UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. __ )*
Eastex Energy Inc.
(Name of Issuer)
Common Stock, $.01 par value
(Title of Class of Securities)
277239109
(CUSIP Number)
Gary P. Cooperstein, Esq.
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Telephone: (212) 859-8000
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
May 8, 1995
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this
Schedule 13D, and is filing this schedule because of Rule 13d-
1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement
[x]. (A fee is not required only if the reporting person: (1)
has a previous statement on file reporting beneficial ownership of
more than five percent of the class of securities described in
Item 1; and (2) has filed no amendment subsequent thereto
reporting beneficial ownership of five percent or less of such
class.) (See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits,
should be filed with the Commission. See Rule 13d-1(a) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect to the
subject class of securities, and for any subsequent amendment
containing information which would alter disclosures provided in a
prior cover page.
The information required on the remainder of this cover page shall
not be deemed to be "filed" for the purpose of Section 18 of the
Securities Exchange Act of 1934 ("Act") or otherwise subject to
the liabilities of that section of the Act but shall be subject to
all other provisions of the Act (however, see the Notes).
<PAGE>
SCHEDULE 13D
CUSIP No. 277239109
1
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
El Paso Natural Gas Company
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [x]
3
SEC USE ONLY
4
SOURCE OF FUNDS*
WC
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
[ ]
6
CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
WITH
7
SOLE VOTING POWER
- - 0 -
8
SHARED VOTING POWER
3,340,500; see Item 4 (includes 300,000 shares with respect to
which the reporting person may be deemed to share voting power,
as described in Item 4)
9
SOLE DISPOSITIVE POWER
- - 0 -
10
SHARED DISPOSITIVE POWER DO NOT TYPE IN THIS CELL
3,040,500; see Item 4
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,340,500; see Item 4 (includes 300,000 shares with respect
to which the reporting person may be deemed to share voting
power, as described in Item 4)
12
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
[ ]
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) DO NOT TYPE IN
THIS CELL
48% (includes 300,000 shares with respect to which the
reporting person may be deemed to share voting power, as
described in Item 4)
14
TYPE OF REPORTING PERSON*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
1
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
El Paso Acquisition Company
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [x]
3
SEC USE ONLY
4
SOURCE OF FUNDS*
WC, AF
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
[ ]
6
CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
WITH
7
SOLE VOTING POWER
- - 0 -
8
SHARED VOTING POWER
3,340,500; see Item 4 (includes 300,000 shares with respect
to which the reporting person may be deemed to share voting
power, as described in Item 4)
9
SOLE DISPOSITIVE POWER
- - 0 -
10
SHARED DISPOSITIVE POWER
3,040,500; see Item 4
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,340,500; see Item 4 (includes 300,000 shares with respect
to which the reporting person may be deemed to share voting
power, as described in Item 4)
12
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
[ ]
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48% (includes 300,000 shares with respect to which the
reporting person may be deemed to share voting power, as
described in Item 4)
14
TYPE OF REPORTING PERSON*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
ITEM 1. Security and Issuer
This statement on Schedule 13D (the "Schedule 13D")
relates to the shares of common stock, $.01 par value ("Common
Shares"), of Eastex Energy Inc. ("Eastex"). The principal
executive offices of Eastex are located at 1000 Louisiana, Suite
1100, Houston, Texas 77002.
ITEM 2. Identity and Background
This Schedule 13D is being filed by El Paso Natural Gas
Company, a Delaware corporation ("El Paso"), and El Paso
Acquisition Company, a Delaware corporation and a wholly owned
subsidiary of El Paso ("El Paso Acquisition"). El Paso and El
Paso Acquisition are sometimes collectively referred to herein as
the "Filing Persons." The principal business and executive
offices of El Paso and El Paso Acquisition are located at One Paul
Kayser Center, 100 North Stanton Street, El Paso, Texas 79901.
El Paso is a natural gas pipeline company engaged
principally in the interstate transportation of natural gas
through a fully integrated and federally regulated pipeline
system. El Paso Acquisition is a wholly owned subsidiary of El
Paso and has not engaged in any business, other than in connection
with the matters described in this Schedule 13D.
Schedule I hereto contains certain information with
respect to the executive officers and directors of each of the
Filing Persons, including their business addresses, their
principal occupations or employment, the name, principal
businesses and address of any corporation or other organization in
which such employment is conducted and their citizenship.
Neither the Filing Persons nor, to the knowledge of the
Filing Persons, any of the executive officers or directors of
either of the Filing Persons, has, during the last five (5) years,
been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), or been a party to a civil
proceeding resulting in its or his or her being subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, the federal or
state securities laws or finding any violations with respect to
such laws.
ITEM 3. Source and Amount of Funds or Other Consideration
Pursuant to the terms of the Stockholder Agreements referred to in
Item 4 below, subject to certain conditions, El Paso
Acquisition has the option to acquire (i) 2,393,000
Common Shares and (ii) warrants to purchase 647,500
Common Shares (each, an "Option" and, collectively, the
"Options") at an aggregate cash price of $12,064,250.
Pursuant to the Phillips Stockholder Agreement referred
to in Item 4 below, El Paso Acquisition has the right to
acquire 2,393,000 Common Shares for a cash price of $4.50
per share. Pursuant to the RIMCO Stockholder Agreement
referred to in Item 4 below, El Paso Acquisition has the
right to acquire (i) 487,500 warrants to purchase Common
Shares for a cash price of $2.50 per warrant and (ii)
160,000 warrants to purchase Common Shares for a cash
price of $.50 per warrant. Funds for any exercise of the
Options will be obtained from working capital of El Paso.
<PAGE>
ITEM 4. Purpose of Transaction
El Paso, El Paso Acquisition and Eastex have entered into
an Agreement and Plan of Merger, dated as of May 8, 1995 (the
"Merger Agreement"), which provides for the merger (the "Merger")
of Eastex with and into El Paso Acquisition. As a result of the
Merger, El Paso will acquire the entire equity interest in Eastex,
and each Common Share outstanding prior to the effective time of
the Merger (other than Common Shares issued and held in Eastex's
treasury and Common Shares owned by El Paso or its majority-owned
subsidiaries) will be converted into the right to receive $4.50
either (i) in common stock of El Paso (subject to a maximum and
minimum exchange ratio of .1629 and .1485, respectively) or (ii)
in cash (subject to the amount of cash paid in the Merger and
otherwise to acquire Common Shares and warrants of Eastex not
exceeding 49% of the total consideration paid). A copy of the
Merger Agreement is attached hereto as Exhibit A and incorporated
herein by reference.
Stockholder Agreements
In connection with the execution of the Merger Agreement,
on May 8, 1995, El Paso and El Paso Acquisition entered into
stockholder agreements with Mr. Robert G. Phillips ("Phillips"),
Chairman of the Board and Chief Executive Officer of Eastex (the
"Phillips Stockholder Agreement"), and RIMCO Partners, L.P., RIMCO
Partners, L.P. II, RIMCO Partners, L.P. III and RIMCO Partners,
L.P. IV (collectively, the "RIMCO Entities" and, together with
Phillips, the "Stockholders") (the "RIMCO Stockholder Agreement"
and, together with the Phillips Stockholder Agreement, the
"Stockholder Agreements"). The Phillips Stockholder Agreement
provides, among other things, for the grant by Phillips to El Paso
Acquisition of an Option to purchase 2,393,000 Common Shares at an
exercise price of $4.50 per share in cash. The RIMCO Stockholder
Agreement provides, among other things, for the grant by the RIMCO
Entities of an Option to purchase warrants to purchase 647,500
Common Shares at an exercise price per warrant equal to the excess
of (x) $4.50 (or such higher cash price per share as may be paid
pursuant to the Merger Agreement) over (y) the exercise price per
Common Share of each such warrant ($2.00 in the case of 487,500
warrants and $4.00 in the case of 160,000 warrants), multiplied by
the number of Common Shares covered by such warrant. The Common
Shares and warrants covered by the Options are hereinafter
referred to as the "Optioned Securities."
Pursuant to each of the Stockholder Agreements, El Paso
Acquisition may exercise the Option granted pursuant to such
Stockholder Agreement in whole but not in part at any time after
all waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), applicable
to the exercise of such Option have expired or been terminated, by
written notice specifying a date and time for the closing not
later than ten business days from the date of such notice (which
date and time may be one day after the delivery of such notice or
earlier if reasonably practicable), but only if (x) the Merger
Agreement shall have been terminated and (y) either (i) the
stockholders of Eastex shall have failed to approve the Merger at
the stockholders' meeting contemplated by Section 7.3 of the
Merger Agreement (the "Stockholders' Meeting"), (ii) the
Stockholders' Meeting shall not have occurred (other than by
reason of a breach by El Paso or El Paso Acquisition of its
obligations under the Merger Agreement), or (iii) the termination
fee contemplated by Section 9.5(b) of the Merger Agreement shall
have become due and payable.
<PAGE>
Except as provided below, the Option granted pursuant to
the Phillips Stockholder Agreement expires on the earliest of (a)
the Effective Time (as defined in the Merger Agreement) or (b)
twelve months after the termination of the Merger Agreement, and
the Option granted pursuant to the RIMCO Stockholder Agreement
expires on the earliest of (a) the Effective Time, (b) twelve
months after termination of the Merger Agreement (but in any event
not later than December 31, 1996) or (c) 60 days after receipt by
El Paso of the termination fee contemplated by Section 9.5(b) of
the Merger Agreement. However, if either Option cannot be
exercised prior to the earliest date described above by reason of
any applicable injunction, decree, order or similar restraint
issued by a court, such Option will expire on the later of such
earliest date or the tenth business day after such impediment to
exercise shall have been removed or when such injunction, decree,
order or similar restraint shall have become permanent and no
longer subject to appeal, as the case may be (the expiration date
of each Option described in this paragraph is referred to herein
as the "Expiration Date").
Each Stockholder has agreed that (a) during the period
from the date of the applicable Stockholder Agreement until the
Expiration Date thereof, except in accordance with the provisions
of the Stockholder Agreement, each Stockholder will not: (i)
sell, transfer, pledge, hypothecate, assign or otherwise dispose
of, or enter into any contract, option or other arrangement or
understanding with respect to the sale, transfer, pledge,
hypothecation, assignment or other disposition of, any Optioned
Securities owned by him; (ii) deposit any Optioned Securities into
a voting trust, or grant any proxies or enter into a voting
agreement with respect to any Optioned Securities; or (iii)
initiate, solicit or encourage, directly or indirectly, any
inquiries or the making or implementation of any proposal or offer
(including, without limitation, any proposal or offer to Eastex's
stockholders) with respect to a merger, acquisition, consolidation
or similar transaction involving, or any purchase of all or any
significant portion of the assets or any equity securities of,
Eastex or any of its subsidiaries (any such proposal or offer
being hereinafter referred to as an "Acquisition Proposal") or
engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person
relating to an Acquisition Proposal, or otherwise facilitate any
effort or attempt to make or implement an Acquisition Proposal;
except that any Stockholder who is a member of the board of
directors of Eastex may discuss such proposals at meetings of the
board of directors of Eastex and, solely to the extent permitted
by Section 7.1 of the Merger Agreement, any Stockholder who is a
member of the board of directors or an officer of Eastex may
engage in discussions or negotiations with, or provide
confidential information or data to third parties (other than El
Paso Acquisition, its affiliates, permitted assigns or
representatives) in connection with an Acquisition Proposal; (b)
any additional Common Shares, warrants, options or other
securities or rights exercisable for, exchangeable for or
convertible into Common Shares (collectively, "Equity Securities")
acquired by the Stockholder will become subject to the applicable
Stockholder Agreement and will, for all purposes of such
Stockholder Agreement, be considered Optioned Securities; and (c)
such Stockholder will not engage in any action or omit to take any
action which would have the effect of preventing or disabling such
Stockholder from delivering his Optioned Securities to El Paso
Acquisition or otherwise performing such Stockholder's obligations
under the applicable Stockholder Agreement.
<PAGE>
Under the Stockholder Agreements, each Stockholder has
agreed that, during the time the applicable Stockholder Agreement
is in effect, at any meeting of the stockholders of Eastex,
however called, and in any action by written consent of the
stockholders of Eastex, such Stockholder will (a) vote all voting
Equity Securities of such Stockholder in favor of the Merger; (b)
not vote any voting Equity Securities in favor of any action or
agreement which would result in a breach in any material respect
of any covenant, representation or warranty or any other
obligation of Eastex under the Merger Agreement; and (c) vote all
voting Equity Securities of such Stockholder against any action or
agreement which would impede, interfere with or attempt to
discourage the Merger, including, but not limited to: (i) any
Acquisition Proposal (other than the Merger) involving Eastex or
any of its subsidiaries; (ii) any change in the management or
board of directors of Eastex, except as otherwise agreed to in
writing by El Paso Acquisition; (iii) any material change in the
present capitalization or dividend policy of Eastex; or (iv) any
other material change in Eastex's corporate structure or business.
In addition, pursuant to the terms of the Stockholder
Agreements, at the request of El Paso Acquisition, each
Stockholder has agreed to execute and deliver to El Paso
Acquisition an irrevocable proxy and irrevocably appoint El Paso
Acquisition or its designees, its attorney and proxy to vote all
voting Equity Securities of such Stockholder, for all purposes
whatsoever, with full power of substitution. Any such proxy will
terminate upon the termination of the applicable Stockholder
Agreement.
Other Matters
In connection with the Merger Agreement, and as a
condition to the obligations of El Paso and El Paso Acquisition to
effect the merger, Heath Petra Resources, Inc. ("HPRI"), a wholly
owned subsidiary of Eastex, on May 5, 1995, entered into a Letter
of Intent (the "Letter of Intent") to amend certain employment
agreements and related agreements between HPRI and Brian Heath,
Doug Morgan and Scott Gaddis (collectively, the "HPRI Managers"),
which included, among other things, an agreement by the HPRI
Managers to vote an aggregate of 300,000 Common Shares in favor of
the Merger.
Pursuant to Section 7.15 of the Merger Agreement, El
Paso and El Paso Acquisition have the right to acquire Common
Shares in the open market or in private transactions prior to the
consummation of the Merger. Depending upon market conditions and
other factors, El Paso and El Paso Acquisition may exercise this
right at any time or from time to time prior to the Merger.
The Phillips Stockholder Agreement, the RIMCO Stockholder
Agreement and the Letter of Intent are attached hereto as Exhibits
B, C, and D, respectively, and incorporated herein by reference,
and the foregoing descriptions of such agreements are qualified in
their entirety by reference to the complete text of such
agreements.
The Common Shares are registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and are
traded on the NASDAQ - National Market System. If
<PAGE>
the Merger is consummated, the Common Shares will be
deregistered under the Exchange Act and will cease to be quoted on
the NASDAQ - National Market System.
ITEM 5. Interest in Securities of the Issuer
By reason of the execution of the Stockholder Agreements,
El Paso and El Paso Acquisition may be deemed to share voting
power and dispositive power with respect to 2,393,000 Common
Shares subject to the Phillips Stockholder Agreement and warrants
to purchase 647,500 Common Shares subject to the RIMCO Stockholder
Agreement and may be deemed to share voting power over 300,000
Common Shares subject to the Letter of Intent. The foregoing
shares represent in the aggregate approximately 48% of the
outstanding Common Shares, assuming the exercise of the warrants
and no other options, warrants or convertible or exchangeable
securities of Eastex.
Except as indicated in Item 6, neither the Filing Persons
nor, to the knowledge of the Filing Persons, any of the persons
listed in Schedule I hereto, presently owns any Common Shares, or
has effected any transaction in the Common Shares during the past
sixty (60) days.
ITEM 6. Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of the Issuer
Reference is made to Item 4 for a description of the Merger
Agreement, the Stockholder Agreements and the Letter of Intent.
Except as reported above and in Item 4, neither the Filing Persons
nor, to the knowledge of the Filing Persons, any
executive officer or director of either of the Filing
Persons, has any contract, arrangement, understanding or
relationship with any person with respect to any
securities of Eastex, including, but not limited to,
transfer or voting of any such securities, finder's fees,
joint ventures, loan or option arrangements, puts or
calls, guarantees of profits, division of profits or
loss, or the giving or withholding of proxies.
<PAGE>
ITEM 7. Material to be Filed as Exhibits
Exhibit A -- Agreement and Plan of Merger, dated as of May 8,
1995, between El Paso Natural Gas Company, El Paso
Acquisition Company and Eastex Energy Inc.
Exhibit B -- Stockholder Agreement, dated as of May 8, 1995,
among Robert G. Phillips, El Paso Natural Gas Company
and El Paso Acquisition Company.
Exhibit C -- Stockholder Agreement, dated as of May 8, 1995,
among RIMCO Partners, L.P., RIMCO Partners, L.P. II,
RIMCO Partners, L.P. III, RIMCO Partners, L.P. IV, El
Paso Natural Gas Company and El Paso Acquisition
Company.
Exhibit D -- Letter of Intent to Amend the Employment Agreements
and Related Agreements between Heath Petra Resources,
Inc. and Brian Heath, Doug Morgan and Scott Gaddis
dated April 23, 1993, dated May 5, 1995, between
Heath Petra Resources, Inc., Brian N. Heath, Douglas
D. Morgan and Scott C. Gaddis.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set forth in
this statement is true, complete and correct.
EL PASO NATURAL GAS COMPANY
By: /s/ H. Brent Austin
Name: H. Brent Austin
Title: Executive Vice President and
Chief Financial Officer
EL PASO ACQUISITION COMPANY
By: /s/ H. Brent Austin
Name: H. Brent Austin
Title: Vice President
and Treasurer
Dated: May 18, 1995
<PAGE>
Schedule I
Executive Officers and Directors of
El Paso Natural Gas Company
Name and Citizenship Business Address
Position/Principal Occupation
Executive Officers & Directors:
William A. Wise El Paso Natural Gas Company
(United States Citizen) 100 North Stanton Street
Chairman of the Board, El Paso, Texas 79901
President and Chief
Executive Officer
H. Brent Austin El Paso Natural Gas Company
(United States Citizen) 100 North Stanton Street
Executive Vice President and El Paso, Texas 79901
Chief Financial Officer
Richard Owen Baish El Paso Natural Gas Company
(United States Citizen) 100 North Stanton Street
Executive Vice President El Paso, Texas 79901
Michael C. Holland El Paso Natural Gas Company
(United States Citizen) 100 North Stanton Street
Senior Vice President El Paso, Texas 79901
Joel Richards III El Paso Natural Gas Company
(United States Citizen) 100 North Stanton Street
Senior Vice President El Paso, Texas 79901
John W. Somerhalder II El Paso Natural Gas Company
(United States Citizen) 100 North Stanton Street
Senior Vice President El Paso, Texas 79901
Larry R. Tarver El Paso Natural Gas Company
(United States Citizen) 100 North Stanton Street
Senior Vice President El Paso, Texas 79901
Britton White, Jr. El Paso Natural Gas Company
(United States Citizen) 100 North Stanton Street
Senior Vice President El Paso, Texas 79901
and General Counsel
<PAGE>
Byron Allumbaugh Ralphs Grocery Company
(United States Citizen) 1100 West Artesia Boulevard
Director of El Paso/Chairman Compton, CA 90220
of the Board and Chief
Executive Officer of Ralphs
Grocery Company
Eugenio Garza Lagera FEMSA
(Mexican Citizen) Ave. Alfonso Reyes
Director of El Paso/Chairman No. 2202 Norte
of the Board of Valores Monterrey, N.L. 64000
Industriales, S.A. ("VISA") Mexico
and Fomento Economico
Mexicano, S.A. de C.V.
