<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
--------------------------
Date of Report (Date of earliest event reported): February 13, 1998
(February 4, 1998)
UNION TEXAS PETROLEUM HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 1-9019 76-0040040
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
</TABLE>
1330 Post Oak Boulevard, Houston, Texas 77056
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 623-6544
<PAGE> 2
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
On February 4, 1998, Union Texas Petroleum Holdings, Inc. (the
"Company"), through its subsidiary Union Texas Venezuela Limited, completed the
acquisition of all of the stock of Compania Occidental de Hidrocarburos, Inc.
("Hidrocarburos"), a U.S. affiliate of Occidental Oil and Gas Corporation
("Occidental"). The acquisition cost approximately $212 million, which included
approximately $14 million in working capital and certain closing adjustments.
Occidental may receive contingent payments of up to a maximum of $15 million
annually for six years based primarily on the level of oil prices. The effective
date of the transaction was December 31, 1997. The Company initially funded the
acquisition under bank facilities, including a new $130 million facility through
Hidrocarburos guaranteed by the Company. The Company may elect to offer
preferred stock and long term debt securities under its existing shelf
registration statement with the Securities and Exchange Commission in connection
with such acquisition. Hidrocarburos operates and has a 100% interest in the
operating service contract with PDVSA Petroleo y Gas S.A. ("PDVSA PyG"), a
subsidiary of the national oil company, Petroleos de Venezuela S.A. ("PDVSA")
and the successor to Maraven S.A., for the Desarrollo Zulia Occidental ("DZO")
unit located west of Lake Maracaibo in Western Venezuela. An affiliate of PDVSA
has an option to purchase up to a 10% working interest in the DZO operating
service contract. In 1998, the Company recorded 114 million net barrels in
proved reserves from the DZO unit. The Company anticipates spending $400 to $450
million over the next nine years for future DZO development expenditures. The
Company plans to increase current DZO production from 23,000 gross barrels a day
up to 55,000 gross barrels within five years. With the addition of the DZO unit
more than offsetting the anticipated production decline in 1998, the Company's
estimated annual production for 1998 is expected to rise by 25% from
approximately 40 million barrels of oil equivalent to about 50 million barrels
of oil equivalent. The Company expects to spend $79 million in 1998 on
development activities on the DZO unit and its Boqueron properties in Venezuela.
Hidrocarburos was awarded the operating service contract during
Venezuela's Second Round of Operating Agreements in 1993 and operations
commenced in 1994. Under an operating services contract, the operator invests
capital and provides technology for reactivation of the fields, in exchange for
several fees. Under this contract, PDVSA PyG makes a quarterly payment to the
operator comprised of operating, capital and incentive fee components and
interest on unrecovered capital costs. The operating, capital and interest
components are limited by a calculated maximum total fee. The maximum total fee
is indexed to a basket of crude oil products and was approximately $7.50 per
barrel in the latter half of 1997. Additionally, an incremental incentive fee of
several dollars per barrel, which is also indexed to a basket of crude oil
products, is payable when cumulative production from the DZO unit (from
inception of the 1993 contract) reaches 52 million barrels. Cumulative
production is expected to reach 52 million barrels during the second half of
1999. The operator is subject to corporate and local taxes of approximately 37%
and does not pay any royalties. Operating costs currently are averaging about
$2.90 per barrel. The 20-year contract expires in 2013 and may be extended with
the approval of PDVSA PyG.
2
<PAGE> 3
Item 5. OTHER EVENTS
China's Bohai Bay. Phillips China Inc., a unit of Phillips Petroleum
Company, and Union Texas Bohai Limited announced in January 1998 a second oil
discovery in the Bozhong Block of China's Bohai Bay, 35 miles southwest of an
unrelated discovery announced in November 1997. The Bozhong 36-2-1 well was
drilled to a total depth of 8,491 feet in 69 feet of water. Drill-stem tests
over a 653-foot interval, within a gross hydrocarbon column of 1,909 feet,
flowed oil at a maximum rate of 2,262 barrels per day. Test rates were limited
by testing facilities on the drilling rig. The well was plugged and abandoned.
