaining
to or in connection with this Agreement (a "Dispute") shall be resolved by
binding arbitration in accordance with the terms hereof. Any party hereto may,
by summary proceedings, bring an action in court to compel arbitration of any
Dispute.
(b) Governing Rules. Any arbitration shall be administered by
the American Arbitration Association (the "AAA") in accordance with the terms of
this Section , the Commercial Arbitration Rules of the AAA, and, to the maximum
extent applicable, the Federal Arbitration Act. Judgment on any award rendered
by an arbitrator may be entered in any court having jurisdiction.
(c) Arbitrators. Any arbitration shall be conducted before a
three person panel of neutral arbitrators. Such panel shall consist of one
person from each of the following categories: (i) an attorney who has practiced
in the area of commercial law for at least 10 years or a retired judge at the
Texas or United States District Court or an appellate court level; (ii) a person
with at least 10 years experience in mergers and
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acquisitions, and (iii) a person with at least 10 years experience in the
petroleum industry (collectively, the "Arbitrators"). The AAA shall submit a
list of persons meeting the criteria outlined above for each category of
arbitrator, and the parties shall select one person from each category in the
manner established by the AAA. If the parties cannot agree on an arbitrator
within 30 days after the request for an arbitration, then any party may request
the AAA to select an arbitrator. The Arbitrators may engage engineers,
accountants or other consultants that the Arbitrators deem necessary to render a
conclusion in the arbitration proceeding.
(d) Conduct of Arbitration. To the maximum extent practicable,
an arbitration proceeding hereunder shall be concluded within 180 days of the
filing of the Dispute with the AAA. Arbitration proceedings shall be conducted
in Houston, Texas. Arbitrators shall be empowered to impose sanctions and to
take such other actions as the arbitrators deem necessary to the same extent a
judge could impose sanctions or take such other actions pursuant to the Federal
Rules of Civil Procedure and applicable law. At the conclusion of any
arbitration proceeding, the Arbitrators shall make specific written findings of
fact and conclusions of law. The Arbitrators shall have the power to award
recovery of all costs and fees to the prevailing party. The parties hereto each
agrees to keep all Disputes and arbitration proceedings strictly confidential
except for disclosure of information required by applicable law or the rules of
the NYSE. It is expressly agreed that the Arbitrators shall have no authority to
award treble, exemplary or punitive damages of any type under any circumstances
regardless of whether such damages may be available under Texas law, the parties
hereby waiving their right, if any, to recover treble, exemplary or punitive
damages in connection with any Dispute.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
ENRON FINANCE CORP.
By:
---------------------------
Timothy J. Detmering
Vice President
DOMAIN ENERGY CORPORATION
By:
---------------------------
Michael V. Ronca
President & CEO
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