("FEMSA"), Chairman of the
Board of Regents of Instituto
Tecnologico Y de Estudios
Superiores De Monterrey,
and Chairman of the Board of
Grupo Financiero Bancomer
and BANCOMER
James F. Gibbons Stanford University
(United States Citizen) School of Engineering
Director of El Paso/Faculty of Terman 214 (Mail Stop 4027)
Stanford University and Dean Stanford, CA 94305-4027
of Stanford University School
of Engineering
Ben F. Love Texas Commerce
(United States Citizen) Bancshares, Inc.
Director of El Paso/Investor Texas Commerce Tower
600 Travis, 18th Floor
Houston, TX 77002
Kenneth L. Smalley 3686 Lost Creek Blvd.
(United States Citizen) Austin, TX 78735
Director of El Paso/Retired
Malcolm Wallop Frontiers of Freedom
(United States Citizen) Foundation
Director of El Paso/President 1735 North Lynn Street
of Frontiers of Freedom Suite 1050
Foundation Arlington , VA 22209
<PAGE>
Schedule I
Executive Officers and Directors of
El Paso Acquisition Company
Name and Citizenship Business Address
Position/Principal Occupation
Executive Officers & Directors:
William A. Wise El Paso Natural Gas Company
(United States Citizen) 100 North Stanton Street
President/Director El Paso, Texas 79901
H. Brent Austin El Paso Natural Gas Company
(United States Citizen) 100 North Stanton Street
Vice President and Treasurer/ El Paso, Texas 79901
Director
Richard Owen Baish El Paso Natural Gas Company
(United States Citizen) 100 North Stanton Street
Senior Vice President/ El Paso, Texas 79901
Director
SCHEDULE 13D
CUSIP No.
277239109
AGREEMENT AND PLAN OF MERGER
between
EL PASO NATURAL GAS COMPANY,
EL PASO ACQUISITION COMPANY
and
EASTEX ENERGY INC.
Dated as of May 8, 1995
<PAGE>
TABLE OF CONTENTS
1. The Merger 1
1.1 The Merger 1
1.2. The Closing 2
1.3. Effective Time 2
2. Certificate of Incorporation and By-laws of the
Surviving Corporation. 2
2.1. Certificate of Incorporation 2
2.2. By-laws 2
3. Directors and Officers of the Surviving
Corporation 3
3.1. Directors 3
3.2. Officer 3
4. Conversion of Company Stock 3
4.1. Conversion of Company Stock 3
4.2. Election Procedures 6
4.3. Selection of Company Common Stock 8
4.5. Adjustment of Exchange Ratio 13
5. Representations and Warranties of the Company 13
5.1. Existence; Good Standing; Corporate Authority;
Compliance With Law 13
5.2. Authorization, Validity and Effect of Agreement 14
5.3. Capitalization 14
5.4. Subsidiaries 15
5.5. Other Interests 16
5.8. Litigation 17
5.9. Absence of Certain Changes 17
5.10. Taxes 18
5.11 Certain Employee Plans 18
5.12. Labor Matters 19
5.13. No Brokers 20
5.14. Fairness Opinion 20
5.15. Environmental Matters 20
5.16. Related Party Transactions 22
6. Representations and Warranties
of Parent and Merger Sub 22
6.1. Existence; Good Standing; Corporate Authority;
Compliance with Law 22
<PAGE>
6.2. Authorization, Validity and Effect of Agreements 23
6.3. No Violation 23
6.4. No Brokers 24
6.5. Capitalization 24
6.6. SEC Documents 24
6.7. Litigation 25
6.8. Absence of Certain Changes 25
6.9. Parent Common Stock 25
7. Covenants. 27
7.1. Acquisition Proposals 27
7.2. Conduct of Businesses 28
7.3. Meeting of Stockholders 30
7.4. Filings; Other Action 31
7.5. Inspection of Records; Access 31
7.6. Publicity 32
7.7. Registration Statement 32
7.8. Listing Application 33
7.9. Agreements by Affiliated Stockholders of the
Company 33
7.10. Further Action 34
7.11. Expenses 34
7.12. Indemnification and Insurance 34
7.13. Certain Benefits 34
7.14. Reorganization 35
7.15. Purchase of Company Common Stock 35
7.16. Headquarters of the Surviving Corporation;
Operations 35
7.17. Merger of Subsidiaries of the Company 35
8. Conditions. 36
8.1. Conditions to Each Party's Obligation to Effect
the Merger 36
8.2. Conditions to Obligation of the Company to Effect
the Merger 36
8.3. Conditions to Obligation of Parent and Merger Sub
to Effect the Merger 37
9. Termination. 38
9.1. Termination by Mutual Consent 38
9.2. Termination by Either Parent or the Company 38
9.3. Termination by the Company 38
9.4. Termination by Parent 38
9.5. Effect of Termination and Abandonment 38
9.6. Extension; Waiver 39
10. General Provisions. 40
10.1. Survival of Representations and Warranties 40
<PAGE>
10.2. Notices 40
10.3. Assignment; Binding Effect; Benefit 41
10.4. Entire Agreement 41
10.5. Amendment 41
10.6. Governing Law 41
10.7. Counterparts 41
10.8. Headings 42
10.9. Interpretation 42
10.10. Waivers 42
10.11. Severability 42
10.12. Enforcement of Agreement 43
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated
as of May 8, 1995, between El Paso Natural Gas Company, a Delaware
corporation ("Parent"), El Paso Acquisition Company, a Delaware
corporation and a wholly owned subsidiary of Parent ("Merger
Sub"), and Eastex Energy Inc., a Delaware corporation (the
"Company").
RECITALS
A. The Boards of Directors of Parent, Merger Sub
and the Company, and Parent as the sole stockholder of Merger Sub,
each have approved the merger of the Company with and into Merger
Sub (the "Merger"), upon the terms and subject to the conditions
set forth herein.
B. For federal income tax purposes, it is intended
that the Merger shall qualify as a reorganization within the
meaning of Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code").
C. The Company has received a fairness opinion
relating to the transactions contemplated hereby as more fully
described herein.
D. Parent, Merger Sub and the Company desire to
make certain representations, warranties and agreements in
connection with the Merger.
NOW, THEREFORE, in consideration of the foregoing, and
of the representations, warranties, covenants and agreements
contained herein, the parties hereto hereby agree as follows:
ARTICLE 1
1. The Merger.
1.1. The Merger. Subject to the terms and conditions
of this Agreement, at the Effective Time (as defined in
Section 1.3), the Company shall be merged with and into Merger Sub
in accordance with this Agreement and the separate corporate
existence of the Company shall thereupon cease. Merger Sub shall
be the surviving corporation in the Merger (sometimes hereinafter
referred to as the "Surviving Corporation"). The Merger shall
have the effects specified in the Delaware General Corporation Law
(the "DGCL").
<PAGE>
1.2. The Closing. Subject to the terms and
conditions of this Agreement, the closing of the Merger (the
"Closing") shall take place at the offices of Fried, Frank,
Harris, Shriver & Jacobson, One New York Plaza, New York, New
York, at 9:00 a.m., local time, on the first business day
immediately following the day on which the last to be fulfilled or
waived of the conditions set forth in Article 8 shall be fulfilled
or waived in accordance herewith, or at such other time, date or
place as Parent and the Company may agree. The date on which the
Closing occurs is hereinafter referred to as the "Closing Date."
1.3. Effective Time. If all the conditions to the
Merger set forth in Article 8 shall have been fulfilled or waived
in accordance herewith and this Agreement shall not have been
terminated as provided in Article 9, the parties hereto shall
cause a Certificate of Merger meeting the requirements of Section
251 of the DGCL to be properly executed and filed in accordance
with such Section on the Closing Date. The Merger shall become
effective at the time of filing of the Certificate of Merger with
the Secretary of State of the State of Delaware in accordance with
the DGCL or at such later time which the parties hereto shall have
agreed upon and designated in such filing as the effective time of
the Merger (the "Effective Time").
ARTICLE 2
2. Certificate of Incorporation and By-laws of the
Surviving Corporation.
2.1. Certificate of Incorporation. The Certificate
of Incorporation of Merger Sub in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation, until duly amended in accordance with
applicable law, except that the name of Merger Sub shall be
changed to Eastex Energy Inc.
2.2. By-laws. The By-laws of Merger Sub in effect
immediately prior to the Effective Time shall be the By-laws of
the Surviving Corporation, until duly amended in accordance with
applicable law.
ARTICLE 3
3. Directors and Officers of the Surviving
Corporation.
3.1. Directors. The directors of the Surviving
Corporation as of the Effective Time shall be the directors of
Merger Sub immediately prior to the Effective Time and Robert G.
Phillips.
<PAGE>
3.2. Officers. The officers of the Company
immediately prior to the Effective Time shall be the officers of
the Surviving Corporation as of the Effective Time.
ARTICLE 4
4. Conversion of Company Stock.
4.1. Conversion of Company Stock.
(a) At the Effective Time, each share of the
common stock, $1.00 par value, of Merger Sub
outstanding immediately prior to the Effective Time
shall remain outstanding and shall represent one share
of common stock, $1.00 par value, of the Surviving
Corporation.
(b) (i) At the Effective Time, each share of
the common stock, $.01 par value (the "Company Common
Stock"), of the Company issued and outstanding
immediately prior to the Effective Time which, under
the terms of this Article 4, is to be converted into
the right to receive common stock, $3.00 par value
(the "Parent Common Stock"), of Parent, shall, by
virtue of the Merger and without any action on the
part of the holder thereof, be converted into the
right to receive (as the same may be adjusted as
hereinafter provided) a number of shares of Parent
Common Stock, rounded to four decimal places,
determined by dividing $4.50 by the "Average Price" of
a share of Parent Common Stock, but in any event not
less than .1485 and not more than .1629 (the "Exchange
Ratio"). The "Average Price" of a share of Parent
Common Stock shall be the average, rounded to four
decimal places, of the closing sales prices thereof on
The New York Stock Exchange (the "NYSE") (as reported
by The Wall Street Journal or, if not reported
thereby, by another authoritative source) over the ten
business days immediately preceding the Closing Date.
Holders of shares of Company Common Stock converted
into Parent Common Stock shall also have the right to
receive, together with each share of Parent Common
Stock issued in the Merger, one associated preferred
stock purchase right (a "Right") in accordance with
the Shareholder Rights Agreement dated as of July 7,
1992, between Parent and The First National Bank of
Boston (the "Parent Rights Agreement"). References
herein to the shares of Parent Common Stock issuable
in the Merger shall be deemed to include the
associated Rights.
(ii) At the Effective Time, each share of
Company Common Stock issued and outstanding
<PAGE>
immediately prior to the Effective Time which, under
the terms of this Article 4, is to be converted into
the right to receive cash shall, by virtue of the
Merger and without any action on the part of the
holder thereof, be converted into the right to receive
$4.50 in cash, without interest (the "Cash Amount").
(iii) The consideration payable in
respect of each share of Company Common Stock pursuant
to Section 4.1(b)(i) or 4.1(b)(ii) hereof (including
cash for fractional shares of Parent Common Stock in
accordance with Section 4.4(e)) is hereinafter
referred to as the "Merger Consideration."
(c) As a result of the Merger and without any
action on the part of the holder thereof, all shares
of Company Common Stock shall cease to be outstanding
and shall be cancelled and retired and shall cease to
exist, and each holder of a certificate (a
"Certificate") representing any shares of Company
Common Stock shall thereafter cease to have any rights
with respect to such shares of Company Common Stock,
except the right to receive, without interest, the
Merger Consideration payable with respect thereto in
accordance with Sections 4.1(b) and 4.4(e) upon the
surrender of such Certificate.
(d) Each share of Company Common Stock issued
and held in the Company's treasury at the Effective
Time or owned by Parent or any of its Subsidiaries (as
defined in Section 10.9) shall, by virtue of the
Merger, cease to be outstanding and shall be cancelled
and retired without payment of any consideration
therefor.
(e) Immediately prior to the Effective Time,
except as provided in Section 4.1(f) and (g), all
options (individually, an "Option" and collectively,
the "Options") then outstanding under the Company's
1987 Nonemployee Director Stock Option Plan, Second
Amended and Restated 1987 Stock Option Plan, 1994
Executive Long-Term Stock Option Plan or any other
incentive compensation or stock option plan of the
Company (the "Option Plans"), whether or not then
exercisable, shall be canceled and each holder of an
Option will be entitled to receive from the Company,
for each share of Company Common Stock subject to an
Option, an amount in cash equal to the excess, if any,
of the Cash Amount over the per share exercise price
of such Option. The Company will use its reasonable
best efforts to obtain any necessary consents from
holders of Options to the cancellation and payment
provided for in this Section 4.1(e). From and after
<PAGE>
the date of this Agreement, no additional options
shall be granted by the Company or its Subsidiaries
(as defined in Section 10.9 hereof) under the Option
Plans or otherwise.
(f) Notwithstanding anything to the contrary
contained herein or otherwise, each of the Options
listed on Schedule 4.1(f) shall not be canceled
pursuant to Section 4.1(e) above, but shall instead
remain outstanding at the Effective Time and, shall by
virtue of the Merger and without any action on the
part of the holder thereof, be assumed by Parent and
converted into an option to purchase Parent Common
Stock (each a "Converted Option") as set forth below.
Each Converted Option (i) shall be subject to the same
terms and conditions that applied to the corresponding
Option prior to conversion (including the terms and
conditions relating to exercisability, but without
regard to any acceleration of exercisability that may
occur in connection with the Merger, so that the
vesting and exercisability of all Converted Options
will be determined as if the Merger had not occurred),
(ii) shall be exercisable for that whole number of
shares of Parent Common Stock (rounded downward to the
nearest whole share) equal to the number of shares of
Company Common Stock subject to such Option
immediately prior to the Effective Time, multiplied by
the Exchange Ratio, and (iii) shall have an exercise
price per share of Parent Common Stock equal to the
exercise price per share of Company Common Stock under
the corresponding Option immediately prior to the
Effective Time, divided by the Exchange Ratio (the
exercise price per share of Parent Common Stock, as so
determined, being rounded upward to the nearest full
cent). The Company will use its reasonable best
efforts to obtain any necessary consents from the
holders of the Options listed on Schedule 4.1(f) to
the conversion of such Options as set forth above.
(g) Notwithstanding anything to the contrary
contained herein or otherwise, each of the stock-
related performance shares and performance units
outstanding as of the Effective Time under (i) the
Company's Incentive Compensation Plan, (ii) the Heath
Petra Resources, Inc. Incentive Compensation Plan and
(iii) the proposed amendment to certain employment
agreements and related agreements set forth in the
term sheet relating thereto described in item 3 of
Exhibit B hereto (each a "Terminated Performance
Unit") shall by virtue of the Merger and without any
action on the part of the holder thereof, be assumed
by Parent and converted into a performance share unit
relating to Parent Common Stock (each a "Converted
Performance Unit") as set forth below. Each Converted
Performance Unit (i) shall be subject to terms and
conditions which, as nearly as practicable, duplicate
the terms and conditions that applied to the
corresponding Terminated Performance Unit prior to
conversion (including the terms and conditions
<PAGE>
relating to vesting and payment, but without regard to
any acceleration of vesting or payment that may occur
in connection with the Merger, so that the vesting and
payment of all Converted Performance Units will be
determined as if the Merger had not occurred) and
(ii) shall be denominated in that whole number of
performance share units of Company Common Stock
subject to such Terminated Performance Unit
immediately prior to the Effective Time, multiplied by
the Exchange Ratio. The Company will use its
reasonable best efforts to obtain any necessary
consent from the holders of the Terminated Performance
Units to the conversion of such Units as set forth
above.
4.2. Election Procedures. Each holder of Company
Common Stock (other than holders of Company Common Stock to be
cancelled as set forth in Section 4.1(d)) shall have the right to
submit a request, in accordance with the following procedures,
specifying the number of shares of his Company Common Stock which
he desires to have converted into the right to receive Parent
Common Stock in the Merger and the number of shares of his Company
Common Stock which he desires to have converted into the right to
receive the Cash Amount in the Merger in accordance with the
following procedure.
(a) Each holder of Company Common Stock may
specify in a request made in accordance with the
provisions of this Section (herein called an
"Election"):
(i) the number of shares of Company
Common Stock owned by such holder which such holder
shall desire to have converted into the right to
receive the Cash Amount in the Merger (a "Cash
Election"); and
(ii) the number of shares of Company
Common Stock owned by such holder which such holder
shall desire to have converted into the right to
receive Parent Common Stock in the Merger (a "Stock
Election").
Any Cash Election may be conditioned on all of the
shares of Company Common Stock covered thereby being
converted into the right to receive the Cash Amount (a
"Conditional Cash Election"). If the proration
provisions of Section 4.3(d) are applicable to the
Merger (or would be applicable but for this sentence),
all shares of Company Common Stock covered by a
Conditional Cash Election shall be converted into the
right to receive Parent Common Stock in the Merger.
<PAGE>
(b) Parent shall authorize a person (which
shall be Parent's transfer agent or another person
reasonably satisfactory to the Company) to receive
Elections and to act as Exchange Agent hereunder (the
"Exchange Agent").
(c) Parent shall prepare a form (the "Form of
Election") pursuant to which each holder of Company
Common Stock at the close of business on the day on
which the Effective Time occurs may make an Election,
which Form of Election shall be mailed to holders of
Company Common Stock at such time as to permit holders
of Company Common Stock to exercise their right to
make an Election. As used herein, "Election Date"
means the date announced by Parent, in a news release
delivered to the Dow Jones News Service, as the last
day on which Forms of Election will be accepted;
provided, that such day shall be a business day no
earlier than five business days prior to the Effective
Time and no later than the date on which the Effective
Time occurs and shall be at least five business days
following the date of such news release.
(d) Any Election shall have been properly made
only if the Exchange Agent at its office designated in
the Form of Election shall have received, by 5:00 p.m.
local time in the city in which such Exchange Agent is
located, on the Election Date, a Form of Election
properly completed and signed (with the signature or
signatures thereon guaranteed if required by the Form
of Election), accompanied either by the Certificate or
Certificates representing all of the shares of Company
Common Stock owned by such holder, duly endorsed or
otherwise acceptable for transfer, or by an
appropriate guaranty of delivery in the form
customarily used in transactions of this nature from a
member of a national securities exchange or a member
of the National Association of Securities Dealers,
Inc. or a commercial bank or trust company in the
United States. Failure to deliver shares covered by
such a guaranty of delivery within the time set forth
on such guaranty shall be deemed to invalidate any
otherwise properly made Election.
(e) Any holder of Company Common Stock may at
any time prior to the Election Date change his
Election by written notice received by the Exchange
Agent at or prior to the Election Date accompanied by
a properly completed, revised Form of Election (with
such other documents as are required as contemplated
by subsection (d) above).
(f) Any holder of Company Common Stock may at
any time prior to the Election Date revoke his
Election by written notice received by the Exchange
Agent at or prior to the Election Date or by
withdrawal prior to the Election Date of his
Certificates for Company Common Stock or of the
guaranty of delivery of such Certificates, previously
deposited with the Exchange Agent.
<PAGE>
(g) As used in this Agreement, "holders" of
Company Common Stock shall mean record holders of
Company Common Stock. Record holders who are nominees
only may submit a separate Form of Election for each
beneficial owner for whom any such record holder is a
nominee; provided, however, that at the request of
Parent, such record holder shall certify to the
satisfaction of Parent that such record holder holds
such shares as nominee for the beneficial owner
thereof. For purposes of this Agreement, each
beneficial owner for which a Form of Election is
submitted will be treated as a separate holder of
shares.
(h) Parent shall have the right to make rules
not inconsistent with the terms of this Agreement
governing the validity of the Forms of Election, the
manner and extent to which Elections are to be taken
into account in making the determinations prescribed
by Section 4.3, the issuance and delivery of
certificates for Parent Common Stock into which
Company Common Stock is converted in the Merger and
the payment for shares of Company Common Stock
converted into the right to receive the Cash Amount in
the Merger. All such rules and determinations
thereunder shall be final and binding on all holders
of Company Common Stock.