Gravity of the oil was 20.5 degrees API. Phillips China Inc. is operator with a
60% interest; Union Texas Bohai Limited, a unit of the Company, holds the
remaining 40%. China National Offshore Oil Corp. has the right to acquire up to
a 51% interest in any proposed development. The Bohai-10 drilling rig has been
moved to the site of another exploration well, the Bohzhong 36-2-W, which will
test a structure adjacent to the most recent discovery. Plans are to gather
more seismic data and drill another well on the block later in 1998 or 1999.
Press Releases. The information set forth in the press releases of
the registrant dated November 12, 1997, January 5, 1998, January 27, 1998 and
February 5, 1998 which are filed as exhibits hereto, are incorporated herein by
reference.
The information included in this Current Report on Form 8-K and the
press releases contain forward-looking statements within the meaning of and in
reliance upon the "safe harbor" provisions of the Private Securities Litigation
Reform Act, as set forth in Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
that involve risks and uncertainties, including price volatility, exploration,
development, operational, implementation, marketing and opportunity risks, and
other factors described from time to time in the registrant's publicly available
SEC reports, which could cause actual results to differ materially.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired
Financial statements are not required to be provided pursuant to
Item 7(a) of Form 8-K
(b) Pro Forma Financial Information
Pro forma financial statements are not required to be provided
pursuant to Item 7(b) of Form 8-K
3
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(c) Exhibits:
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<CAPTION>
Exhibit
Number Description
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2.1 Stock Purchase Agreement dated as of January 27, 1998,
between Occidental Oil and Gas Corporation, Union Texas
Venezuela Limited and Union Texas International Corporation.
99.1 Press Release dated November 12, 1997
99.2 Press Release dated January 5, 1998
99.3 Press Release dated January 27, 1998
99.4 Press Release dated February 5, 1998
</TABLE>
4
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNION TEXAS PETROLEUM HOLDINGS, INC.
By: /s/ ALAN R. CRAIN, JR.
----------------------------------------
Alan R. Crain, Jr.
Vice President and General Counsel
Date: February 13, 1998
5
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
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2.1 Stock Purchase Agreement dated as of January 27, 1998,
between Occidental Oil and Gas Corporation, Union Texas
Venezuela Limited and Union Texas International Corporation.
99.1 Press Release dated November 12, 1997
99.2 Press Release dated January 5, 1998
99.3 Press Release dated January 27, 1998
99.4 Press Release dated February 5, 1998
</TABLE>
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EXHIBIT 2.1
================================================================================
STOCK PURCHASE AGREEMENT
between
OCCIDENTAL OIL AND GAS CORPORATION,
UNION TEXAS VENEZUELA, LIMITED
and
UNION TEXAS INTERNATIONAL CORPORATION
Dated as of January 27, 1998
================================================================================
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
Section 1.1 Specific Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE II
PURCHASE AND SALE OF SHARES; GUARANTEE
Section 2.1 Purchase and Sale of Company Shares and OOG Receivable and Assumption of OOG Payable . . . . . . . . 10
Section 2.2 Closing; Delivery and Payment; Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.3 December 31, 1997 Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.4 Contingent Purchase Price Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.1 Organization and Authority of Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.3 Capitalization of the Company; Organization and Qualification; Subsidiaries . . . . . . . . . . . . 21
Section 3.4 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.6 Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.8 Litigation and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.9 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.10 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.11 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.12 Corporate Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.13 Compliance with Law and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.14 Absence of Subsequent Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.15 Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.16 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.17 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.18 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.19 Directors and Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.20 Other Representations or Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND GUARANTOR
Section 4.1 Organization and Authority of Buyer and Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.3 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.4 Financial Capability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.5 Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.6 Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.7 No Other Representations or Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE V
CERTAIN COVENANTS AND
AGREEMENTS OF SELLER AND BUYER