(i) If this Agreement is terminated, Parent
will cause the Exchange Agent to return to the holders
of Company Common Stock any Certificates delivered by
such holders to the Exchange Agent.
4.3. Selection of Company Common Stock. The manner
in which each share of Company Common Stock (other than shares of
Company Common Stock to be cancelled as set forth in Section
4.1(d)) shall be converted at the Effective Time into either the
Cash Amount or Parent Common Stock shall be as set forth below in
this Section 4.3.
(a) The portion of the aggregate consideration
paid or deemed paid pursuant to the Merger (the
"Aggregate Merger Consideration") which shall be paid
other than in the form of Parent Common Stock (which
shall be deemed to include, without limitation, cash
paid upon the acquisition by Parent or any of its
Subsidiaries of Company Common Stock or warrants to
purchase Company Common Stock, whether pursuant to the
Merger, the Stockholder Agreement, Section 7.15 or
<PAGE>
otherwise, cash paid in lieu of fractional shares and
cash paid upon the cancellation of Options) (the "Cash
Consideration") shall not exceed 49% of the Aggregate
Merger Consideration (the "Maximum Cash
Consideration"). For the purpose of determining the
Maximum Cash Consideration, a share of Parent Common
Stock shall be valued at the lowest of (x) the closing
trading price of a share of Parent Common Stock on the
NYSE Composite Tape on the date of the Effective Time,
(y) the median, rounded to four decimal places, of the
high and low trading price of a share of Parent Common
Stock on the NYSE Composite Tape on the date of the
Effective Time and (z) the Average Price.
(b) The maximum number of shares of Company
Common Stock to be converted into the right to receive
cash pursuant to the Merger shall be determined by
(x) subtracting from the Maximum Cash Consideration
all consideration paid or deemed paid pursuant to the
Merger other than in the form of Parent Common Stock
(other than payments of the Cash Amount for shares of
Company Common Stock covered by Cash Elections) and
(y) dividing the result by the Cash Amount (the "Cash
Conversion Number").
(c) If Cash Elections are received for a
number of shares of Company Common Stock which is
equal to or less than the Cash Conversion Number, each
share of Company Common Stock covered by a Cash
Election shall be converted into the right to receive
the Cash Amount in the Merger.
(d) If Cash Elections are received for a
number of shares of Company Common Stock which is more
than the Cash Conversion Number, (i) all shares of
Company Common Stock covered by a Conditional Cash
Election shall be converted into the right to receive
Parent Common Stock in the Merger and (ii) if, after
subtracting all shares of Company Common Stock covered
by Conditional Cash Elections, (x) the number of
shares of Company Common Stock covered by Cash
Elections is equal to or less than the Cash Conversion
Number, the provisions of paragraph (c) above shall
apply, or (y) the number of shares of Company Common
Stock covered by Cash Elections is more than the Cash
Conversion Number, the shares of Company Common Stock
for which Cash Elections have been received (excluding
shares covered by Conditional Cash Elections) shall be
converted into the right to receive the Cash Amount
and Parent Common Stock in the following manner:
<PAGE>
(i) A cash proration factor (the "Cash
Proration Factor") shall be determined by
dividing the Cash Conversion Number by the total
number of shares of Company Common Stock with
respect to which effective Cash Elections were
made.
(ii) The number of shares of Company
Common Stock covered by each Cash Election to be
converted into the right to receive the Cash
Amount shall be determined by multiplying the
Cash Proration Factor by the total number of
Shares of Company Common Stock covered by such
Cash Election, rounded to the next lowest
integer.
(iii) Each share of Company Common Stock
covered by a Cash Election and not converted
into the right to receive the Cash Amount as set
forth above shall be converted into the right to
receive Parent Common Stock in the Merger.
(e) Each share of Company Common Stock for
which Stock Elections have been made shall be
converted into the right to receive Parent Common
Stock in the Merger.
(f) For the purposes of this Section 4.3,
outstanding shares of Company Common Stock (other than
shares of Company Common Stock to be cancelled as set
forth in Section 4.1(d)) as to which an Election is
not in effect and effective on the Election Date shall
be called "Non-Electing Shares." If Parent shall
determine for any reason that any Election was not
properly made with respect to shares of Company Common
Stock, such Election shall be deemed to be not in
effect and shares of Company Common Stock covered by
such Election shall, for the purpose hereof, be deemed
to be Non-Electing Shares. Each Non-Electing Share
shall be converted into the right to receive Parent
Common Stock in the Merger.
4.4. Parent To Make Cash and Certificates Available;
Transfer Taxes.
(a) Parent shall make available to the Exchange
Agent promptly after the Election Date (the
"Allocation Date"), an amount in cash equal to the
cash to be paid in exchange for shares of Company
Common Stock in the Merger, including amounts to be
paid in lieu of fractional shares, and sufficient
shares of Parent Common Stock to permit the Exchange
Agent to make the distributions of cash and Parent
Common Stock provided for hereunder (such cash and
Parent Common Stock, collectively, the "Exchange
Fund"). The Exchange Agent shall not be entitled to
vote or exercise any rights of ownership with respect
to such shares held by it from time to time hereunder,
except that it shall receive and hold all dividends or
<PAGE>
other distributions paid or distributed with respect
to such shares for the account of the persons entitled
thereto.
(b) As soon as practicable after the
Allocation Date, the Exchange Agent shall distribute
to holders of shares of Company Common Stock whose
shares are to be converted into the right to receive
the Cash Amount in accordance with Section 4.1(b)(ii),
upon surrender to the Exchange Agent (to the extent
not previously surrendered with a Form of Election) of
one or more Certificates for such shares of Company
Common Stock for cancellation, a bank check for an
amount equal to the Cash Amount for each share of
Company Common Stock so converted. In no event shall
the holder of any such surrendered Certificates be
entitled to receive interest on any of the funds to be
received in the Merger. If such check is to be sent
to a person other than the person in whose name the
certificates for shares of Company Common Stock
surrendered for exchange are registered, it shall be a
condition of the exchange that the person requesting
such exchange shall pay to the Exchange Agent any
transfer or other taxes required by reason of the
delivery of such check to a person other than the
registered holder of the certificate surrendered, or
shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not
applicable.
(c) As soon as practicable after the
Allocation Date, each holder of shares of Company
Common Stock converted into the right to receive
shares of Parent Common Stock pursuant to Section
4.1(b)(i) upon surrender to the Exchange Agent (to the
extent not previously surrendered with a Form of
Election) of one or more Certificates for such shares
of Company Common Stock for cancellation, will be
entitled to receive certificates representing the
number of shares of Parent Common Stock to be issued
in respect of the aggregate number of such shares of
Company Common Stock previously represented by the
Certificates surrendered based upon the Exchange
Ratio.
(d) At or after the Effective Time, there
shall be no transfers on the stock transfer books of
the Company of the shares of Company Common Stock
which were outstanding immediately prior to the
Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving
Corporation, they shall be cancelled and exchanged for
certificates for shares of Parent Common Stock and
cash in lieu of fractional shares, if any, deliverable
in respect thereof pursuant to this Agreement in
accordance with the procedures set forth in this
Article 4. Certificates surrendered for exchange for
<PAGE>
shares of Parent Common Stock by any person
constituting an "affiliate" of the Company for
purposes of Rule 145(c) under the Securities Act of
1933, as amended (the "Securities Act"), shall not be
exchanged until Parent has received a written
agreement from such person as provided in Section 7.9.
(e) No fractional shares of Parent Common
Stock shall be issued in the Merger. In lieu of the
issuance of any fractional share of Parent Common
Stock pursuant to Section 4.1(b)(i), cash adjustments
will be paid to holders in respect of any fractional
share of Parent Common Stock that would otherwise be
issuable, and the amount of such cash adjustment shall
be equal to such fractional proportion of the Average
Price of a share of Parent Common Stock.
(f) Any portion of the Exchange Fund
(including the proceeds of any investments thereof and
any certificates representing shares of Parent Common
Stock) that remains unclaimed by the former
stockholders of the Company one (1) year after the
Effective Time shall be delivered to the Surviving
Corporation. Any former stockholders of the Company
who have not theretofore complied with this Article 4
shall thereafter look only to the Surviving
Corporation for payment of the Cash Amount or the
shares of Parent Common Stock, cash in lieu of
fractional shares and unpaid dividends and
distributions on the Parent Common Stock, as the case
may be, deliverable in respect of each share of
Company Common Stock such stockholder holds as
determined pursuant to this Agreement, in each case,
without any interest thereon.
(g) None of Parent, the Surviving Corporation,
the Exchange Agent or any other person shall be liable
to any former holder of shares of Company Common Stock
for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or
similar laws.
(h) In the event any Certificate shall have
been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by
such person of a bond in such reasonable amount as the
Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to
such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed
Certificate the Cash Amount or the shares of Parent
Common Stock and cash in lieu of fractional shares,
and unpaid dividends and distributions on shares of
Parent Common Stock, as the case may be, deliverable
in respect thereof pursuant to this Agreement.
<PAGE>
4.5. Adjustment of Exchange Ratio. In the event
that, subsequent to the date of this Agreement but prior to the
Effective Time, Parent or the Company changes the number of shares
of Parent Common Stock or Company Common Stock, respectively,
issued and outstanding as a result of a stock split, reverse stock
split, stock dividend, recapitalization or other similar
transaction, the Exchange Ratio shall be appropriately adjusted.
ARTICLE 5
5. Representations and Warranties of the Company.
Except as set forth in the disclosure letter delivered
by or on behalf of the Company to Parent and Merger Sub at or
prior to the execution hereof (the "Company Disclosure Letter"),
the Company represents and warrants to Parent and Merger Sub as
follows:
5.1. Existence; Good Standing; Corporate Authority;
Compliance With Law. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws
of Delaware. The Company is duly licensed or qualified to do
business as a foreign corporation and is in good standing under
the laws of any other state of the United States in which the
character of the properties owned or leased by it therein or in
which the transaction of its business makes such qualification
necessary, except where the failure to be so qualified would not
be material to the Company and its Subsidiaries taken as a whole.
The Company has all requisite corporate power and authority to
own, operate and lease its properties and carry on its business as
now conducted. Each of the Company's Subsidiaries is a
corporation or partnership duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of
incorporation or organization, has the corporate or partnership
power and authority to own its properties and to carry on its
business as it is now being conducted, and is duly qualified to do
business and is in good standing in each jurisdiction in which the
ownership of its property or the conduct of its business requires
such qualification, except for jurisdictions in which such failure
to be so qualified or to be in good standing would not be material
to the Company and its Subsidiaries taken as a whole. Neither the
Company nor any of its Subsidiaries is in violation of any order
of any court, governmental authority or arbitration board or
tribunal, or any law, ordinance, governmental rule or regulation
to which the Company or any of its Subsidiaries or any of their
respective properties or assets is subject, except where such
violation, individually or in the aggregate, is not and would not
reasonably be expected to be material to the Company and its
Subsidiaries taken as a whole. The Company and its Subsidiaries
have obtained all licenses, permits and other authorizations and
have taken all actions required by applicable law or governmental
regulations in connection with their business as now conducted,
where the failure to obtain any such item or to take any such
action, individually or in the aggregate, is or would reasonably
<PAGE>
be expected to be material to the Company and its Subsidiaries
taken as a whole. Neither the Company nor any of its Subsidiaries
is an "electric utility company" or "gas utility company" within
the meaning of the Public Utility Holding Company Act of 1935, as
amended. The copies of the Company's Restated Certificate of
Incorporation and By-laws previously delivered to Parent are true
and correct.
5.2. Authorization, Validity and Effect of Agreements. The
Company has the requisite corporate power and authority to execute
and deliver this Agreement and all agreements and documents
contemplated hereby. Subject only to the approval of this
Agreement and the transactions contemplated hereby by the holders
of a majority of the outstanding shares of Company Common Stock,
the consummation by the Company of the transactions contemplated
hereby has been duly authorized by all requisite corporate action.
The Board of Directors has approved each of this Agreement, the
Merger and the Stockholder Agreement, dated the date hereof (the
"Stockholder Agreement"), between Parent, Merger Sub and certain
stockholders of the Company for the purposes of Section 203 of the
DGCL. This Agreement constitutes, and all agreements and
documents contemplated hereby (when executed and delivered
pursuant hereto for value received) will constitute, the valid and
legally binding obligations of the Company, enforceable in
accordance with their respective terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating
to creditors' rights and general principles of equity.
5.3. Capitalization. The authorized capital stock of
the Company consists of 15,000,000 shares of Company Common Stock,
and 1,000,000 shares of preferred stock, par value $.01 per share
(the "Company Preferred Stock"). As of May 8, 1995, there were
6,313,950 shares of Company Common Stock issued and outstanding
and no shares of Company Preferred Stock issued and outstanding.
Since such date, no additional shares of capital stock of the
Company have been issued, except pursuant to the Option Plans set
forth on Schedule 5.3 of the Company Disclosure Letter. Except
for the warrants (the "Warrants") issued pursuant to the warrant
agreements listed in the Company Disclosure Letter, the Company
has no outstanding bonds, debentures, notes or other obligations
the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to
vote) with the stockholders of the Company on any matter. All
such issued and outstanding shares of Company Common Stock are
duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights. Other than as contemplated by this
Agreement or the Option Plans set forth on Schedule 5.3 of the
Company Disclosure Letter and except for the Warrants, there are
no options, warrants, calls, subscriptions, convertible
securities, or other rights, agreements or commitments which
obligate the Company or any of its Subsidiaries to issue, transfer
or sell any shares of capital stock of the Company or any of its
Subsidiaries or any securities exercisable for, exchangeable for
<PAGE>
or convertible into such capital stock. After the Effective Time,
the Surviving Corporation will have no obligation to issue,
transfer or sell any shares of capital stock of the Company or the
Surviving Corporation pursuant to any Company Benefit Plan (as
defined in Section 5.11).
5.4. Subsidiaries. The Company owns directly or
indirectly each of the outstanding shares of capital stock of each
of its Subsidiaries. Each of the outstanding shares of capital
stock of each of the Company's 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 local law which are not material to
the Company and its Subsidiaries taken as a whole. The following
information for each Subsidiary of the Company has been previously
provided to Parent, if applicable: (i) its name and jurisdiction
of incorporation or organization; (ii) its authorized capital
stock or equity capital; and (iii) the number of issued and
outstanding shares of capital stock or equity capital.
5.5. Other Interests. Except for interests in its
Subsidiaries, neither the Company nor any of its Subsidiaries owns
directly or indirectly any interest or investment (whether equity
or debt) in any corporation, partnership, joint venture, business,
trust or entity.
5.6. No Violation. Neither the execution and
delivery by the Company of this Agreement nor the consummation by
the Company of the transactions contemplated hereby in accordance
with the terms hereof will: (i) conflict with or result in a
breach of any provisions of the Restated Certificate of
Incorporation or By-laws of the Company; (ii) except as disclosed
in the Company Reports (as defined in Section 5.7), result in a
breach or violation of, a default under, or the triggering of any
payment or other material obligations pursuant to, or accelerate
vesting under, any of the Option Plans, or any grant or award made
under any of the foregoing; (iii) violate, or conflict with, or
result in a breach of any provision of, or constitute a default
(or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in a
right of termination or cancellation of, or accelerate the
performance required by, or result in the triggering of any
payments or obligations under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the
material properties of the Company or its Subsidiaries under, or
result in being declared void, voidable, or without further
binding effect, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust or any material
license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which the Company or any
of its Subsidiaries is a party, or by which the Company or any of
its Subsidiaries or any of their properties is bound or affected,
except for any of the foregoing matters which, individually or in
the aggregate, are not and would not reasonably be expected to be
material to the Company and its Subsidiaries taken as a whole; or
(iv) other than the filings provided for in Article 1, certain
federal, state and local regulatory filings, filings required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the "HSR Act"), the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Securities Act or applicable state
securities and "Blue Sky" laws or filings in connection with the
maintenance of qualification to do business in other jurisdictions
(collectively, the "Regulatory Filings"), require any consent,
approval or authorization of, or declaration, filing or
registration with, any domestic governmental or regulatory
authority, the failure to obtain or make which would be material
to the Company and its Subsidiaries taken as a whole. The Company
has waived any and all rights of the Company which may arise under
the Buy-Sell Agreement, dated April 8, 1991, by and among the
Company and Robert G. Phillips by virtue of the transactions
contemplated by this Agreement or the Stockholder Agreement.
5.7. SEC Documents. The Company has delivered to
Parent each registration statement, report, proxy statement or
information statement prepared by it since December 31, 1992, each
in the form (including exhibits and any amendments thereto) filed
with the Securities and Exchange Commission (the "SEC")
(collectively, the "Company Reports"). As of their respective
dates, the Company Reports (i) were prepared in all material
respects in accordance with the applicable requirements of the
Securities Act, the Exchange Act, and the respective rules and
regulations thereunder and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
made therein, in the light of the circumstances under which they
were made, not misleading. Each of the consolidated balance
sheets of the Company included in or incorporated by reference
into the Company Reports (including the related notes and
schedules) fairly presents the consolidated financial position of
Company and the Company Subsidiaries as of its date and each of
the consolidated statements of income, retained earnings and cash
flows of the Company included in or incorporated by reference into
the Company Reports (including any related notes and schedules)
fairly presents the results of operations, retained earnings or
cash flows, as the case may be, of the Company and its
Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments
which would not be material in amount or effect), in each case in
accordance with generally accepted accounting principles
consistently applied during the periods involved, except as may be
noted therein. Except as and to the extent set forth on the
consolidated balance sheet of the Company and its Subsidiaries at
December 31, 1994, including all notes thereto, or as set forth in
the Company Reports, neither the Company nor any of its
Subsidiaries has any material liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise),
except liabilities arising in the ordinary course of business
since such date.
5.8. Litigation. Except as disclosed in the Company
Reports filed with the SEC prior to the date of this Agreement,
<PAGE>
there are no actions, suits or proceedings pending against the
Company or any of its Subsidiaries or, to the actual knowledge of
the executive officers of the Company, threatened against the
Company or any of its Subsidiaries, at law or in equity, or before
or by any federal or state commission, board, bureau, agency or
instrumentality, that, individually or in the aggregate, are or
would reasonably be expected to be material to the Company and its
Subsidiaries taken as a whole.
5.9. Absence of Certain Changes. Except as disclosed
in the Company Reports filed with the SEC prior to the date of
this Agreement, since December 31, 1994, the Company has conducted
its business only in the ordinary course of such business
consistent with past practice and there has not been (i) any event
or events which, individually or in the aggregate, have or would
reasonably be expected to have a material adverse effect on the
business, financial condition, results of operations, assets,
liabilities or prospects of the Company and its Subsidiaries taken
as a whole, (ii) any declaration, setting aside or payment of any
dividend or other distribution with respect to its capital stock
or any redemption or repurchase of any shares of its capital
stock, (iii) any material change in its accounting principles,
practices or methods, (iv) any increase in the salaries or other
compensation payable to any officer, director or employee of the
Company or any of its Subsidiaries (except for normal increases in
the ordinary course of business consistent with past practice) or
any increase in, or addition to, other benefits to which any
officer, director or employee may be entitled (except as required
by the terms of plans as in effect on the date of this Agreement
or as required by law), (v) any incurrence of indebtedness for
borrowed money (except in the ordinary course of business
consistent with past practice), (vi) any material adverse change
or threat of a material adverse change in the Company's or any of
its Subsidiaries' relations with, or any loss or threat of loss
of, any of the Company's important suppliers or customers, (vii)
any termination, cancellation or waiver of any contract or other
right material to the operation of the business of the Company and
its Subsidiaries taken as a whole or (viii) any material damage,
destruction or loss, whether or not covered by insurance,
adversely affecting the properties, business or prospects of the
Company and its Subsidiaries taken as a whole, or any
deterioration in the operating condition of the assets of the
Company and its Subsidiaries which would be material to the
Company and its Subsidiaries taken as a whole.