Section 5.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.2 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.3 Registrations, Filings and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.5 Guarantee of OSA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.6 Employee Matters; Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.7 Assets Not Transferred with the Company Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.8 Continued Use of Intellectual Property and Hardware . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.9 Reagor Lawsuit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to Obligations of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.2 Conditions to Obligations of Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE VII
TERMINATION
Section 7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>
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ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
Section 8.1 Survival of Representations, Warranties, Covenants and Agreements . . . . . . . . . . . . . . . . . 48
Section 8.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.3 Method of Asserting Claims, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.4 Subrogation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.5 Insurance Proceeds; Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 8.6 Investigation and Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 8.7 Deductible; Maximum Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE IX
MISCELLANEOUS
Section 9.1 Amendment and Modification; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.3 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.5 Parties in Interest; No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 9.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 9.7 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 9.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 9.9 GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF FORUM . . . . . . . . . . . . . . . . . . . 56
Section 9.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 9.11 Attorney's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 9.12 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Schedules:
Schedule 2.3 - December 31, 1997 Balance Sheet
Schedule 3.5 - Financial Statements
Schedule 3.8 - Litigation and Claims
Schedule 3.9 - Labor Matters
Schedule 3.10 - Material Contracts
Schedule 3.14 - Absence of Subsequent Actions
Schedule 3.13 - Compliance with Law and Permits
Schedule 3.15 - Employee Plans
Schedule 3.17 - Intellectual Property
Schedule 3.18 - Insurance Policies
Schedule 3.19 - Directors and Representatives
Schedule 5.1 - Conduct of Business
Schedule 5.6(a) - National Employees
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Schedule 5.6(b) - Expatriate Employees
Schedule 5.7 - Assets Not Transferred
Schedule 8.2(a) - Indemnification
Exhibits:
Exhibit 1 - OSA
Exhibit 6.1(e) - Opinion of Seller's Counsel
Exhibit 6.1(g)(i) - License Agreement
Exhibit 6.1(g)(ii) - Transition Services Agreement
Exhibit 6.2(h) - Opinion of Buyer's Counsel
</TABLE>
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STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of
January 27, 1998, by and among Occidental Oil and Gas Corporation, a California
corporation ("Seller"), Union Texas Venezuela, Limited, a company organized
under the laws of the Bahamas ("Buyer"), and Union Texas International
Corporation, a Delaware corporation ("Guarantor").
W I T N E S S E T H:
WHEREAS, Seller indirectly owns all of the issued and
outstanding shares of capital stock of Compania Occidental de Hidrocarburos,
Inc., a California corporation (the "Company") (consisting of 10,000 shares of
common stock, par value $1.00 per share (the "Company Shares"));
WHEREAS, (i) Seller desires to sell or cause to be sold to
Buyer the Company Shares, together with certain accounts receivable, and to
have Buyer assume certain accounts payable, (ii) Buyer desires to purchase the
Company Shares, together with certain accounts receivable, and to assume
certain accounts payable, from Seller and (iii) Guarantor desires to guarantee
the obligations of Buyer hereunder;
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and subject to and on the terms and conditions
herein set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Specific Definitions. As used in this
Agreement, the following terms shall have the meanings set forth or as
referenced below:
"Actions" shall have the meaning set forth in Section 3.8
hereof.
"Adjustment Amount" shall have the meaning set forth in
Section 2.3 hereof.
"Affiliate," with respect to any Person, means any other
Person directly or indirectly controlling, controlled by or under common
control with that Person. The term "control" as used in the preceding sentence
means, with
<PAGE> 7
respect to a corporation, the right to exercise, directly or indirectly, 50% or
more of the voting rights attributable to the shares of the controlled
corporation, and, with respect to any Person other than a corporation, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person.
"Affiliated Group" means any affiliated group within the
meaning of Section 1504(a) of the Code or any similar group defined under a
similar provision of state, local or foreign law.
"Agreement" shall mean this Agreement (including the exhibits
and schedules hereto).
"Assets" means all of the assets (whether real, personal,
tangible or intangible) used or held for use by the Company in connection with
the Business including, without limitation, all of the assets reflected on the
Balance Sheet, other than those disposed of since the Balance Sheet Date (i) as
contemplated by this Agreement or (ii) in the ordinary course of business
consistent with past practices.