5.10. Taxes. The Company and each of its Subsidiaries
(i) have timely filed all material federal, state and foreign tax
returns required to be filed by any of them for tax years ended
prior to the date of this Agreement or requests for extensions
have been timely filed and any such request shall have been
granted and not expired and all such returns are complete in all
material respects, (ii) have paid or accrued all taxes that may be
due and payable with respect to such returns, (iii) have properly
accrued in all material respects all such taxes for such periods
<PAGE>
subsequent to the periods covered by such returns, and (iv) have
"open" years for federal income tax returns only as set forth in
the Company Reports.
5.11 Certain Employee Plans.
(a) Each employee benefit or compensation plan
or arrangement, including each "employee benefit
plan," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended
("ERISA") maintained by the Company or any of its
Subsidiaries (the "Company Benefit Plans") complies,
and has been administered, in all material respects in
accordance with all applicable requirements of law,
and no "reportable event" or "prohibited transaction"
(as such terms are defined in ERISA) or termination
has occurred with respect to any Company Benefit Plan
under circumstances which present a risk of liability
by the Company or any of its Subsidiaries to any
governmental entity or other person, including a
Company Benefit Plan, which liability would be
material to the Company and its Subsidiaries taken as
a whole. The Company Benefit Plans are listed on
Schedule 5.11(a) and copies or descriptions of all
material Company Benefit Plans have previously been
provided to Parent.
(b) Each Company Benefit Plan intended to
qualify under Section 401(a) of the Code is so
qualified and a determination letter has been issued
by the Internal Revenue Service ("IRS") with respect
to the qualification of each Company Benefit Plan and
no circumstances exist which would adversely affect
such qualification. Each Company Benefit Plan which
is subject to Part 3 of Subtitle B of Title I of ERISA
or Section 412 of the Code has been maintained in
compliance with the minimum funding standards of ERISA
and the Code and no such Company Benefit Plan has
incurred any "accumulated funding deficiency" (as
defined in Section 412 of the Code and Section 302 of
ERISA), whether or not waived. Neither the Company
nor any of its Subsidiaries has sought or received a
waiver of its minimum funding requirements with
respect to any Company Benefit Plan. Neither Company
nor any of its Subsidiaries has incurred, nor
reasonably expects to incur, any liability in respect
of any Company Benefit Plan under Title IV of ERISA
(other than with respect to the payment of premiums),
which liability would be material to the Company and
its Subsidiaries taken as a whole. Neither the
Company nor any of its Subsidiaries has incurred any
material withdrawal liability under any "multiemployer
plan" within the meaning of Section 3(37) of ERISA
which has not been satisfied in full nor do any of
them reasonably expect to incur such liability.
<PAGE>
(c) Except as required by applicable law or as
set forth on Schedule 5.11(c), neither the Company nor
any of its Subsidiaries provides any health, welfare
or life insurance benefits to any of their former or
retired employees.
(d) Except as disclosed on Schedule 5.11(d),
no payment or benefit which will or may be made by the
Company or any of its Subsidiaries will be
characterized as an "excess parachute payment" within
the meaning of Section 280G(b)(1) of the Code.
5.12. Labor Matters. Neither the Company nor any of
its Subsidiaries is a party to, or bound by, any collective
bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization. There is no unfair
labor practice or labor arbitration proceeding pending or, to the
actual knowledge of the executive officers of the Company,
threatened against the Company or its Subsidiaries relating to
their business, except for any such proceeding which, individually
or in the aggregate, is not and would not reasonably be expected
to be material to the Company and its Subsidiaries taken as a
whole. To the actual knowledge of the executive officers of the
Company, there are no organizational efforts with respect to the
formation of a collective bargaining unit presently being made or
threatened involving employees of the Company or any of its
Subsidiaries.
5.13. No Brokers. The Company has not entered into
any contract, arrangement or understanding with any person or firm
which may result in the obligation of the Company or Parent to pay
any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated
hereby, except that the Company has retained Rauscher Pierce
Refsnes, Inc., the arrangements with which have been disclosed in
writing to Parent prior to the date hereof. Other than the
foregoing arrangements, 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 negotiations leading to
this Agreement or the consummation of the transactions
contemplated hereby.
5.14. Fairness Opinion. The Company has received the
opinion of Rauscher Pierce Refsnes, Inc., to the effect that, as
of the date of this Agreement, the Merger Consideration is fair to
the holders of Company Common Stock.
5.15. Environmental Matters.
(a) For the purposes of this Agreement:
"Environmental Matters" means any matter arising
out of, relating to or resulting from pollution, protection of the
<PAGE>
environment and human health or safety, health or safety of
employees, sanitation, and any matters relating to emissions,
discharges, releases or threatened releases of Hazardous Materials
or otherwise arising out of, resulting from or relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
"Environmental Costs" means, without limitation,
any actual or potential cleanup costs, remediation, removal, or
other response costs, investigation costs, losses, liabilities or
obligations, payments, damages, civil or criminal fines or
penalties, judgments, and amounts paid in settlement arising out
of or relating to or resulting from any Environmental Matter.
"Environmental Laws" means, without limitation,
the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. 9601 et seq., the Emergency Planning
and Community Right-to-Know Act of 1986, 42 U.S.C. 11001 et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. 6901
et seq., the Toxic Substances Control Act, 15 U.S.C. 2601
et seq., the Federal Insecticide, Fungicide, and
Rodenticide Act, 7 U.S.C. 136 et seq., the Clean Air Act, 42
U.S.C. 7401 et seq., the Clean Water Act (Federal Water
Pollution Control Act), 33 U.S.C. 1251 et seq., the Safe
Drinking Water Act, 42 U.S.C. 300f et seq., the Occupational
Safety and Health Act, 29 U.S.C. 641 et seq., the Hazardous
Materials Transportation Act, 49 U.S.C. 1801 et seq., as any of
the above statutes have been or may be amended from time to time,
all rules and regulations promulgated pursuant to any of the above
statutes, and any other foreign, federal, state or local law,
statute, ordinance, rule or regulation governing Environmental
Matters, as the same have been or may be amended from time to
time, including any common law cause of action providing any right
or remedy with respect to Environmental Matters, and all
applicable judicial and administrative decisions, orders, and
decrees relating to Environmental Matters.
"Hazardous Materials" means any pollutants,
contaminants, or hazardous or toxic substances, materials, wastes,
constituents or chemicals that are regulated by, or form the basis
for liability under, any Environmental Laws.
(b) (i) The Company and each of its
Subsidiaries is in compliance in all material respects with all
applicable Environmental Laws.
(ii) The Company and each of its
Subsidiaries has obtained, and is in compliance in all material
respects with, all permits, licenses, authorizations,
registrations and other governmental consents ("Environmental
Permits") required to be obtained by it by applicable
Environmental Laws for the use, storage, treatment,
transportation, release, emission and disposal of raw materials,
by-products, wastes and other substances used or produced by or
otherwise relating to its business.
<PAGE>
(iii) All such Environmental Permits are
in all material respects in full force and effect, and the Company
and each of its Subsidiaries has made all appropriate filings for
issuance or renewal of such Environmental Permits.
(iv) There are no Hazardous Materials in
amounts required to be remediated under applicable Environmental
Laws at, on, under or within any real property owned, leased or
occupied by the Company or any of its Subsidiaries.
(v) There are no material claims,
notices, civil, criminal or administrative actions, suits,
hearings, investigations, inquiries or proceedings pending or
threatened that are based on or related to any Environmental
Matters or the failure to have any required Environmental Permits.
(vi) Neither the Company nor any of its
Subsidiaries has used any waste disposal site, or otherwise
disposed of, transported, or arranged for the transportation of,
any Hazardous Materials to any place or location, in violation of
any Environmental Laws.
(vii) There are no underground storage
tanks or surface impoundments at, on, under or within any of real
property owned, leased or occupied by the Company or any of its
Subsidiaries, or any portion thereof.
(viii) None of the Company or its
Subsidiaries has received any notice asserting that it may be a
potentially responsible party at any waste disposal site or other
location used for the disposal of any Hazardous Materials.
5.16. Related Party Transactions. There are no
contracts, arrangements or transactions in effect between the
Company or any of its Subsidiaries, on the one hand, and any
officer, director or 5% stockholder of the Company, or any
affiliate or immediate family member of any of the foregoing
persons, on the other hand, except as set forth in the Company
Disclosure Letter.
ARTICLE 6
6. Representations and Warranties
of Parent and Merger Sub.
Except as set forth in the disclosure letter delivered
by or on behalf of Parent or Merger Sub to the Company at or prior
to the execution hereof (the "Parent Disclosure Letter"), Parent
and Merger Sub represent and warrant to the Company as follows:
6.1. Existence; Good Standing; Corporate Authority;
Compliance with Law. Each of Parent and Merger Sub is a
corporation duly incorporated, validly existing and in good
<PAGE>
standing under the laws of its jurisdiction of incorporation.
Parent is duly licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of any other
state of the United States in which the character of the
properties owned or leased by it therein or in which the
transaction of its business makes such qualification necessary,
except where the failure to be so qualified would not be material
to Parent and its Subsidiaries taken as a whole. Parent has all
requisite corporate power and authority to own, operate and lease
its properties and carry on its business as now conducted.
Neither Parent nor any of its Subsidiaries is in violation of any
order of any court, governmental authority or arbitration board or
tribunal, or any law, ordinance, governmental rule or regulation
to which Parent or any of its Subsidiaries or any of their
respective properties or assets is subject, except where such
violation, individually or in the aggregate, is not and would not
reasonably be expected to be material to Parent and its
Subsidiaries taken as a whole. Parent and its Subsidiaries have
obtained all licenses, permits and other authorizations and have
taken all actions required by applicable law or governmental
regulations in connection with their business as now conducted,
where the failure to obtain any such item or to take any such
action, individually or in the aggregate, is or would reasonably
be expected to be material to Parent and its Subsidiaries taken as
a whole.
6.2. Authorization, Validity and Effect of Agreements.
Each of Parent and Merger Sub has the requisite corporate power
and authority to execute and deliver this Agreement and all
agreements and documents contemplated hereby. The consummation by
Parent and Merger Sub of the transactions contemplated hereby has
been duly authorized by all requisite corporate action. This
Agreement constitutes, and all agreements and documents
contemplated hereby (when executed and delivered pursuant hereto
for value received) will constitute, the valid and legally binding
obligations of Parent and Merger Sub, enforceable in accordance
with their respective terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
6.3. No Violation. Neither the execution and
delivery by Parent and Merger Sub of this Agreement, nor the
consummation by Parent and Merger Sub of the transactions
contemplated hereby in accordance with the terms hereof, will:
(i) conflict with or result in a breach of any provisions of the
Certificate of Incorporation or By-laws of Parent or Merger Sub;
(ii) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default)
under, or result in the termination or in a right of termination
or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or
encumbrance upon any of the material properties of Parent or its
Subsidiaries under, or result in being declared void, voidable, or
without further binding effect, any of the terms, conditions or
<PAGE>
provisions of any note, bond, mortgage, indenture, deed of trust
or any material license, franchise, permit, lease, contract,
agreement or other instrument, commitment or obligation to which
Parent or any of its Subsidiaries is a party, or by which Parent
or any of its Subsidiaries or any of their properties is bound or
affected, except for any of the foregoing matters which would not
reasonably be expected to be material to Parent and its
Subsidiaries taken as a whole; or (iii) other than the Regulatory
Filings, require any material consent, approval or authorization
of, or declaration, filing or registration with, any domestic
governmental or regulatory authority, the failure to obtain or
make which would be material to Parent and its Subsidiaries taken
as a whole.
6.4. No Brokers. Neither Parent nor any of its
Subsidiaries has entered into any contract, arrangement or
understanding with any person or firm which may result in the
obligation of the Company or Parent to pay any finder's fees,
brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby, except that
Parent has retained Rodman & Renshaw, Inc. Other than the
foregoing arrangements, Parent 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 negotiations leading to
this Agreement or the consummation of the transactions
contemplated hereby.
6.5. Capitalization. The authorized capital stock of
Parent consists of 100,000,000 shares of Parent Common Stock and
25,000,000 shares of preferred stock, $.01 par value (the "Parent
Preferred Stock"). As of April 30, 1995, there were 35,004,939
shares of Parent Common Stock issued and outstanding (not
including 430,000 shares of Parent Common Stock deposited in
Parent's Benefits Protection Trust) and no shares of Parent
Preferred Stock issued and outstanding. Other than as
contemplated by this Agreement or as set forth in the Parent
Reports (as defined in Section 6.6) or on Schedule 6.5 of the
Parent Disclosure Letter, as of the date of this Agreement, there
are no options, warrants, calls, subscriptions, convertible
securities, or other rights, agreements or commitments which
obligate Parent or any of its Subsidiaries to issue any shares of
capital stock of Parent or any securities exercisable for,
exchangeable for or convertible into such capital stock.
6.6. SEC Documents. Parent has delivered to the
Company each registration statement, report, proxy statement or
information statement prepared by it since December 31, 1992, each
in the form (including exhibits and any amendments thereto) filed
with the SEC (collectively, the "Parent Reports"). As of their
respective dates, the Parent Reports (i) were prepared in all
material respects in accordance with the applicable requirements
of the Securities Act, the Exchange Act, and the respective rules
and regulations thereunder and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
made therein, in the light of the circumstances under which they
were made, not misleading. Each of the consolidated balance
<PAGE>
sheets included in or incorporated by reference into the Parent
Reports (including the related notes and schedules) fairly
presents the consolidated financial position of Parent and the
Parent Subsidiaries as of its date and each of the consolidated
statements of income, retained earnings and cash flows included in
or incorporated by reference into the Parent Reports (including
any related notes and schedules) fairly presents the results of
operations, retained earnings or cash flows, as the case may be,
of Parent and the Parent Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to normal
year-end audit adjustments which would not be material in amount
or effect), in each case in accordance with generally accepted
accounting principles consistently applied during the periods
involved, except as may be noted therein. As of the date of this
Agreement, except as and to the extent set forth on the
consolidated balance sheet of Parent and its Subsidiaries at
December 31, 1994, including all notes thereto, or as set forth in
the Parent Reports, neither Parent nor any of its Subsidiaries has
any material liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise), except liabilities
arising in the ordinary course of business since such date.
6.7. Litigation. Except as disclosed in the Parent
Reports filed with the SEC prior to the date of this Agreement,
there are no actions, suits or proceedings pending against Parent
or any of its Subsidiaries or, to the actual knowledge of the
executive officers of Parent, threatened against Parent or any of
its Subsidiaries, at law or in equity, or before or by any federal
or state commission, board, bureau, agency or instrumentality,
that, individually or in the aggregate, are or would reasonably be
expected to be material to Parent and its Subsidiaries taken as a
whole.
6.8. Absence of Certain Changes. Since December 31,
1994, there has not been any event or events which, individually
or in the aggregate, have a material adverse effect on the
business, financial condition, results of operations, assets or
liabilities of Parent and its Subsidiaries taken as a whole (other
than changes resulting from general economic, industry or market
conditions or business combinations proposed, announced or
consummated after the date of this Agreement).
6.9. Parent Common Stock. The issuance and delivery
by Parent of shares of Parent Common Stock in connection with the
Merger and this Agreement have been duly and validly authorized by
all necessary corporate action on the part of Parent. The shares
of Parent Common Stock to be issued in connection with the Merger
and this Agreement, when issued in accordance with the terms of
this Agreement, will be validly issued, fully paid and
nonassessable.
<PAGE>
ARTICLE 7
7. Covenants.
7.1. Acquisition Proposals. Prior to the Effective
Time, the Company agrees (a) that neither the Company nor any of
its Subsidiaries shall, and the Company shall direct and use its
best efforts to cause its officers, directors, employees, agents
and representatives (including, without limitation, any investment
banker, attorney or accountant retained by it or any of its
Subsidiaries) not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any
proposal or offer (including, without limitation, any proposal or
offer to its stockholders) with respect to a merger, acquisition,
consolidation or similar transaction involving, or any purchase of
all or any significant portion of the assets or any equity
securities of, the Company or any of its Subsidiaries (any such
proposal or offer being hereinafter referred to as an "Acquisition
Proposal") or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions
with, any person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an
Acquisition Proposal; (b) that it will immediately cease and cause
to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to
any of the foregoing and will take the necessary steps to inform
the individuals or entities referred to above of the obligations
undertaken in this Section 7.1; and (c) that it will notify Parent
immediately if any such inquiries or proposals are received by,
any such information is requested from, or any such negotiations
or discussions are sought to be initiated or continued with it;
provided, however, that nothing contained in this Section 7.1
shall prohibit the Board of Directors of the Company from (i)
furnishing information to or entering into discussions or
negotiations with, any person or entity that makes an unsolicited
bona fide written proposal to acquire the Company pursuant to a
merger, consolidation, share exchange, business combination or
other similar transaction, if, and only to the extent that, (A)
the Board of Directors of the Company determines in good faith,
based as to legal matters on the written opinion of outside legal
counsel, that such action is required for the Board of Directors
to comply with its fiduciary duties to stockholders imposed by
law, (B) prior to furnishing such information to, or entering into
discussions or negotiations with, such person or entity, the
Company provides written notice to Parent to the effect that it is
furnishing information to, or entering into discussions or
negotiations with, such person or entity and provides Parent with
a copy of any such written proposal, and (C) the Company keeps
Parent informed of the status and the terms of any such
discussions or negotiations; and (ii) to the extent applicable,
complying with Rule 14e-2 promulgated under the Exchange Act with
regard to an Acquisition Proposal. Nothing in this Section 7.1
shall (x) permit the Company to terminate this Agreement,
(y) permit the Company to enter into any agreement with respect to
an Acquisition Proposal during the term of this Agreement or any
<PAGE>
other agreement with any person that provides for, or in any way
facilitates, an Acquisition Proposal, or (z) affect any other
obligation of any party under this Agreement.
7.2. Conduct of Businesses. Prior to the Effective
Time, except as specifically set forth in the Company Disclosure
Letter or as contemplated by any other provision of this
Agreement, unless Parent has consented in writing thereto, the
Company:
(a) shall, and shall cause each of its
Subsidiaries to, conduct its operations according to its usual,
regular and ordinary course in substantially the same manner as
heretofore conducted;
(b) shall use its reasonable efforts, and
shall cause each of its respective Subsidiaries to use its
reasonable efforts, to preserve intact its business organization
and goodwill, keep available the services of its officers and
employees and maintain satisfactory relationships with those
persons having business relationships with it;
(c) shall confer on a regular basis with one
or more representatives of Parent to report operational matters of
materiality and any proposals to engage in material transactions;
(d) shall not amend its organizational
documents;
(e) shall promptly notify Parent of (i) any
material emergency or other material change in the condition
(financial or otherwise) of the Company's or any Subsidiary's
business, properties, assets, liabilities, prospects or the normal
course of its businesses or in the operation of its properties,
(ii) any material litigation or material governmental complaints,
investigations or hearings (or communications indicating that the
same may be contemplated), or (iii) the breach in any material
respect of any representation or warranty or covenant contained
herein;
(f) shall promptly deliver to Parent true and
correct copies of any report, statement or schedule filed by the
Company with the SEC subsequent to the date of this Agreement;
(g) shall not (i) except pursuant to the
exercise of options, warrants, conversion rights and other
contractual rights existing on the date of this Agreement and
disclosed in the Company Disclosure Letter, issue any shares of
its capital stock, effect any stock split or otherwise change its
capitalization as it exists on the date of this Agreement, (ii)
grant, confer or award any option, warrant, conversion right or
other right not existing on the date hereof to acquire any shares
of its capital stock from the Company, (iii) increase any <PAGE>
compensation or enter into or amend any employment, severance,
termination or similar agreement with any of its present or future
officers or directors, except for normal increases in compensation
to employees consistent with past practice and the payment of cash
bonuses to employees pursuant to and consistent with existing
plans or programs, or (iv) adopt any new employee benefit plan
(including any stock option, stock benefit or stock purchase plan)
or amend any existing employee benefit plan in any material
respect, except for changes which are less favorable to
participants in such plans or as may be required by applicable
law;
(h) shall not (i) declare, set aside or pay
any dividend or make any other distribution or payment with
respect to any shares of its capital stock; (ii) directly or
indirectly redeem, purchase or otherwise acquire any shares of its
capital stock or capital stock of any of its Subsidiaries, or make
any commitment for any such action or (iii) split, combine or
reclassify any of its capital stock;
(i) shall not, and shall not permit any of its
Subsidiaries to sell, lease or otherwise dispose of any of its
assets (including capital stock of Subsidiaries) which are
material, individually or in the aggregate, except in the ordinary
course of business;
(j) shall not (i) incur or assume any long-
term or short-term debt or issue any debt securities except for
borrowings under existing lines of credit in the ordinary course
of business; (ii) except for obligations of wholly owned
Subsidiaries of the Company, assume, guaranty, endorse or
otherwise become liable or responsible (whether directly,
indirectly, contingently or otherwise) for the obligations of any
other person except in the ordinary course of business consistent
with past practices in an amount not material to the Company and
its Subsidiaries, taken as a whole; (iii) other than wholly owned
Subsidiaries of the Company, make any loans, advances or capital
contributions to, or investments in, any other person; (iv) modify
in any manner adverse to the Company or any of its Subsidiaries
any outstanding indebtedness or obligation of the Company or any
of its Subsidiaries; (v) pledge or otherwise encumber shares of
capital stock of the Company or its Subsidiaries; or (vi) mortgage
or pledge any of its material assets, tangible or intangible, or
create or suffer to create any material mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect to
such asset;
(k) shall not acquire, sell, lease or dispose
of any assets outside the ordinary course of business or any
assets which in the aggregate are material to the Company and its
Subsidiaries taken as a whole, or enter into any commitment or
transaction outside the ordinary course of business consistent
with past practices which would be material to the Company and its
Subsidiaries taken as a whole;
(l) shall not change any of the accounting
principles or practices used by the Company;
<PAGE>
(m) shall not (i) acquire (by merger,
consolidation or acquisition of stock or assets) any corporation,
partnership or other business organization or division thereof or
any equity interest therein; (ii) enter into any contract or
agreement other than in the ordinary course of business consistent
with past practice which would be material to the Company and its
Subsidiaries taken as a whole; (iii) authorize any new capital
expenditure or expenditures which, individually, is in excess of
$50,000 or, in the aggregate, are in excess of $150,000; provided,
that none of the foregoing shall limit any capital expenditure
within the aggregate amount previously authorized by the Company's
Board of Directors for capital expenditures, written evidence of
which has been previously provided to Parent; or (iv) enter into
or amend any contract, agreement, commitment or arrangement
providing for the taking of any action which would be prohibited
hereunder;
(n) shall not make any tax election or settle
or compromise any income tax liability material to the Company and
its Subsidiaries taken as a whole;
(o) shall not pay, discharge or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business of
liabilities reflected, reserved against or disclosed in the
consolidated financial statements (or the notes thereto) of the
Company and its Subsidiaries or incurred in the ordinary course of
business consistent with past practice;
(p) shall not settle or compromise any pending
or threatened suit, action or claim relating to the transactions
contemplated hereby; or
(q) shall not take, or agree in writing or
otherwise to take, any of the actions described in Section 7.2(a)
through 7.2(p) or any action that would make any of the
representations and warranties of the Company contained in this
Agreement untrue or incorrect as of the date when made.
7.3. Meeting of Stockholders. The Company will take
all action necessary in accordance with applicable law and its
Restated Certificate of Incorporation and By-laws to convene a
meeting of its stockholders as promptly as practicable to consider
and vote upon the approval of this Agreement and the transactions
contemplated hereby. The Board of Directors of the Company shall
recommend such approval and the Company shall take all lawful
action to solicit such approval, including, without limitation,
timely mailing the Proxy Statement/Prospectus (as defined in
Section 7.7); provided, however, that such recommendation or
solicitation is subject to any action taken by, or upon authority
of, the Board of Directors of the Company in the exercise of its
good faith judgment as to its fiduciary duties to its stockholders
imposed by law.
<PAGE>
7.4. Filings; Other Action. Subject to the terms and
conditions herein provided, the Company and Parent shall:
(a) promptly make their respective filings and thereafter make any
other required submissions under the HSR Act with respect to the
Merger; (b) use all reasonable efforts to cooperate with one
another in (i) promptly determining which filings are required to
be made prior to the Effective Time with, and which consents,
approvals, permits or authorizations are required to be obtained
prior to the Effective Time from, governmental or regulatory
authorities of the United States, the several states and foreign
jurisdictions in connection with the execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby and (ii) timely making all such filings and
timely seeking all such consents, approvals, permits or
authorizations; and (c) use all reasonable efforts to take, or
cause to be taken, all other action and do, or cause to be done,
all other things necessary, proper or appropriate to promptly
consummate and make effective the transactions contemplated by
this Agreement. Each of Parent and the Company will use all
reasonable efforts to resolve such objections, if any, as may be
asserted with respect to the Merger under the HSR Act or other
antitrust laws. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purpose
of this Agreement, the proper officers and directors of Parent and
the Company shall take all such necessary action.
7.5. Inspection of Records; Access. From the date of
this Agreement to the Effective Time, the Company shall allow all
designated officers, attorneys, accountants and other
representatives of Parent ("Parent's Representatives") access at
all reasonable times to all employees, plants, offices,
warehouses, transmission facilities and other facilities and to
the records and files, correspondence, audits and properties, as
well as to all information relating to commitments, contracts,
titles and financial position, or otherwise pertaining to the
business and affairs, of the Company and its Subsidiaries;
provided, however, that Parent's Representatives shall use their
reasonable best efforts to avoid unreasonably interfering with,
hindering or otherwise disrupting the employees of the Company in
the execution of their employment duties during any visit to, or
inspection of, the Company's facilities. From the date of this
Agreement to the Effective Time, but not more frequently than once
in any 30-day period, Parent shall allow all designated officers,
attorneys, accountants, and other representatives of the Company
access during regular business hours upon reasonable notice to
Parent's officers and, to the extent relevant thereto, to the
records and files of Parent and its Subsidiaries, for the purpose
of confirming the accuracy of the representations and warranties
of Parent and Merger Sub set forth in this Agreement.
7.6. Publicity. The initial press release relating
to this Agreement shall be a joint press release and thereafter
the Company and Parent shall, subject to their respective legal
obligations (including requirements of stock exchanges and other
similar regulatory bodies), consult with each other, and use
<PAGE>
reasonable efforts to agree upon the text of any press release,
before issuing any such press release or otherwise making public
statements with respect to the transactions contemplated hereby
and in making any filings with any federal or state governmental
or regulatory agency or with any national securities exchange with
respect thereto.
7.7. Registration Statement. Parent and the Company
shall cooperate and promptly prepare and Parent shall file with
the SEC as soon as practicable a Registration Statement on Form S-
4 (the "Form S-4") under the Securities Act, with respect to the
Parent Common Stock issuable in connection with the transactions
contemplated by this Agreement, a portion of which Registration
Statement shall also serve as the proxy statement with respect to
the meeting of the stockholders of the Company in connection with
the Merger (the "Proxy Statement/Prospectus"). The respective
parties will cause the Proxy Statement/Prospectus and the Form S-4
to comply as to form in all material respects with the applicable
provisions of the Securities Act, the Exchange Act and the rules
and regulations thereunder. Parent shall use all reasonable
efforts, and the Company will cooperate with Parent, to have the
Form S-4 declared effective by the SEC as promptly as practicable.
Parent shall use its best efforts to obtain, prior to the
effective date of the Form S-4, all necessary state securities law
or "Blue Sky" permits or approvals required to carry out the
transactions contemplated by this Agreement and will pay all
expenses incident thereto. Parent agrees that the Proxy
Statement/Prospectus and each amendment or supplement thereto, at
the time of the mailing thereof and at the time of the meeting of
stockholders of the Company, or, in the case of the Form S-4 and
each amendment or supplement thereto, at the time it is filed or
becomes effective, will not include an untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading; provided, however, that the foregoing shall not apply
to the extent that any such untrue statement of a material fact or
omission to state a material fact was made by Parent in reliance
upon and in conformity with written information concerning the
Company furnished to Parent by the Company specifically for use in
the Proxy Statement/Prospectus or the Form S-4. The Company
agrees that the information provided by it for inclusion in the
Proxy Statement/Prospectus and each amendment or supplement
thereto, at the time of mailing thereof and at the time of the
meeting of stockholders of the Company, or, in the case of
information provided by the Company for inclusion in the Form S-4
or any amendment or supplement thereto, at the time it is filed or
becomes effective, will not include an untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading. No amendment or supplement to the Proxy
Statement/Prospectus will be made by Parent or the Company without
the approval of the other party. Parent will advise the Company,
promptly after it receives notice thereof, of the time when the
Form S-4 has become effective or any supplement or amendment has
been filed, the issuance of any stop order, the suspension of the
<PAGE>
qualification of the Parent Common Stock issuable in connection
with the transactions contemplated by this Agreement for offering
or sale in any jurisdiction, or any request by the SEC for
amendment of the Proxy Statement/Prospectus or the Form S-4 or
comments thereon and responses thereto or requests by the SEC for
additional information.
7.8. Listing Application. Parent shall promptly
prepare and submit to the NYSE a listing application covering the
shares of Parent Common Stock (and associated Rights) issuable in
connection with the transactions contemplated by this Agreement,
and shall use its best efforts to obtain, prior to the Effective
Time, approval for the listing of such Parent Common Stock (and
associated Rights), subject to official notice of issuance.
7.9.
Agreements by Affiliated Stockholders of the Company. At
least 30 days prior to the Closing Date, the Company shall deliver
to Parent a list of names and addresses of those persons who were,
in the Company's reasonable judgment, at the record date for its
stockholders' meeting to approve the Merger, "affiliates" (each
such person, an "Affiliate") of the Company within the meaning of
Rule 145 of the rules and regulations promulgated under the
Securities Act ("Rule 145"). The Company shall provide Parent
such information and documents as Parent shall reasonably request
for purposes of reviewing such list. The Company shall deliver or
cause to be delivered to Parent, prior to the Closing Date, from
each of the Affiliates of the Company identified in the foregoing
list, an Affiliate Letter in the form attached hereto as
Exhibit A. Parent shall be entitled to place legends as specified
in such Affiliate Letters on the certificates evidencing any
Parent Common Stock to be received by such Affiliates pursuant to
the terms of this Agreement, and to issue appropriate stop
transfer instructions to the transfer agent for the Parent Common
Stock, consistent with the terms of such Affiliate Letters.
7.10. Further Action. Each party hereto shall,
subject to the fulfillment at or before the Effective Time of each
of the conditions of performance set forth herein or the waiver
thereof, perform such further acts and execute such documents as
may be reasonably required to effect the Merger.
7.11. Expenses. Whether or not the Merger is
consummated, except as provided in Section 9.5(b), all costs and
expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party
incurring such expenses.
7.12. Indemnification and Insurance.
(a) Parent shall cause the Surviving
Corporation to keep in effect provisions in its Certificate of
Incorporation and By-laws providing for exculpation of director
and officer liability and indemnification of the indemnified
parties under the Company's Restated Certificate of Incorporation
and By-laws (the "Indemnified Parties") to the fullest extent
<PAGE>
permitted under the DGCL, which provisions shall not be amended
except as required by applicable law or except to make changes
permitted by law that would enlarge the Indemnified Parties' right
of indemnification.
(b) The provisions of this Section shall
survive the consummation of the Merger and expressly are intended
to benefit each of the Indemnified Parties.
(c) For a period of three years after the
Effective Time, Parent shall cause to be maintained officers' and
directors' liability insurance covering the parties who are
currently covered, in their capacities as officers and directors,
by the Company's existing officers' and directors' liability
insurance policies on terms substantially no less advantageous to
such parties than such existing insurance; provided, however, that
Parent shall not be required, in order to maintain or procure such
coverage, to pay premiums in excess of $250,000 in the aggregate
over such three year period (the "Cap"); and provided, further,
that if equivalent coverage cannot be obtained, or can be obtained
only by paying an amount in excess of the Cap, Parent shall only
be required to obtain such coverage for such three-year period as
can be obtained by paying aggregate premiums equal to the Cap.
7.13. Certain Benefits.
(a) From and after the Effective Time, subject
to applicable law, Parent and its Subsidiaries will honor in
accordance with their terms, all Company Benefit Plans; provided,
however, that nothing herein shall preclude any change effected on
a prospective basis in any Company Benefit Plan.
(b) The Surviving Corporation shall employ at
the Effective Time all employees of the Company and its
Subsidiaries who are employed on the Closing Date on terms
consistent with the Company's current employment practices and at
comparable levels of compensation and positions. Subject to the
obligations of the Surviving Corporation under the employment
agreements and amendments to employment agreements described in
Section 8.3(d), such employment shall be at will and Parent and
the Surviving Corporation shall be under no obligation to continue
to employ any individuals.
7.14. Reorganization. From and after the date hereof
and until the Effective Time, neither Parent nor the Company nor
any of their respective subsidiaries or other affiliates shall
knowingly take any action, or knowingly fail to take any action,
that would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code or
enter into any contract, agreement, commitment or arrangement with
respect to the foregoing. Following the Effective Time, Parent
shall use its best efforts to conduct its business in a manner
<PAGE>
that would not jeopardize the characterization of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
7.15. Purchase of Company Common Stock. The Company
acknowledges and agrees that, subject to Section 7.14, nothing in
this Agreement shall restrict Parent or Merger Sub from acquiring
shares of Company Common Stock in open market or private
transactions between the date of this Agreement and the Closing
Date.
7.16. Headquarters of the Surviving Corporation;
Operations. Parent intends that, following the Effective Time,
the headquarters of the Surviving Corporation will be located in
Houston, Texas. In addition, Parent intends that, following the
Effective Time, the gas marketing operations of Parent and its
Subsidiaries, on the one hand, and the Company and its
Subsidiaries, on the other hand, will be operated as a single
business unit.
7.17. Merger of Subsidiaries of the Company. Prior to
the Effective Time, the Company will take all necessary action to
cause Eastex Gas Storage and Exchange, Inc. to be merged with
Eastex Hydrocarbons, Inc. in a manner which will not result in the
incurrence of any liability, cost or expense by Parent, the
Company or any of their respective Subsidiaries (other than
expenses of preparation and filing of the merger documents
relating to such merger and legal expenses of preparation of any
documents evidencing third-party consents required to effect such
merger).
ARTICLE 8
8. Conditions.
8.1. Conditions to Each Party's Obligation to Effect
the Merger. The respective obligation of each party to effect the
Merger shall be subject to the fulfillment at or prior to the
Closing Date of the following conditions:
(a) The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or
been terminated.
(b) Neither of the parties hereto shall be
subject to any order or injunction of a court of competent
jurisdiction which prohibits the consummation of the transactions
contemplated by this Agreement.
(c) This Agreement and the Merger shall have
been approved by the stockholders of the Company in accordance
with the DGCL and the Company's Restated Certificate of
Incorporation and By-laws.
<PAGE>
(d) The Form S-4 shall have become effective
and no stop order with respect thereto shall be in effect.
(e) Each of the Parent and the Company shall
have received the opinion of Fried, Frank, Harris, Shriver &
Jacobson, special counsel to Parent, dated the Closing Date, to
the effect that the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a)
of the Code, and that the Company and Parent will each be a party
to that reorganization within the meaning of Section 368(b) of the
Code; except that the delivery of such opinion shall not be a
condition to the Company's obligation to effect the Merger if at
the Closing Date the Company shall not have fulfilled any of the
conditions set forth in Section 8.3(c) or 8.3(f).
8.2.
Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall
be subject to the fulfillment at or prior to the Closing Date of
the condition that Parent shall have performed its agreements
contained in this Agreement required to be performed on or prior
to the Closing Date and the representations and warranties of
Parent and Merger Sub contained in this Agreement shall be true
and correct in all material respects as of the date when made and
(unless made as of a specified date) as of the Closing Date, and
the Company shall have received a certificate of the President or
a Vice President of Parent, dated the Closing Date, certifying to
such effect.
8.3. Conditions to Obligation of Parent and Merger
Sub to Effect the Merger. The obligations of Parent and Merger
Sub to effect the Merger shall be subject to the fulfillment at or
prior to the Closing Date of the following conditions:
(a) The Company shall have performed its
agreements contained in this Agreement required to be performed on
or prior to the Closing Date and the representations and
warranties of the Company contained in this Agreement shall be
true and correct in all material respects as of the date when made
and (unless made as of a specified date) as of the Closing Date,
and Parent shall have received a certificate of the Company, dated
the Closing Date, certifying to such effect.
(b) All necessary governmental and third party
consents required in connection with the transactions contemplated
by this Agreement shall have been obtained and there shall be no
action, suit or proceeding pending or threatened against the
Company, Parent or any of their Subsidiaries which would or would
reasonably be expected to prevent or delay the transactions
contemplated by this Agreement or result in material damages in
connection herewith or therewith.
(c) Parent shall have received from each
Affiliate of the Company an Affiliate Letter in the form attached
hereto as Exhibit A.
<PAGE>
(d) The employment agreements and the
amendments to employment agreements listed in Exhibit B hereto
shall have been executed and delivered by the employee specified
in each such amendment, shall be in full force and effect, and
shall constitute valid and binding obligations of each such
employee.
(e) Working capital of the Company and its
Subsidiaries as of the close of business on the business day
preceding the Closing Date shall be at least $12,000,000 computed
on a consolidated basis in accordance with generally accepted
accounting principles applied on a consistent basis; provided
however that any obligations of or payments by the Company
pursuant to Section 4.1 (e) of this Agreement shall not be treated
as a reduction of working capital for the purpose of this
Section 8.3(e).
(f) Parent shall have received from an officer
of the Company an Officer's Certificate containing standard
representations on which Fried, Frank, Harris, 1Shriver & Jacobson
will rely in rendering its tax opinion.
ARTICLE 9
9. Termination.
9.1. Termination by Mutual Consent. This Agreement
may be terminated and the Merger may be abandoned at any time
prior to the Effective Time by the mutual consent of Parent and
the Company.
9.2. Termination by Either Parent or the Company.
This Agreement may be terminated and the Merger may be abandoned
by Parent or the Company if (a) the Merger shall not have been
consummated by December 31, 1995, or (b) a United States federal
or state court of competent jurisdiction or United States federal
or state governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken
any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and
such order, decree, ruling or other action shall have become final
and non-appealable; provided, that the party seeking to terminate
this Agreement pursuant to this clause (b) shall have used all
efforts required by this Agreement to remove such injunction,
order or decree.
9.3. Termination by the Company. This Agreement may
be terminated and the Merger may be abandoned at any time prior to
the Effective Time by the Company, if there has been a breach by
Parent or Merger Sub of any representation or warranty contained
in this Agreement which would cause Parent or Merger Sub to fail
to satisfy any condition to Closing and such condition shall not
have been waived by the Company.