"Balance Sheet" shall have the meaning set forth in Section
3.5 hereof.
"Balance Sheet Date" shall have the meaning set forth in
Section 3.5.
"Base Fee" means $5.50.
"Business" means the business and operations of the Company.
"Business Day" means any day other than a Saturday, a Sunday
or a day on which banks in California are authorized or obligated by law or
executive order to close.
"Buyer" shall have the meaning set forth in the Preamble
hereto.
"Cash Adjustment Amount" means (a) the amount of cash that is
advanced, contributed or loaned to the Company by Seller or any Affiliate of
Seller after December 31, 1997 and prior to the Closing Date, other than the
Replacement Debt, any payments with respect to third party Company Debt
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and payments with respect to the OOG Payable, and less any repayments made of
such cash, minus (b) the amount of cash that is advanced or loaned by the
Company to Seller or any Affiliate of Seller after December 31, 1997 and prior
to the Closing Date, less any repayments made of such cash.
"Claims" means any and all fines, liabilities, judgments,
losses, costs, expenses, or actual damages, including in each case, interest,
penalties, reasonable attorneys' fees and reasonable costs of investigations
and litigation.
"Closing" shall have the meaning set forth in Section 2.2(a)
hereof.
"Closing Date" shall have the meaning set forth in Section
2.2(a) hereof.
"Code" means the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
"Commercial Registry" shall have the meaning set forth in
Section 3.3(c) hereof.
"Common Parent" means the "common parent" (within the meaning
of such term as it is used in Section 1504 of the Code) of the Seller
Affiliated Group.
"Company" shall have the meaning set forth in the Preamble
hereto.
"Company Debt" means any debt, obligation or other arrangement
of the Company evidencing or relating to any borrowing or loaning or available
borrowing or loaning of money to the Company (or to any other Person for which
the Company has liability), whether secured or unsecured, or which is intended
to provide any guarantee or credit support by the Company with respect to the
obligations of any Person, but not including the Long-Term Debt and the
Replacement Debt and any guarantees by the Company of residential leases of
Expatriate Employees.
"Company Interests" shall have the meaning set forth in
Section 3.11(a) hereof.
"Company Shares" shall have the meaning set forth in the
Preamble hereto.
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"Consideration" shall have the meaning set forth in Section
2.3(f) hereof.
"Contingent Purchase Price Payments" shall have the meaning
set forth in Section 2.4 hereof.
"CPA Firm" shall have the meaning set forth in Section 2.3
hereof.
"December Balance Sheet" shall have the meaning set forth in
Section 2.3(a) hereof.
"Employees" shall have the meaning set forth in Section 5.6
hereof.
"Employee Plan" means any existing written understanding,
program or arrangement that evidences any pension or other retirement plan or
program or any profit sharing or other benefit plan or that provides retirement
income, medical, surgical, or hospital care benefits or benefits in the event
of sickness, accident, disability, death or unemployment, deferred
compensation, incentive benefits, bonuses, stock options, stock awards,
severance pay, education scholarships, tuition reimbursement benefits,
retention incentive benefits or vacation benefits sponsored, maintained or
contributed to by Seller, the Company or any Affiliate of the Seller or the
Company for the benefit of any present or former employees or directors of the
Company or their spouses, dependents or beneficiaries.
"Encumbrances" means any liens, charges, pledges, security
interests, options, warrants, purchase rights, preemptive rights, adverse
claims, levies, orders of execution, orders of expropriation or written
notifications of intent to expropriate, easements, equitable interests or other
encumbrances.
"Exchange Rate" means, for any given day, the rate, as
published in the Wall Street Journal or, if not published therein, in another
authoritative source, that Venezuelan Bolivars are being converted into United
States dollars as of the close of business on the immediately preceding
Business Day.
"Expatriate Employees" shall have the meaning set forth in
Section 5.6 hereof.
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"Fee Multiplier" means 6,000,000.
"Financial Statements" shall have the meaning set forth in
Section 3.5 hereof.