<PAGE>
9.4. Termination by Parent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to
the Effective Time by Parent, if there has been a breach by the
Company of any representation or warranty contained in this
Agreement which would cause the Company to fail to satisfy any
condition to Closing and such condition shall not have been waived
by Parent.
9.5. Effect of Termination and Abandonment.
(a) In the event of termination of this
Agreement and the abandonment of the Merger pursuant to this
Article 9, all obligations of the parties hereto shall terminate,
except the obligations of the parties pursuant to this Section 9.5
and Sections 7.11, 10.3, 10.4, 10.5, 10.6, 10.7, 10.8, 10.9, 10.10
and 10.11 and the Confidentiality Agreement referred to in
Section 10.4. Moreover, in the event of termination of this
Agreement, nothing herein shall prejudice the ability of the
non-breaching to seek damages from any other party for any breach
of this Agreement, including without limitation, attorneys' fees
and the right to pursue any remedy at law or in equity.
(b) In the event of a termination of this
Agreement for any reason other than a material breach by Parent or
Merger Sub and (i) the Board of Directors of the Company shall
have withdrawn its recommendation of (or encouraged stockholders
not to approve) the Merger or shall have recommended (or
encouraged stockholders to support) any Acquisition Proposal, or
shall have resolved to do any of the foregoing (and such
withdrawal, recommendation or encouragement is not the result of a
material breach by Parent or Merger Sub of any representation,
warranty or obligation under this Agreement), (ii) prior to such
termination, the Company shall have received any Acquisition
Proposal which the Board of Directors has determined is more
favorable to the Company's stockholders than the transactions
contemplated by this Agreement, or (iii)(A) at any time prior to
the termination of this Agreement either (I) the stockholders of
the Company shall have failed to approve this Agreement at the
stockholders meeting provided for in Section 7.3 or (II) any
person (other than Parent or any of its Subsidiaries) shall have
publicly announced any Acquisition Proposal and (B), at any time
on or prior to one year after the date of this Agreement, any
person (other than Parent or any of its Subsidiaries) shall either
(I) become the beneficial owner of 40% or more of the outstanding
shares of Company Common Stock or (II) consummate an Acquisition
Proposal, then the Company shall promptly, but in no event later
than two business days after the first of such events to occur,
(x) pay Parent the sum of $1,000,000 in cash and (y) reimburse
Parent for all documented out of pocket costs and expenses
(including, without limitation, all documented legal, investment
banking, printing and related fees and expenses) incurred by
Parent or Merger Sub or on their behalf in connection with this
Agreement or the transactions contemplated hereby, up to a maximum
of $750,000.
<PAGE>
9.6. Extension; Waiver. At any time prior to the
Effective Time, any party hereto may, to the extent legally
allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive
any inaccuracies in the representations and warranties made to
such party contained herein or in any document delivered pursuant
hereto and (c) waive compliance with any of the agreements or
conditions for the benefit of such party 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 an instrument in
writing signed by or on behalf of the party granting such
extension or waiver.
ARTICLE 10
10. General Provisions.
10.1. Survival of Representations and Warranties.
Unless this Agreement is terminated pursuant to Article 9, the
representations and warranties and covenants made in this
Agreement shall terminate at the Closing, except that any covenant
herein which by its terms contemplates performance after the
Closing Date shall survive the Closing Date for the period
contemplated thereby.
10.2. Notices. Any notice required to be given
hereunder shall be sufficient if in writing, and sent by facsimile
transmission and by courier service (with proof of service), hand
delivery or certified or registered mail (return receipt requested
and first-class postage prepaid), addressed as follows:
If to the Company: If to Parent or Merger Sub:
Eastex Energy Inc. El Paso Natural Gas Company
1000 Louisiana One Paul Kayser Center
Suite 1100 100 North Stanton Street
Houston, Texas 77002 El Paso, Texas 79901
Attention: Robert G. Phillips Attention: H. Brent Austin
Chairman of the Board and Executive Vice President
Chief Executive Officer and Chief Financial Officer
Facsimile: (713) 650-1107 Facsimile: (915) 541-5008
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With a copy to: With a copy to:
Dallas Parker, Esq. Gary P. Cooperstein, Esq.
Brown, Parker & Leahy, L.L.P. Fried, Frank, Harris,
3600 Citicorp Center Shriver & Jacobson
1200 Smith Street One New York Plaza
Houston, TX 77002 New York, NY 10004
Facsimile: (713) 654-1871 Facsimile: (212) 747-1526
or to such other address as any party shall specify by written
notice so given, and such notice shall be deemed to have been
delivered as of the date so telecommunicated, personally delivered
or mailed.
10.3. Assignment; Binding Effect; Benefit. 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; provided, however, that Parent may
assign this Agreement to any of its Subsidiaries whether or not
such Subsidiaries exist at the date hereof; provided, further,
that no such assignment shall relieve Parent of any of its
obligations hereunder. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the
contrary, except for the provisions of Section 7.12, which are
expressly intended to be enforceable by the beneficiaries thereof,
nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their
respective heirs, successors, executors, administrators and
assigns any rights, remedies, obligations or liabilities under or
by reason of this Agreement.
10.4. Entire Agreement. This Agreement, the Company
Disclosure Letter, the Parent Disclosure Letter and the
Confidentiality Agreement dated April 10, 1995 between the Company
and Parent constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior
agreements and understandings (oral and written) among the parties
with respect thereto. No addition to or modification of any
provision of this Agreement shall be binding upon any party hereto
unless made in writing and signed by all parties hereto.
10.5. Amendment. This Agreement may be amended by the
parties hereto by an instrument in writing signed by or on behalf
of each of the parties hereto.
10.6. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York without regard to its rules of conflict of laws.
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10.7. Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies of
this Agreement, each of which may be signed by less than all of
the parties hereto, but together all such copies are signed by all
of the parties hereto.
10.8. Headings. Headings of the Articles and
Sections of this Agreement are for the convenience of the parties
only, and shall be given no substantive or interpretive effect
whatsoever.
10.9. Interpretation. In this Agreement, unless the
context otherwise requires, words describing the singular number
shall include the plural and vice versa, and words denoting any
gender shall include all genders and words denoting natural
persons shall include corporations and partnerships and vice
versa. 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 by their
terms ordinary voting power to elect a majority of the board of
directors or others performing similar functions with respect to
such corporation or other organization, or any organization of
which such party is a general partner.
10.10. Waivers. Except as provided in this
Agreement, no action taken pursuant to this Agreement, including,
without limitation, any investigation by or on behalf of any
party, shall be deemed to constitute a waiver by the party taking
such action of compliance with any representations, warranties,
covenants or agreements contained in this Agreement. The waiver
by any party hereto of a breach of any provision hereunder shall
not operate or be construed as a waiver of any prior or subsequent
breach of the same or any other provision hereunder.
10.11. 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 otherwise 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.
10.12. Enforcement of Agreement. The parties
hereto agree that irreparable damage would occur in the event that
any of the provisions of this Agreement were not performed in
accordance with its specific terms or was otherwise breached. It
is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to
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prevent breaches of this Agreement and to enforce specifically the
terms and provisions hereof, this being in addition to any other
remedy to which they may be entitled at law or in equity.
IN WITNESS WHEREOF, the parties have executed this
Agreement and caused the same to be duly delivered on their behalf
as of the day and year first written above.
EL PASO NATURAL GAS COMPANY
By: /s/ William A. Wise
Name: William A. Wise
Title: Chairman of the Board,
President and Chief
Executive Officer
EL PASO ACQUISITION COMPANY
By: /s/ H. Brent Austin
Name: H. Brent Austin
Title: Vice President
and Treasurer
EASTEX ENERGY INC.
By: /s/ Robert G. Phillips
Name: Robert G. Phillips
Title: Chairman of the
Board and Chief
Executive Officer
<PAGE>
EXHIBIT A
FORM OF AFFILIATE LETTER
El Paso Natural Gas Company
100 North Stanton Street
El Paso, Texas 79901
Ladies and Gentlemen:
I have been advised that as of the date of this letter
I may be deemed to be an "affiliate" of Eastex Energy Inc., a
Delaware corporation (the "Company"), as the term "affiliate" is
defined for purposes of paragraphs (c) and (d) of Rule 145 of the
rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"). Pursuant to the
terms of the Agreement and Plan of Merger dated as of May 8, 1995
(the "Agreement"), between El Paso Natural Gas Company, a Delaware
corporation ("Parent"), El Paso Acquisition Company, a Delaware
corporation and a wholly owned subsidiary of Parent ("Merger
Sub"), and the Company, pursuant to which the Company will be
merged with and into Merger Sub (the "Merger").
As a result of the Merger, I may receive shares of
common stock, par value $3.00 per share, of Parent (the "Parent
Securities") in exchange for shares owned by me of Common Stock,
par value $.01 per share, of the Company.
I represent, warrant and covenant to Parent that in
the event I receive any Parent Securities as a result of the
Merger:
A. I shall not make any sale, transfer or other
disposition of the Parent Securities in violation of the Act or
the Rules and Regulations.
B. I have carefully read this letter and the
Agreement and discussed the requirements of such documents and
other applicable limitations upon my ability to sell, transfer or
otherwise dispose of the Parent Securities to the extent I felt
necessary, with my counsel or counsel for the Company.
C. I have been advised that the issuance of Parent
Securities to me pursuant to the Merger has been registered with
the Commission under the Act on a Registration Statement on Form
S-4. However, I have also been advised that, since at the time
the Merger was submitted for a vote of the stockholders of the
<PAGE>
Company, I may be deemed to have been an affiliate of the Company
and the distribution by me of the Parent Securities has not been
registered under the Act, I may not sell, transfer or otherwise
dispose of the Parent Securities issued to me in the Merger unless
(i) such sale, transfer or other disposition has been registered
under the Act, (ii) such sale, transfer or under other disposition
is made in conformity with Rule 145 promulgated by the Commission
under the Act, or (iii) in the opinion of counsel reasonably
acceptable to Parent, or a "no action" letter obtained by the
undersigned from the staff of the Commission, such sale, transfer
or other disposition is otherwise exempt from registration under
the Act.
D. I understand that Parent is under no obligation
to register the sale, transfer or other disposition of the Parent
Securities by me or on my behalf under the Act or to take any
other action necessary in order to make compliance with an
exemption from such registration available.
E. I also understand that stop transfer
instructions will be given to Parent's transfer agents with
respect to the Parent Securities and that there will be placed on
the certificates for the Parent Securities issued to me, or any
substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED
IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER
THE SECURITIES ACT OF 1933 APPLIES. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED
IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED AS
OF MAY 8, 1995 BETWEEN THE REGISTERED HOLDER HEREOF AND
EL PASO NATURAL GAS COMPANY, A COPY OF WHICH AGREEMENT
IS ON FILE AT THE PRINCIPAL OFFICES OF EL PASO NATURAL
GAS COMPANY."
F. I also understand that unless the transfer by me
of my Parent Securities has been registered under the Act or is a
sale made in conformity with the provisions of Rule 145, Parent
reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES IN
A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE
SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN
ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR
RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF
WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND
<PAGE>
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF
1933."
It is understood and agreed that the legends set forth
in paragraphs E and F above shall be removed by delivery of
substitute certificates without such legend if such legend is not
required for purposes of the Act or this Agreement. It is
understood and agreed that such legends and the stop orders
referred to above will be removed if (i) two years shall have
elapsed from the date the undersigned acquired the Parent
Securities received in the Merger and the provisions of Rule
145(d)(2) are then available to the undersigned, (ii) three years
shall have elapsed from the date the undersigned acquired the
Parent Securities received in the Merger and the provisions of
Rule 145(d)(3) are then applicable to the undersigned, or (iii)
Parent has received either an opinion of counsel, which opinion
and counsel shall be reasonably satisfactory to Parent, or a "no
action" letter obtained by the undersigned from the staff of the
Commission, to the effect that the restrictions imposed by Rule
145 under the Act no longer apply to the undersigned.
G. [FOR ROBERT PHILLIPS ONLY] I have no plan or
intention to sell, transfer or otherwise dispose of, or enter into
an agreement to sell, transfer or otherwise dispose of, any Parent
Securities (or any interest therein); and for one year from the
date hereof, I will not sell, transfer or otherwise dispose of, or
enter into an agreement to sell, transfer or otherwise dispose of,
more than 30,000 shares of Parent Securities.
Execution of this letter should not be considered an
admission on my part that I am an "affiliate" of the Company as
described in the first paragraph of this letter or as a waiver of
any rights I may have to object to any claim that I am such an
affiliate on or after the date of this letter.
Very truly yours,
______________________
Name:
Accepted this day of
, 1995 by
EL PASO NATURAL GAS COMPANY
By:_________________________
Name:____________________
Title:___________________
<PAGE>
Exhibit B
1. Amended Employment Agreements with the following
individuals:
(i) Robert G. Phillips
(ii) Mark A. Searles
(iii) R. Cristian Sherman
(iv) Jerry L. Pendleton
2. Employment Agreements, in the form initialed by Company,
Parent and Merger Sub, with the following individuals:
(i) David H. Eargle
(ii) Patrick J. Bhirdo
(iii) Jeffrey D. Hunter
(iv) Larry B. Leverett
(v) Terry L. Morrison
3. Amendments to Employment Agreements and Related Agreements,
as set forth in the term sheet dated May 5, 1995 entitled
"Revised Proposed Amendment to Employment Agreements and
Related Agreements between Heath Petra Resources, Inc. and
Brian Heath, Doug Morgan and Scott Gaddis dated April 23,
1993" as modified and initialed by the Company, Parent and
Merger Sub.
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT (this "Agreement") dated as of
May 8, 1995 among the persons listed on Schedule 1 hereto (each, a
"Stockholder" and, collectively, the "Stockholders"), El Paso
Natural Gas Company, a Delaware corporation ("Parent"), and El
Paso Acquisition Company, a Delaware corporation and a wholly
owned subsidiary of Parent (the "Purchaser").
Parent, the Purchaser and Eastex Energy Inc., a
Delaware corporation (the "Company"), propose to enter into an
Agreement and Plan of Merger (the "Merger Agreement") on the date
of this Agreement pursuant to which the Purchaser proposes to
acquire the entire equity interest in the Company pursuant to the
merger (the "Merger") of the Company with and into the Purchaser,
as a result of which each outstanding share of Common Stock, $.01
par value, of the Company (the "Company Common Stock") would be
converted into the right to receive Common Stock, $3.00 par value,
of Parent or cash as provided in the Merger Agreement.
Each Stockholder owns the number of shares of Company
Common Stock (the "Shares") or warrants to purchase shares of
Company Common Stock (the "Warrants" and, collectively with the
Shares, the "Optioned Securities") listed opposite the name of
such Stockholder on Schedule 1.
The Stockholders desire to induce Parent and the
Purchaser to enter into the Merger Agreement by entering into this
Agreement.
Accordingly, in consideration of the mutual covenants
and agreements set forth herein and in consideration of $1.00 and
such other valuable consideration the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. The Option. Each Stockholder hereby grants the
Purchaser an irrevocable option (the "Option") to purchase all of
the Optioned Securities of such Stockholder at the price set forth
with respect to such Optioned Securities on Schedule 1, payable in
cash, without interest.
2. Exercise of the Option; Term. On the terms and
subject to the conditions of this Agreement, the Purchaser may
exercise the Option at any time after all waiting periods under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), applicable to the exercise of the Option
have expired or been terminated, by written notice to each
Stockholder specifying a date and time for the closing not later
than ten business days from the date of such notice (which date
and time may be one day after the delivery of such notice or
earlier if reasonably practicable), but only if (x) the Merger
Agreement shall have been terminated and (y) either (i) the
<PAGE>
stockholders of the Company shall have failed to
approve the Merger at the stockholders' meeting contemplated by
Section 7.3 of the Merger Agreement (the "Stockholders' Meeting"),
(ii) the Stockholders' Meeting shall not have occurred (other than
by reason of a breach by Parent or the Purchaser of its
obligations under the Merger Agreement), or (iii) the termination
fee contemplated by Section 9.5(b) of the Merger Agreement shall
have become due and payable. The closing of the purchase of the
Optioned Securities shall take place at the offices of Fried,
Frank, Harris, Shriver & Jacobson, One New York Plaza, New York,
New York. The Option shall expire on the earliest of (a) the
Effective Time (as defined in the Merger Agreement) or (b) twelve
months after the termination of the Merger Agreement, except that
if the Option cannot be exercised prior to such earliest date by
reason of any applicable injunction, decree, order or similar
restraint issued by a court, the Option shall expire on the later
of such earliest date or the tenth business day after such
impediment to exercise shall have been removed or when such
injunction, decree, order or similar restraint shall have become
permanent and no longer subject to appeal, as the case may be
(such expiration date is referred to herein as the "Expiration
Date").
3. Closing. At the closing:
(a) against delivery of the Optioned
Securities, free and clear of all liens, claims, charges and
encumbrances of any kind or nature whatsoever, Parent shall cause
the Purchaser to make payment to each Stockholder of the aggregate
price for such Stockholder's Optioned Securities by wire transfer
of immediately available funds; and
(b) each Stockholder shall deliver to the
Purchaser a duly executed certificate or certificates representing
the number of Optioned Securities purchased from such Stockholder,
together with transfer powers endorsed in blank relating to such
certificates and, if requested by the Purchaser, an irrevocable
proxy, duly executed by such Stockholder, authorizing such persons
as the Purchaser shall designate to act for such Stockholder as
his lawful agents, attorneys and proxies, with full power of
substitution, to vote in such manner as each such agent, attorney
and proxy or his substitute shall in his sole discretion deem
proper, and otherwise act with respect to the Optioned Securities
at any meeting (whether annual or special and whether or not an
adjourned meeting) of the Company's stockholders or otherwise, and
revoking any prior proxies granted by such Stockholder with
respect to the Stockholder's Optioned Securities.
4. Covenants of the Stockholders.
(a) During the period from the date of this Agreement until the
Expiration Date, except in accordance with the provisions of this
Agreement, each Stockholder severally and not jointly agrees that
he will not:
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(i) sell, transfer, pledge, hypothecate,
assign or otherwise dispose of, or enter into any contract, option
or other arrangement or understanding with respect to the sale,
transfer, pledge, hypothecation, assignment or other disposition
of, any Optioned Securities;
(ii) deposit any Optioned Securities into
a voting trust, or grant any proxies or enter into a voting
agreement with respect to any Optioned Securities; or
(iii) initiate, solicit or encourage,
directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including, without
limitation, any proposal or offer to the Company's stockholders)
with respect to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of all or any significant
portion of the assets or any equity securities of, the Company or
any of its subsidiaries (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal") or engage in
any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person
relating to an Acquisition Proposal, or otherwise facilitate any
effort or attempt to make or implement an Acquisition Proposal;
except that any Stockholder who is a member of the board of
directors of the Company may discuss such proposals at meetings of
the board of directors of the Company and, solely to the extent
permitted by Section 7.1 of the Merger Agreement, any Stockholder
who is a member of the board of directors or an officer of the
Company may engage in discussions or negotiations with, or provide
confidential information or data to third parties (other than the
Purchaser, its affiliates, permitted assigns or representatives)
in connection with an Acquisition Proposal.
(b) Any additional shares of Company Common
Stock, warrants, options or other securities or rights exercisable
for, exchangeable for or convertible into shares of Company Common
Stock (collectively, "Equity Securities") acquired by any
Stockholder will become subject to this Agreement and shall, for
all purposes of this Agreement, be considered Optioned Securities.
(c) Each Stockholder agrees not to engage in
any action or omit to take any action which would have the effect
of preventing or disabling such Stockholder from delivering his
Optioned Securities to the Purchaser or otherwise performing his
obligations under this Agreement.