"Final Balance Sheet" shall have the meaning set forth in
Section 2.3 hereof.
"Form" shall have the meaning set forth in Section 5.2 hereof.
"GAAP" means U.S. generally accepted accounting principles as
in effect from time to time and as consistently applied.
"Governmental Authority" means any court, government,
legislature, council, government department, commission, board, bureau, agency,
instrumentality, arbitrator or other authority of Venezuela or any jurisdiction
therein, or of the United States or any jurisdiction therein, together with any
company directly or indirectly owned by the government of Venezuela, including
Maraven.
"Hydrocarbons Receivables" means the accounts receivable of
the Company for the fourth quarter of 1997 from Maraven for the Operating Fee
and the Capital Fee (each as defined in the OSA) and the interest recoverable
pursuant to Article 18 of the OSA reduced by the Maximum Total Fee Limitation
(as defined in the OSA).
"Indemnified Party" shall have the meaning set forth in
Section 8.2(a) hereof.
"Indemnifying Party" shall have the meaning set forth in
Section 8.2(a) hereof.
"Initial Purchase Price" means $204,500,000.00 plus or minus,
as the case may be, the Adjustment Amount.
"Intellectual Property" means all trade secrets, know-how,
computer software and all documentation thereof and related rights, and any and
all applications, registrations, or the like relating to any of the foregoing,
and all tangible manifestations and all technical information relating thereto,
owned, licensed or used by the Company or otherwise used in the Business for
the benefit of the Company by Seller or any Affiliate of Seller.
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"Law" means any applicable law, statute, ordinance, rule or
regulation or any ruling, writ, injunction, restriction, order, judgment,
decree or other official written act of any Governmental Authority.
"License Agreement" means the License Agreement, substantially
in the form attached hereto as Exhibit 6.1(g)(i).
"Long-Term Debt" means the aggregate principal balance of debt
outstanding under the Credit Agreement, dated as of June 20, 1995, among the
Company, certain lenders named therein and The Bank of Nova Scotia, as agent,
and the Credit Agreement, dated as of June 2, 1997, among the Company, certain
lenders named therein and The Bank of Nova Scotia, as agent.
"Maraven" means Maraven S.A. and any successor entity to
Maraven S.A.
"Material Adverse Effect" means, with respect to any Person,
any effect that is material and adverse to the financial condition or results
of operations of such Person.
"Material Contracts" shall have the meaning set forth in
Section 3.10 hereof.
"National Employees" shall have the meaning set forth in
Section 5.6 hereof.
"Notice Period" shall have the meaning set forth in Section
8.3(b) hereof.
"Occidental" means Occidental Petroleum Corporation, a
Delaware corporation.
"OIEPC" means Occidental International Exploration and
Production Company, a California corporation.
"OOG Contract" means that certain contract dated March 27,
1996, between the Company and Seller pursuant to which the Company, as "The
Assignor," assigned and transferred to Seller, as "The Assignee," the remaining
unpaid balance of invoices Nos. CCA-001, CCA-005, CCA-009, CCA-014 and CCA-021
payable under the terms and conditions set forth in the OSA.
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"OOG Payable" means the remaining unpaid balance as of
December 31, 1997, of the consideration payable by "The Assignee" under the OOG
Contract to "The Assignor" under the OOG Contract for the assignment of the OOG
Receivable from The Assignor to The Assignee, such remaining balance as of
December 31, 1997 being 14,714,133,380 Bolivars.
"OOG Receivable" means the remaining unpaid balance as of
December 31, 1997, of invoices Nos. CCA-001, CCA-005, CCA-009, CCA-014 and
CCA-021 payable under the terms and conditions set forth in the OSA, together
with all rights of "The Assignee" in and under the OOG Contract, such remaining
balance as of December 31, 1997 being U.S.$54,222,475.
"OSA" means the Operating Services Agreement dated November
19, 1993, between Maraven and the Company covering approximately 391,973.51
hectares in the State of Zulia, Venezuela, together with all amendments
thereto, true, correct and complete copies of which are attached hereto as
Exhibit 1.
"Permits" means all licenses, certificates, registrations,
approvals, authorizations or permits required of or with the applicable
Governmental Authority.
"Person" means any individual, corporation, partnership,
limited liability company, firm, joint venture, association, joint-stock
company, trust, unincorporated organization, governmental or regulatory body or
other entity.
"Preliminary Amount" means $204,500,000.00.
"Purchase Price" means (a) the Initial Purchase Price and (b)
the Contingent Purchase Price Payments which Buyer is contingently obligated to
make pursuant to Section 2.4 hereof.
"Remaining Expatriates" shall have the meaning set forth in
Section 5.6 hereof.
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"Replacement Debt" shall have the meaning set forth in Section
2.3(b) hereof.
"Replacement Debt Amount" shall have the meaning set forth in
Section 2.3(b) hereof.
"Section 338(h)(10) Election" shall have the meaning set forth
in Section 5.2 hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" shall have the meaning set forth in the Preamble
hereto.
"Tax Returns" means any return, declaration, report, form,
claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendments
thereof.
"Taxes" means any federal, state, local, or foreign income,
gross receipts, license, payroll, business assets, luxury, goods and services,
employment, excise, severance, stamp, occupation, premium, environmental
(including taxes under Section 59A of the Code), customs duties, capital stock,
franchise, profits, gains, withholding, social security (or similar, including
all obligations arising from the Social Security Law and in respect to the
Instituto de Cooperacion Educativa (INCE)), unemployment, disability, real
property, personal property, sales, use, wholesale sales, municipal, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever of any Governmental Authority, including any
interest, penalty, or addition thereto, whether disputed or not.
"Third Party Claim Notice" shall have the meaning set forth in
Section 8.3(b) hereof.
"Transferring Expatriates" shall have the meaning set forth in
Section 5.6 hereof.
"Transition Services Agreement" means the Transition Services
Agreement, substantially in the form attached hereto as Exhibit 6.1(g)(ii).
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"Venezuela DZO Business" means the business and operations of
the Company which arise under or out of or relate to the OSA, any hydrocarbons
attributable thereto, or any activities or operations in connection with the
OSA or any hydrocarbons attributable thereto.
"Voting Debt" shall be as defined in Section 3.3(a).
"Working Capital" means the current assets (excluding any
intercompany receivables) of the Company less the current liabilities
(excluding any intercompany liabilities) of the Company, in each case as of
December 31, 1997 and calculated in accordance with GAAP and in a manner
substantially consistent with the calculation thereof in the Balance Sheet.
"Yearly Fee Calculation" means, with respect to the particular
calendar year, the arithmetic mean of the four quarterly "MTF Calculations" for
such calendar year, in U.S. dollars per barrel, which are determined per the
OSA as in effect at December 31, 1997 and in accordance with the fourth quarter
1997 calculation methodology ("Current Base Fee Agreement"). The "MTF
Calculation", with respect to a particular calendar quarter of a particular
calendar year, is the lower of (a) the Operating Fee plus interest recoverable
pursuant to Article 18 of the Current Base Fee Agreement plus the Capital Fee,
in each case for such calendar quarter, and (b) the Maximum Total Fee for such
calendar quarter pursuant to the Current Base Fee Agreement. The foregoing
calculations will be unaffected by any later modifications of the Current Base
Fee Agreement. The MTF Calculation for each calendar quarter shall be
converted into U.S. dollars per barrel based on the production volumes for such
quarter which are used in determining the fees referenced in the MTF
Calculation. The terms "Operating Fee", "Capital Fee" and "Maximum Total Fee"
shall be as defined in the Current Base Fee Agreement. The "Incentive
Production Fee", as defined in the OSA, shall not be considered for any purpose
in connection with the "Yearly Fee Calculation" and/or the calculation of the
Contingent Purchase Price Payments.