5. Representations and Warranties of each
Stockholder. Each Stockholder severally and not jointly
represents and warrants to Parent and the Purchaser as follows:
3
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(a) (i) such Stockholder is the record or
beneficial owner of the Optioned Securities listed opposite the
name of such Stockholder on Schedule 1, (ii) such Optioned
Securities are the only Equity Securities owned of record or
beneficially by such Stockholder or in which such Stockholder has
any interest, and (iii) such Stockholder does not have any option
or other right to acquire any other Equity Securities;
(b) such Stockholder has the right, power and
authority to execute and deliver this Agreement and to perform his
obligations hereunder; the execution, delivery and performance of
this Agreement by such Stockholder will not require the consent of
any other person and will not constitute a violation of, conflict
with or result in a default under (i) any contract, understanding
or arrangement to which such Stockholder is a party or by which
such Stockholder is bound, (ii) any judgment, decree or order
applicable to such Stockholder, or (iii) any law, rule or
regulation of any governmental body applicable to such
Stockholder; and this Agreement constitutes a valid and binding
agreement on the part of such Stockholder, enforceable in
accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity;
(c) any Shares included in the Optioned
Securities owned by such Stockholder have been validly issued and
are fully paid and nonassessable and any shares of Company Common
Stock issuable upon exercise of the Warrants, when issued and upon
payment of the exercise price therefor, will be validly issued,
fully paid and nonassessable;
(d) except as set forth on Schedule 1, the
Optioned Securities owned by such Stockholder are now, and at all
times during the term of this Agreement will be, held by such
Stockholder free and clear of all adverse claims, liens,
encumbrances and security interests, and none of the Optioned
Securities are subject to any voting trust or other agreement or
arrangement (except as created by this Agreement and except for
those Optioned Securities subject to that certain Buy-Sell
Agreement dated April 18, 1991 by and among the Company and Robert
G. Phillips (the "Buy-Sell Agreement"), with respect to which any
rights of the Company arising by virtue of the Merger Agreement or
this Agreement have been waived) with respect to the voting or
disposition of the Optioned Securities; and there are no
outstanding options, warrants or rights to purchase or acquire, or
agreements (except for this Agreement and the Buy-Sell Agreement)
relating to, such Optioned Securities; and
(e) upon purchase of the Optioned Securities
owned by such Stockholder, the Purchaser will obtain good and
marketable title to such Optioned Securities, free and clear of
all adverse claims, liens, encumbrances and security interests
(except any created by the Purchaser).
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<PAGE>
6. Effect of Representations, Warranties and
Covenants of Stockholders. The representations, warranties and
covenants of the Stockholders shall be several and not joint. The
liability of each individual Stockholder shall extend only to the
representations, warranties and covenants of such Stockholder and
not to any representation, warranty or covenant of any other
Stockholder.
7. Representations and Warranties of Parent and the
Purchaser. Each of Parent and the Purchaser hereby represents and
warrants to each Stockholder that: it is a corporation duly
formed under the laws of the State of Delaware; it has all
requisite corporate power and authority to enter into and perform
all its obligations under this Agreement; the execution and
delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on its part; this Agreement has been
duly executed and delivered by it; and this Agreement constitutes
a valid and binding agreement on its part, enforceable in
accordance with its terms, subject to applicable bankruptcy
insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
8. Voting of Equity Securities. Each Stockholder
hereby agrees that, during the time this Agreement is in effect,
at any meeting of the stockholders of the Company, however called,
and in any action by written consent of the stockholders of the
Company, he shall (a) vote all voting Equity Securities of such
Stockholder in favor of the Merger; (b) not vote any voting Equity
Securities in favor of any action or agreement which would result
in a breach in any material respect of any covenant,
representation or warranty or any other obligation of the Company
under the Merger Agreement; and (c) vote all voting Equity
Securities of such Stockholder against any action or agreement
which would impede, interfere with or attempt to discourage the
Merger, including, but not limited to: (i) any Acquisition
Proposal (other than the Merger) involving the Company or any of
its subsidiaries; (ii) any change in the management or board of
directors of the Company, except as otherwise agreed to in writing
by the Purchaser; (iii) any material change in the present
capitalization or dividend policy of the Company; or (iv) any
other material change in the Company's corporate structure or
business. At the request of the Purchaser, each Stockholder, in
furtherance of the transactions contemplated hereby and by the
Merger Agreement, shall promptly execute and deliver to the
Purchaser an irrevocable proxy substantially in the form of
Exhibit A hereto and irrevocably appoint the Purchaser or its
designees, its attorney and proxy to vote all voting Equity
Securities of such Stockholder, for all purposes whatsoever, with
full power of substitution. Each Stockholder acknowledges that
this proxy (a) shall be coupled with an interest, (b) constitutes,
among other things, an inducement for Parent and the Purchaser to
enter into the Merger Agreement, and (c) shall be irrevocable and
shall not be terminated by operation of law upon the occurrence of
any event. Any such proxy shall terminate upon the termination of
this Agreement.
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<PAGE>
9. Adjustments. In the event of any increase or
decrease or other change in the Optioned Securities by reason of
stock dividends, split-up, recapitalizations, combinations,
exchanges of shares or the like, the number of Optioned Securities
subject to this Agreement shall be adjusted appropriately.
10. [Intentionally omitted.]
11. Governing Law. This Agreement shall be governed
by and construed in accordance with the law of the State of New
York without regard to its rules of conflict of laws.
12. Further Assurances. Each party hereto shall
perform such further acts and execute such further documents as
may reasonably be required to carry out the provisions of this
Agreement.
13. Legend. As soon as practicable after the
execution of this Agreement, the following legend shall be placed
on the certificates representing the Optioned Securities:
"The Securities represented by this certificate
are subject to certain transfer and other
restrictions contained in a stockholder
agreement, dated May 8 1995, among El Paso
Natural Gas Company, El Paso Acquisition Company
and certain stockholders of the Corporation."
14. Assignment. This Agreement may not be assigned
by any party hereto, except that the Purchaser may assign its
right to purchase the Optioned Securities to one or more of its
affiliates.
15. Remedies. The parties agree that legal remedies
for breach of this Agreement will be inadequate and that this
Agreement may be enforced by Parent and the Purchaser by
injunctive or other equitable relief.
16. Notices. All notices or other communications
required or permitted hereunder shall be in writing (except as
otherwise provided herein) and shall be deemed duly given if
delivered in person, by confirmed facsimile transmission or by
overnight courier service, addressed as follows:
To Parent or the Purchaser:
El Paso Natural Gas Company
100 North Stanton Street
El Paso, Texas 79901
Attention: H. Brent Austin,
6
<PAGE>
Senior Vice President and
Chief Financial Officer
With a copy to:
Fried, Frank, Harris, Shriver
& Jacobson
One New York Plaza
New York, New York 10004
Attention: Gary P. Cooperstein, Esq.
Facsimile: (212) 859-4000
To each Stockholder:
At the address set forth beneath the name of
such Stockholder on Schedule 1
17. Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction
shall, as to such 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,
such provision shall be interpreted to be only so broad as is
enforceable.
18. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same agreement.
19. Binding Effect; Benefits. This Agreement shall
survive the death or incapacity of any Stockholder and shall inure
to the benefit of and shall be binding upon the parties hereto and
their respective heirs, legal representatives, successors and
permitted assigns. Nothing in this Agreement, expressed or
implied, is intended to or shall confer on any person other than
the parties hereto and their respective heirs, legal
representatives and successors and permitted assigns any rights,
remedies, obligations or liabilities under or by reason of this
Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Stockholders and the Purchaser
have entered into this Agreement as of the date first written
above.
EL PASO NATURAL GAS
COMPANY
By: /s/ William A. Wise
EL PASO ACQUISITION
COMPANY
By: /s/ H. Brent Austin
STOCKHOLDERS:
/s/ Robert G. Phillips
<PAGE>
IN WITNESS WHEREOF, the Stockholders and the Purchaser have
entered into this Agreement as of the date first written above.
EL PASO NATURAL GAS COMPANY
By: /s/ William A. Wise
EL PASO ACQUISITION COMPANY
By: /s/ H. Brent Austin
STOCKHOLDERS:
/s/ Robert G. Phillips
_____________________________
_____________________________
_____________________________
_____________________________
_____________________________
_____________________________
8
<PAGE>
SCHEDULE I
TO
STOCKHOLDER AGREEMENT
OF
ROBERT G. PHILLIPS
Name and Address of Optioned Option Price
Stockholder Securities
Robert G. Phillips 1,000
1100 First Interstate Bank Plaza 5,000
1000 Louisiana Street 500
Houston, Texas 77002 4,000
500
75,000
2,087,500
(1) 202,000
17,500
2,393,000 $10,768,500
(1) These shares have been pledged to a bank as collateral for a
line of credit.
<PAGE>
EXHIBIT A
PROXY
The undersigned hereby irrevocably appoints designees
of El Paso Acquisition Company, a Delaware corporation (the
"Purchaser"), the attorneys, agents and proxies, with full power
of substitution, for the undersigned and in the name, place and
stead of the undersigned to vote in such manner as such attorneys,
agents and proxies or their substitutes shall in their sole
discretion deem proper and otherwise act, including the execution
of written consents, with respect to all voting equity securities
(the "Securities"), of Eastex Energy Inc., a Delaware corporation
(the "Company"), which the undersigned is or may be entitled to
vote at any meeting of the Company held after the date hereof,
whether annual or special and whether or not an adjourned meeting,
or in respect of which the undersigned is or may be entitled to
act by written consent. This Proxy is coupled with an interest
and shall be irrevocable and binding on any successor in interest
of the undersigned. This Proxy shall operate to revoke any prior
proxy as to the Securities heretofore granted by the undersigned.
This Proxy shall terminate upon the termination of the Stockholder
Agreement dated as of May 8, 1995 among the undersigned, certain
other stockholders of the Company, El Paso Natural Gas Company and
the Purchaser.
<PAGE>
___________________________
Dated:
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT (this "Agreement") dated as of
May 8, 1995 among the persons listed on Schedule 1 hereto (each, a
"Stockholder" and, collectively, the "Stockholders"), El Paso
Natural Gas Company, a Delaware corporation ("Parent"), and El
Paso Acquisition Company, a Delaware corporation and a wholly
owned subsidiary of Parent (the "Purchaser").
Parent, the Purchaser and Eastex Energy Inc., a
Delaware corporation (the "Company"), propose to enter into an
Agreement and Plan of Merger (the "Merger Agreement") on the date
of this Agreement pursuant to which the Purchaser proposes to
acquire the entire equity interest in the Company pursuant to the
merger (the "Merger") of the Company with and into the Purchaser,
as a result of which each outstanding share of Common Stock, $.01
par value, of the Company (the "Company Common Stock") would be
converted into the right to receive Common Stock, $3.00 par value,
of Parent or cash as provided in the Merger Agreement.
Each Stockholder owns the number of shares of Company
Common Stock (the "Shares") or warrants to purchase shares of
Company Common Stock (the "Warrants" and, collectively with the
Shares, the "Optioned Securities") listed opposite the name of
such Stockholder on Schedule 1.
The Stockholders desire to induce Parent and the
Purchaser to enter into the Merger Agreement by entering into this
Agreement.
Accordingly, in consideration of the mutual covenants
and agreements set forth herein and in consideration of $1.00 and
such other valuable consideration the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. The Option. Each Stockholder hereby grants the
Purchaser an irrevocable option (the "Option") to purchase all of
the Optioned Securities of such Stockholder at the price set forth
with respect to such Optioned Securities on Schedule 1, payable in
cash, without interest.
2. Exercise of the Option; Term. On the terms and
subject to the conditions of this Agreement, the Purchaser may
exercise the Option at any time after all waiting periods under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), applicable to the exercise of the Option
have expired or been terminated, by written notice to each
Stockholder specifying a date and time for the closing not later
than ten business days from the date of such notice (which date
and time may be one day after the delivery of such notice or
earlier if reasonably practicable), but only if (x) the Merger
<PAGE>
Agreement shall have been terminated and (y) either (i) the
stockholders of the Company shall have failed to approve the
Merger at the stockholders' meeting contemplated by Section 7.3 of
the Merger Agreement (the "Stockholders' Meeting"), (ii) the
Stockholders' Meeting shall not have occurred (other than by
reason of a breach by Parent or the Purchaser of its obligations
under the Merger Agreement), or (iii) the termination fee
contemplated by Section 9.5(b) of the Merger Agreement shall have
become due and payable. The closing of the purchase of the
Optioned Securities shall take place at the offices of Fried,
Frank, Harris, Shriver & Jacobson, One New York Plaza, New York,
New York. The Option shall expire on the earliest of (a) the
Effective Time (as defined in the Merger Agreement), (b) twelve
months after the termination of the Merger Agreement (but in any
event not later than December 31, 1996) or (c) 60 days after
receipt by Parent of the termination fee contemplated by Section
9.5(b) of the Merger Agreement, except that if the Option cannot
be exercised prior to such earliest date by reason of any
applicable injunction, decree, order or similar restraint issued
by a court, the Option shall expire on the later of such earliest
date or the tenth business day after such impediment to exercise
shall have been removed or when such injunction, decree, order or
similar restraint shall have become permanent and no longer
subject to appeal, as the case may be (such expiration date is
referred to herein as the "Expiration Date").
3. Closing. At the closing:
(a) against delivery of the Optioned
Securities, free and clear of all liens, claims, charges and
encumbrances of any kind or nature whatsoever, Parent shall cause
the Purchaser to make payment to each Stockholder of the aggregate
price for such Stockholder's Optioned Securities by wire transfer
of immediately available funds; and
(b) each Stockholder shall deliver to the
Purchaser a duly executed certificate or certificates representing
the number of Optioned Securities purchased from such Stockholder,
together with transfer powers endorsed in blank relating to such
certificates and, if requested by the Purchaser, an irrevocable
proxy, duly executed by such Stockholder, authorizing such persons
as the Purchaser shall designate to act for such Stockholder as
his lawful agents, attorneys and proxies, with full power of
substitution, to vote in such manner as each such agent, attorney
and proxy or his substitute shall in his sole discretion deem
proper, and otherwise act with respect to the Optioned Securities
at any meeting (whether annual or special and whether or not an
adjourned meeting) of the Company's stockholders or otherwise, and
revoking any prior proxies granted by such Stockholder with
respect to the Stockholder's Optioned Securities.
<PAGE>
4. Covenants of the Stockholders.
(a) During the period from the date of this
Agreement until the Expiration Date, except in accordance with the
provisions of this Agreement, each Stockholder severally and not
jointly agrees that he will not:
(i) sell, transfer, pledge, hypothecate,
assign or otherwise dispose of, or enter into any contract, option
or other arrangement or understanding with respect to the sale,
transfer, pledge, hypothecation, assignment or other disposition
of, any Optioned Securities;
(ii) deposit any Optioned Securities into
a voting trust, or grant any proxies or enter into a voting
agreement with respect to any Optioned Securities; or
(iii) initiate, solicit or encourage,
directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including, without
limitation, any proposal or offer to the Company's stockholders)
with respect to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of all or any significant
portion of the assets or any equity securities of, the Company or
any of its subsidiaries (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal") or engage in
any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person
relating to an Acquisition Proposal, or otherwise facilitate any
effort or attempt to make or implement an Acquisition Proposal;
except that any Stockholder who is a member of the board of
directors of the Company may discuss such proposals at meetings of
the board of directors of the Company and, solely to the extent
permitted by Section 7.1 of the Merger Agreement, any Stockholder
who is a member of the board of directors or an officer of the
Company may engage in discussions or negotiations with, or provide
confidential information or data to third parties (other than the
Purchaser, its affiliates, permitted assigns or representatives)
in connection with an Acquisition Proposal.
(b) Any additional shares of Company Common
Stock, warrants, options or other securities or rights exercisable
for, exchangeable for or convertible into shares of Company Common
Stock (collectively, "Equity Securities") acquired by any
Stockholder will become subject to this Agreement and shall, for
all purposes of this Agreement, be considered Optioned Securities.
(c) Each Stockholder agrees not to engage in
any action or omit to take any action which would have the effect
of preventing or disabling such Stockholder from delivering his
Optioned Securities to the Purchaser or otherwise performing his
obligations under this Agreement.
<PAGE>
5. Representations and Warranties of each
Stockholder. Each Stockholder severally and not jointly
represents and warrants to Parent and the Purchaser as follows:
(a) (i) such Stockholder is the record or beneficial
owner of the Optioned Securities listed opposite the name of such
Stockholder on Schedule 1, (ii) such Optioned Securities are the
only Equity Securities owned of record or beneficially by such
Stockholder or in which such Stockholder has any interest, and
(iii) such Stockholder does not have any option or other right to
acquire any other Equity Securities;
(b) such Stockholder has the right, power and
authority to execute and deliver this Agreement and to perform his
obligations hereunder; the execution, delivery and performance of
this Agreement by such Stockholder will not require the consent of
any other person and will not constitute a violation of, conflict
with or result in a default under (i) any contract, understanding
or arrangement to which such Stockholder is a party or by which
such Stockholder is bound, (ii) any judgment, decree or order
applicable to such Stockholder, or (iii) any law, rule or
regulation of any governmental body applicable to such
Stockholder; and this Agreement constitutes a valid and binding
agreement on the part of such Stockholder, enforceable in
accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity;
(c) any Shares included in the Optioned
Securities owned by such Stockholder have been validly issued and
are fully paid and nonassessable and any shares of Company Common
Stock issuable upon exercise of the Warrants, when issued and upon
payment of the exercise price therefor, will be validly issued,
fully paid and nonassessable;
(d) except as set forth on Schedule 1, the
Optioned Securities owned by such Stockholder are now, and at all
times during the term of this Agreement will be, held by such
Stockholder free and clear of all adverse claims, liens,
encumbrances and security interests, and none of the Optioned
Securities are subject to any voting trust or other agreement or
arrangement (except as created by this Agreement) with respect to
the voting or disposition of the Optioned Securities; and there
are no outstanding options, warrants or rights to purchase or
acquire, or agreements (except for this Agreement) relating to,
such Optioned Securities; and
(e) upon purchase of the Optioned Securities
owned by such Stockholder, the Purchaser will obtain good and
marketable title to such Optioned Securities, free and clear of
all adverse claims, liens, encumbrances and security interests
(except any created by the Purchaser).
<PAGE>
6. Effect of Representations, Warranties and
Covenants of Stockholders. The representations, warranties and
covenants of the Stockholders shall be several and not joint. The
liability of each individual Stockholder shall extend only to the
representations, warranties and covenants of such Stockholder and
not to any representation, warranty or covenant of any other
Stockholder.
7. Representations and Warranties of Parent and the
Purchaser. Each of Parent and the Purchaser hereby represents and
warrants to each Stockholder that: it is a corporation duly
formed under the laws of the State of Delaware; it has all
requisite corporate power and authority to enter into and perform
all its obligations under this Agreement; the execution and
delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on its part; this Agreement has been
duly executed and delivered by it; and this Agreement constitutes
a valid and binding agreement on its part, enforceable in
accordance with its terms, subject to applicable bankruptcy
insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
8. Voting of Equity Securities. Each Stockholder
hereby agrees that, during the time this Agreement is in effect,
at any meeting of the stockholders of the Company, however called,
and in any action by written consent of the stockholders of the
Company, he shall (a) vote all voting Equity Securities of such
Stockholder in favor of the Merger; (b) not vote any voting Equity
Securities in favor of any action or agreement which would result
in a breach in any material respect of any covenant,
representation or warranty or any other obligation of the Company
under the Merger Agreement; and (c) vote all voting Equity
Securities of such Stockholder against any action or agreement
which would impede, interfere with or attempt to discourage the
Merger, including, but not limited to: (i) any Acquisition
Proposal (other than the Merger) involving the Company or any of
its subsidiaries; (ii) any change in the management or board of
directors of the Company, except as otherwise agreed to in writing
by the Purchaser; (iii) any material change in the present
capitalization or dividend policy of the Company; or (iv) any
other material change in the Company's corporate structure or
business. At the request of the Purchaser, each Stockholder, in
furtherance of the transactions contemplated hereby and by the
Merger Agreement, shall promptly execute and deliver to the
Purchaser an irrevocable proxy substantially in the form of
Exhibit A hereto and irrevocably appoint the Purchaser or its
designees, its attorney and proxy to vote all voting Equity
Securities of such Stockholder, for all purposes whatsoever, with
full power of substitution. Each Stockholder acknowledges that
this proxy (a) shall be coupled with an interest, (b) constitutes,
among other things, an inducement for Parent and the Purchaser to
enter into the Merger Agreement, and (c) shall be irrevocable and
shall not be terminated by operation of law upon the occurrence of
any event. Any such proxy shall terminate upon the termination of
this Agreement.
<PAGE>
9. Adjustments. In the event of any increase or
decrease or other change in the Optioned Securities by reason of
stock dividends, split-up, recapitalizations, combinations,
exchanges of shares or the like, the number of Optioned Securities
subject to this Agreement shall be adjusted appropriately.
10. Purchase of Warrants; Assumption of Notes.
Provided that all conditions to the obligations of the parties
under the Merger Agreement shall have been satisfied or waived,
immediately prior to the Effective Time (as defined in the Merger
Agreement) Parent shall purchase (and Stockholders shall sell) all
outstanding Warrants held by the Stockholders, at a purchase price
per Warrant in cash equal to the excess, if any, of $4.50 (or such
higher cash price per share of Company Common Stock as shall be
paid by the Purchaser pursuant to the Merger Agreement) over the
exercise price per share of Company Common Stock covered by such
Warrant, multiplied by the number of shares of Company Common
Stock covered by such Warrant. Concurrently with the foregoing
purchase, each Stockholder shall assign to Parent all outstanding
12% Senior Secured Notes and Increasing Rate Secured Notes of the
Company (the "Notes") held by such Stockholder, together with all
rights of such Stockholder with respect to any collateral
therefor, and Parent shall pay to such Stockholder an amount in
cash equal to the sum of (i) the aggregate outstanding unpaid
principal amount of the Notes being assigned by such Stockholder
and (ii) all accrued and unpaid interest thereon. Parent and each
Stockholder shall execute and deliver all documents necessary or
appropriate to effect the transactions contemplated by this
Section 10. All payments required by this Section 10 shall be
made by wire transfer of immediately available funds.
11. Governing Law. This Agreement shall be governed
by and construed in accordance with the law of the State of New
York without regard to its rules of conflict of laws.
12. Further Assurances. Each party hereto shall
perform such further acts and execute such further documents as
may reasonably be required to carry out the provisions of this
Agreement.
13. Legend. As soon as practicable after the
execution of this Agreement, the following legend shall be placed
on the certificates representing the Optioned Securities:
"The Securities represented by this certificate
are subject to certain transfer and other
restrictions contained in a stockholder
agreement, dated May 8 1995, among El Paso
Natural Gas Company, El Paso Acquisition Company
and certain stockholders of the Corporation."
<PAGE>
14. Assignment. This Agreement may not be assigned
by any party hereto, except that the Purchaser may assign its
right to purchase the Optioned Securities to one or more of its
affiliates.
15. Remedies. The parties agree that legal remedies
for breach of this Agreement will be inadequate and that this
Agreement may be enforced by Parent and the Purchaser by
injunctive or other equitable relief.
16. Notices. All notices or other communications
required or permitted hereunder shall be in writing (except as
otherwise provided herein) and shall be deemed duly given if
delivered in person, by confirmed facsimile transmission or by
overnight courier service, addressed as follows:
To Parent or the Purchaser:
El Paso Natural Gas Company
100 North Stanton Street
El Paso, Texas 79901
Attention: H. Brent Austin,
Senior Vice President and
Chief Financial Officer
With a copy to:
Fried, Frank, Harris, Shriver
& Jacobson
One New York Plaza
New York, New York 10004
Attention: Gary P. Cooperstein, Esq.
Facsimile: (212) 859-4000
To each Stockholder:
At the address set forth beneath the name of such
Stockholder on Schedule 1
17. Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction
shall, as to such 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
<PAGE>
provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as
to be unenforceable, such provision shall be interpreted to be
only so broad as is enforceable.
18. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same agreement.
19. Binding Effect; Benefits. This Agreement shall
survive the death or incapacity of any Stockholder and shall inure
to the benefit of and shall be binding upon the parties hereto and
their respective heirs, legal representatives, successors and
permitted assigns. Nothing in this Agreement, expressed or
implied, is intended to or shall confer on any person other than
the parties hereto and their respective heirs, legal
representatives and successors and permitted assigns any rights,
remedies, obligations or liabilities under or by reason of this
Agreement.
<PAGE
IN WITNESS WHEREOF, the Stockholders and the Purchaser have
entered into this Agreement as of the date first written above.
EL PASO NATURAL GAS
COMPANY
By: /s/ William A. Wise
EL PASO ACQUISITION
COMPANY
By: /s/ H. Brent Austin
STOCKHOLDERS:
RIMCO PARTNERS, L.P.
RIMCO PARTNERS, L.P. II
RIMCO PARTNERS, L.P. III
RIMCO PARTNERS, L.P. IV
By: Resource Investors Management
Company Limited Partnership,
their general partner
By: Rimco Associates, Inc.,
its general partner
By: /s/ Stephen F. Oakes
Name: Stephen F. Oakes
Title: Vice President
<PAGE>
SCHEDULE I
TO
STOCKHOLDER AGREEMENT
OF
RIMCO ENTITIES
Option or
Option Purchase
Name and Address Optioned Price for Exercise Price for
of Stockholder Securities Shares(2) Price Warrant
RIMCO Partners, L.P.(3) 185,902 $ 836,559.00 $371,804.00 $464,755.00
RIMCO Partners, L.P.II(3) 301,598 1,357,191.00 603,196.00 $753,995.00
RIMCO Partners, L.P.(4) 52,960 238,320.00 211,840.00 26,480.00
RIMCO Partners, L.P. II(4) 85,920 386,640.00 343,680.00 42,960.00
RIMCO Partners, L.P. III(4) 9,600 43,200.00 38,400.00 4,800.00
RIMCO Partners, L.P. IV (4)11,520 51,840.00 46,080.00 5,760.00
647,500 $2,913,750.0 $1,615,000.00 $1,295,750.00
(1) The address of each of the RIMCO entities is 22 Waterville
Road, Avon, CT 06001, Attn: Paul E. McCollam.
(2) Option Price for Shares is the price for all shares
underlying the respective warrant and assumes that the
warrant has been exercised before purchase.
(3) These Optioned Shares are pursuant to warrants with an
exercise price of $2.00 per share.
(4) These Optioned Shares are pursuant to warrants with an
exercise price of $4.00 per share.
<PAGE>
EXHIBIT A
PROXY
The undersigned hereby irrevocably appoints designees
of El Paso Acquisition Company, a Delaware corporation (the
"Purchaser"), the attorneys, agents and proxies, with full power
of substitution, for the undersigned and in the name, place and
stead of the undersigned to vote in such manner as such attorneys,
agents and proxies or their substitutes shall in their sole
discretion deem proper and otherwise act, including the execution
of written consents, with respect to all voting equity securities
(the "Securities"), of Eastex Energy Inc., a Delaware corporation
(the "Company"), which the undersigned is or may be entitled to
vote at any meeting of the Company held after the date hereof,
whether annual or special and whether or not an adjourned meeting,
or in respect of which the undersigned is or may be entitled to
act by written consent. This Proxy is coupled with an interest
and shall be irrevocable and binding on any successor in interest
of the undersigned. This Proxy shall operate to revoke any prior
proxy as to the Securities heretofore granted by the undersigned.
This Proxy shall terminate upon the termination of the Stockholder
Agreement dated as of May 8, 1995 among the undersigned, certain
other stockholders of the Company, El Paso Natural Gas Company and
the Purchaser.
_______________________
Dated:
Letter of Intent
to Amend the
Employment Agreements
and Related Agreements
between Heath Petra Resources, Inc. and
Brian Heath, Doug Morgan and Scott Gaddis
dated April 23, 1993
This Letter of Intent is by and between Heath Petra Resources,
Inc., ("HPRI") a wholly owned subsidiary of Eastex Energy Inc.
("Eastex" or the "Company"), and Messrs. Brian Heath, Doug Morgan
and Scott Gaddis, individually (the "Employee") and collectively
(the "HPRI Managers") for the express purpose of setting forth the
general terms and conditions relating to the extension and
amendment of each Employee's employment with HPRI. The parties
agree that they will work diligently and cooperatively to fully
document these terms and conditions based upon our previous
discussions and to ensure the most favorable legal, tax and
operational result. The applicable terms and conditions are set
forth below:
1. Term: Each Employee shall agree to an extension of
the primary term of their respective Employment
Agreements until May 1, 1998 and their respective Non-
Compete Agreements shall be amended to include power
marketing activities, provided, however, that in the
event that an Employee is terminated for any reason
(including voluntary termination) during the term
thereof, then the Non-Compete Agreement provisions
with respect to the terminated Employee shall apply
only to HPRI's natural gas business and shall not
apply to any power marketing activities. Provided
further, that in the event any Employee is terminated
by HPRI and HPRI, or its successor in interest,
breaches or violates any of the terms and conditions
set forth in the Employment Agreement regarding
compensation due Employee after termination and during
the remaining primary term of the Employment
Agreement, and such breach or violation is not cured
or resolved within thirty (30) days after notice
thereof, then the provisions of the Non-Compete
Agreements with respect to the terminated Employee and
applicable to HPRI's natural gas business shall be
waived.
2. Compensation: Each Employee's current base salary of
$125,000 per year shall be adjusted to $150,000 per
year effective May 1, 1995. Each Employee shall be
eligible for an annual incentive compensation bonus,
pursuant to the planned HPRI Incentive Compensation
Plan, up to 150% of base salary. Each Employee's base
<PAGE>
salary shall be adjusted each year pursuant to a
mutually agreed cost of living adjustment which shall
in no event exceed 4%.
3. Signing Bonus: Each Employee will receive a signing
bonus of $20,000 payable upon the execution ("closing
date") of the Amendments to Employment Agreements and
Non-Compete Agreements. Such bonus to be amortized by
the Company over the remaining term of the Non-Compete
Agreements.
4. Stock Options: Each Employee will receive 25,000
Company stock options to be issued pursuant to the
Company's 1994 Executive Long Term Stock Option Plan
at an exercise price of $3.625 (the closing price for
the Company stock on May 1, 1995). Such shares shall
be convertible into El Paso Natural Gas Company ("El
Paso") stock options in the event of the completion of
the planned Merger between the Company and El Paso at
the exchange ratio as defined in the Merger Agreement.
5. Release of Contingent Stock from Escrow and Release of
Indemnification of the Company pursuant to Section 15
of the Master Agreement dated April 23, 1993 (the
"Master Agreement"):
(a) Indemnification: Release of individual personal
liability of each Employee relating to the
indemnification of the Company and its affiliates
pursuant to Section 15.l of the Master Agreement
subject to a mutual release of the Company and its
affiliates relating to the indemnification of the
Stockholders and Partners (as defined in the
Master Agreement) pursuant to Section 15.2 of the
Agreement and any other potential claims will also
be released.
(b) Release of Contingent Stock: Release of the
300,000 shares of Contingent Stock in Escrow. The
released shares shall be held and owned by you and
therefore will only be restricted from sale
pursuant to applicable rules and regulations of
the Securities Act of 1933, the Securities
Exchange Act of 1934 and Section 11 of the Master
Agreement subject to your rights under the
Registration Rights Agreement (the "Rights
Agreement") dated April 23, 1993. Such release of
Contingent Stock shall be subject to the
following:
(i) Agreement to defer any request for a Demand
Registration of those shares, pursuant to
Section 1.2 of such Agreement, until after
January 1, 1996. This will in no way effect
<PAGE>
your rights to a "Piggy Back Registration" of
such shares pursuant Section 1.3 thereof or
any other rights you have to sell the shares
including the right to exchange such shares
pursuant to and in accordance with the terms
of the planned merger of the Company and El
Paso. In that regard, the HPRI Managers are
not currently deemed to be an "affiliate" of
the Company under Rule 144 and El Paso
concurs that the HPRI Managers would not be
deemed to be an affiliate of El Paso.
Therefore, in the event the merger is
completed, whereby each Employee would
receive cash or shares of El Paso's stock in
exchange for the contingent stock released
hereinabove, then such shares received would
not be restricted under Rule 145 and would
therefore be freely transferable thereafter
without restriction.
(ii) In consideration of the release of the
contingent stock, the HPRI Managers agree to
vote their shares in support of the planned
merger between the Company and El Paso.
(iii) The consolidation of HPRI and Paragon into
one combined entity for industrial and
commercial sales.
6. Change of Control Provision: Amend each Employee's
Employment Agreement to provide for a lump sum
severance payment equal to one year's base salary in
the event that, following a change of control, which
would be deemed to have occurred "if any Person other
than Robert G. Phillips, or a party designated or
controlled by Mr. Phillips, is or becomes a beneficial
owner, directly or indirectly, of securities of the
Company representing more than 25% of the combined
voting power of the Company's then outstanding
securities", the Employee is terminated for any reason
which, under the terms of the amendments to the
Employment Agreements, entitles such persons to
receive severance payments. Such amendments shall
provide for the same change of control provisions as
are being provided to the other senior managers of the
Company.
7. Executive Committee: Two (2) HPRI representatives
shall become members of the newly formed Executive
Management Committee of the Company. The purpose of
the Executive Management Committee shall be to afford
the senior managers of each of the Company's
subsidiaries or business units a venue to jointly
develop and implement business strategies.
8. Incentive Compensation Plan: The Company will develop
and implement an Incentive Compensation Plan (the "IC-
Gas Plan") designed specifically for HPRI but which
would coincide with the existing Company plan.
<PAGE>
Effective January 1, 1995 the IC-Gas Plan shall
commence in lieu of and substitute for the current
incentive compensation plan applicable to the HPRI
Managers as set forth in Section 5 of the Employment
Agreement. Each Employee has agreed with the basic
philosophy of the IC-Gas Plan subject to the terms of
such new plan which shall not be any less favorable
than the terms of the existing Company plan. The
proposed general terms of the new IC-Gas Plan are set
forth below:
(a) Corporate Plan:
(i) Incentive Pool Calculation: Annually the
following incentive pool calculation will be
made for the Company, Eastex Hydrocarbons,
Inc., HPRI and other qualifying business
units:
After tax income before current year
incentives
+/- Adjustments for unusual or nonrecurring
items
- - Threshold Performance
= Performance above the threshold
x Incentive Pool Percentage
= Annual Incentive Pool
(ii) Threshold Performance: Threshold Performance
will be calculated based on threshold return
on capital invested by the Company in each
subsidiary. The threshold return will be
determined based on the risk adjusted cost of
capital of the Company. The threshold will
be established annually by the Company's
Board of Directors.
(b) HPRI Plan:
(i) The support employees of HPRI shall
participate solely in the IC-Gas Plan. Such
Employee's incentive will be awarded 80% in
cash and 20% in Company performance shares.
The management of HPRI will participate in
the IC-Gas Plan and in the Company plan. 80%
of their incentive potential will be
determined based on the HPRI plan and 20% of
their potential will be determined based on
the Company plan. The top management of each
Company subsidiary or business unit will
participate to the same extent in the Company
<PAGE>
plan. The HPRI management awards, once
calculated, will be distributed 60% cash and
40% Company performance shares.
(ii) In consideration of the HPRI Manager's
election to participate in the new IC-Gas
Plan and to extend the terms of their
respective Employment Agreements, the Company
shall issue, to each Employee on the date of
closing, 10,000 Company performance shares at
a value per share equivalent to the final
price per share for Company stock set forth
in the Merger Agreement. Such performance
shares shall be issued pursuant to the Plan;
provided, however, such performance shares
shall be fully vested upon issuance, non-
forfeitable and shall be redeemable, at the
election of the holder, at any time and from
time to time after January 1, 1997.
9. Power Marketing Venture: Formation of a separate
entity for the express purpose of marketing and
brokering electricity on behalf of the Company. This
venture would be the exclusive vehicle for the
Company's power marketing activities in the
Southeastern US region and with respect to HPRI's
existing and future industrial and commercial
customers. The formation of this power marketing
entity is subject to the following:
(a) In concert with a power marketing consultant(s) of
the mutual selection of the Company and the HPRI
Managers, to be engaged by the Company, the HPRI
Managers will formulate a comprehensive "Business
Plan for Power Marketing to Industrial and
Commercial Customers" including a proposed annual
budget and capital requirements. The Company will
agree to bear upfront expenses not to exceed
$100,000 for the formation of the entity,
regulatory certification of power marketing
activities and the development of a business plan
including a capital and operating budget.
(b) The Company, with the approval of its Board of
Directors, will finance such venture with
contributions of capital and credit (in the form
of letters of credit) sufficient to conduct the
business in accordance with the Business Plan for
a period of not less than two years (the "budget
period") from inception.
(c) The Company, in conjunction with Kent Graham of
Arthur Andersen & Co., (the Company's outside
accountants and advisors) will develop an
Incentive Compensation Plan (the "IC-Power Plan")
which shall be specifically applied to the
<PAGE>
performance of the power marketing entity and
shall include the participation of the HPRI
Managers, salesmen and support personnel at the
discretion of the HPRI Managers. This IC-Power
Plan shall be based upon comparable terms and
conditions as set forth above in the IC-Gas Plan.
(d) In consideration of the HPRI Manager's election to
participate in the new HPRI IC-Power Plan, to
extend the terms of their respective Employment
Agreements and to initiate the Company's entry
into power marketing, the Company shall issue, to
each Employee on the date of closing, 10,000
Company performance shares at a value per share
equivalent to the final price per share for the
Company stock set forth in the Merger Agreement.
Such performance shares shall be issued pursuant
to the Plan, provided, however, such performance
shares shall be fully vested upon issuance, non-
forfeitable and shall be redeemable, at the
election of the holder, at any time and from time
to time after January 1, 1997.
(e) Any awards payable to the Employee in stock,
options or performance shares, pursuant to the
incentive compensation plans set forth in this
Agreement, prior to or after the Merger, shall be
converted into common stock, options or
performance shares of El Paso at the exchange
ratio as defined in the Merger Agreement.
10. The parties anticipate that the amendments to
Employment Agreements and Related Agreements shall be
executed no later than May 16, 1995.
<PAGE>
Each of the undersigned have agreed to the general
terms and conditions as set forth hereinabove and agree to be
bound by said terms subject to the completion of final
documentation of the amendments and other agreements contemplated
herein.
AGREED TO AND ACCEPTED AGREED TO AND ACCEPTED
THIS 5th DAY OF MAY, 1995 THIS 5th DAY OF MAY, 1995
EMPLOYEE: EMPLOYEE:
/s/ Brian N. Heath /s/ Scott C. Gaddis
Brian N. Heath Scott C. Gaddis
AGREED TO AND ACCEPTED AGREED TO AND ACCEPTED
THIS 5th DAY OF MAY, 1995 THIS 5th DAY OF MAY, 1995
EMPLOYEE:
/s/ Douglas D. Morgan /s/ Robert G. Phillips
Douglas D. Morgan Robert G. Phillips,
Chairman and CEO
On behalf of Heath Petra
Resources, Inc.