Section 1.2 Other Definitional Provisions. (a) The words
"hereof," "herein" and "hereunder" and words of similar import, when used in
this Agreement, shall refer to this Agreement as a whole and not to any
particular
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provision of this Agreement. All references in this Agreement to an "Article",
"Section", "subsection", "Exhibit" or "Schedule" shall be to an Article,
Section, subsection, Exhibit or Schedule of or to this Agreement, unless the
context requires otherwise.
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States
dollars.
ARTICLE II
PURCHASE AND SALE OF SHARES; GUARANTEE
Section 2.1 Purchase and Sale of Company Shares and OOG
Receivable and Assumption of OOG Payable.
(a) In reliance on the representations, warranties and other
terms hereof and subject to the conditions contained herein, Buyer agrees to
purchase (i) from OIEPC, and Seller agrees to cause OIEPC to sell to Buyer, the
Company Shares and (ii) from Seller, and Seller agrees to sell to Buyer, the
OOG Receivable, in exchange for payment of the Purchase Price and assumption of
the OOG Payable by Buyer. Seller shall transfer or cause to be transferred all
of the Company Shares and the OOG Receivable to Buyer at Closing.
(b) As consideration for the sale by Seller or OIEPC, as the
case may be, of the Company Shares and the OOG Receivable to Buyer on the terms
and conditions contained herein, Buyer agrees to pay to Seller and OIEPC a
portion of the Purchase Price by means of an intercompany (or third party) loan
to the Company and the payment of the balance of the Purchase Price to Seller
and OIEPC pursuant to Sections 2.2, 2.3 and 2.4 hereof and to assume the
obligation of Seller to pay the balance of the OOG Payable to the Company.
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Section 2.2 Closing; Delivery and Payment; Guarantee.
(a) Subject to the satisfaction or waiver of the conditions
set forth in Article VI, the closing ("Closing") shall be held at the offices
of Sullivan & Cromwell, 444 South Flower Street, Los Angeles, California 90071,
at 7:00 a.m. on the sixth Business Day after the satisfaction of the condition
set forth in 6.1(b) hereof, or on such other date to which the parties may
agree in writing. The date on which the Closing occurs is hereinafter referred
to as the "Closing Date."
(b) At the Closing, (1) Seller shall deliver, or cause to be
delivered, to Buyer:
(i) a certificate representing the Company Shares duly
endorsed and in form for transfer to Buyer;
(ii) an assignment of the OOG Receivable in a form
reasonably satisfactory to Buyer and Seller duly executed by Seller,
together with the originals or copies of the OOG Contract and any
other documents delivered to The Assignee pursuant to Clause Fourth of
the OOG Contract;
(2) Buyer shall:
(i) pay to OIEPC for the Company Shares in immediately
available funds by wire transfer to an account designated by OIEPC an
amount equal to the Preliminary Amount less the amount paid to Seller
pursuant to subsection 2.2(b)(2)(ii) hereof and less the amount
advanced (or caused to be advanced) by Buyer to the Company under
subsection 2.2(b)(2)(iii)(A) hereof;
(ii) in consideration for the assignment of the OOG
Receivable, assume the OOG Payable, pursuant to subsection
2.2(b)(2)(iv) below, and pay to Seller $25,057,000 in immediately
available funds by wire transfer to an account designated by Seller;
(iii) advance (or cause a third party lender to advance) to
the Company in immediately available funds to an account for the
Company designated by Buyer an amount equal to (A) the Replacement
Debt Amount as
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proceeds of the intercompany (or third party) loan from Buyer to the
Company referred to in subsection 2.2(b)(3)(i) hereof plus (B) the
amount the Company is required to pay under Section 2.2(b)(3)(iii);
and
(iv) deliver an assumption of the OOG Payable in a form
reasonably satisfactory to Buyer and Seller duly executed by Buyer.
(3) the Company shall:
(i) deliver to Buyer all documentation required under
Venezuelan Law to evidence an intercompany (or third party) loan from
Buyer to the Company in the amount required to be advanced (or caused
to be advanced) by Buyer to the Company under subsection
2.2(b)(2)(iii) hereof;
(ii) pay to Seller in immediately available funds by wire
transfer to an account designated by Seller the amount advanced (or
caused to be advanced) by Buyer to the Company pursuant to subsection
2.2(b)(2)(iii)(A) hereof in full payment of the Replacement Debt;
(iii) repay to Seller the sum of (A) the positive amount, if
any, of the Cash Adjustment Amount and (B) any amounts paid by Seller
with respect to the OOG Payable after December 31, 1997; and
(iv) deliver to Seller a release of Seller from any liability
under the OOG Payable.
(4) Seller shall deliver or cause to be delivered to the Company an
acknowledgment and agreement that the Replacement Debt has been paid in full,
that there are no further obligations of the Company with respect thereto and
that the Company is released from all obligations thereunder; and
(5) Seller shall pay Buyer (i) the negative amount, if any, of the Cash
Adjustment Amount and (ii) any amounts received by Seller with respect to the
OOG Receivable after December 31, 1997.
(6) Seller, OIEPC and the Company shall deliver or cause to be delivered to
Buyer or Buyer's designee all other documentation necessary to evidence on the
statutory books of the Company the transfers, assignments, redesignations and
other matters contemplated in Section 2.3(b).
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(c) In addition to the documents and transfers of funds
described in this Section 2.2,
(1) Seller will:
(i) at the Closing (A) deliver to Buyer (or, at
Buyer's election, the Company) possession or control of the
Assets and (B) to the extent reasonably practicable possession
or control of the files, documents, papers, contracts,
agreements, legal descriptions, open books of account or
ledgers and documentation in support thereof used or useful in
the operation of the Business, and all other information,
whether in writing, computer diskette or other form or medium,
that constitutes Assets or pertains predominately to the use
or ownership of the Assets or to the Company, the Company
Shares or the OOG Receivable and that is in the possession of
Seller or any Affiliate of Seller;
(ii) as soon as is reasonably practicable after
the Closing Date, deliver to Buyer (or, at Buyer's election,
the Company) (A) possession or control of all items referred
to under Section 2.2(c)(1)(i) hereof that Seller was unable to
deliver at the Closing and (B) a written release evidencing
that the Long-Term Debt has been unconditionally released and
a written termination of the credit facilities with respect
thereto;
(iii) deliver to Buyer (or, at Buyer's election, the
Company) possession of all stock registers, minute books and
corporate books and records for the Company; and
(iv) deliver to Buyer (or, at Buyer's election, the
Company) all documents required to be furnished by Seller and
its Affiliates to Buyer as conditions precedent under Section
6.1 hereof;
(2) Buyer will execute and deliver to Seller all documents
required to be furnished by Buyer and its Affiliates to Seller as
conditions precedent under Section 6.2 hereof.
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In the event of any conflict or inconsistency between the terms of any document
to be entered into in connection with the Closing and the terms of this
Agreement, including the terms of this Agreement with respect to
indemnification, or if this Agreement addresses topics not addressed by those
documents, the terms of this Agreement shall control.
(d) Guarantor hereby unconditionally and irrevocably
guarantees to Seller the performance of all obligations of Buyer arising out of
or in connection with this Agreement.
Section 2.3 December 31, 1997 Balance Sheet.
(a) Seller has delivered to Buyer the Company's balance sheet
as of December 31, 1997 (the "December Balance Sheet"), which will be used for
Closing and is attached hereto as Schedule 2.3. The December Balance Sheet
shall be prepared in accordance with GAAP (except for lack of footnotes and
other presentation items) and shall be prepared on the basis of procedures,
methods and accounting principles that are consistent in all material respects
with the procedures, methods and accounting principles used by the Company in
the preparation of the Balance Sheet.
(b) Seller will (i) cause the Company to have at the
Closing Date cash in an amount sufficient to operate the Company in the normal
course for a two-week period after the Closing Date, (ii) on or prior to the
Closing Date, cause all Company Debt to be repaid and all Encumbrances which
cover or affect any of the Assets and secure any Company Debt or Long-Term Debt
to be released and (iii) on or prior to the Closing Date, make (or cause an
Affiliate of Seller to make) an unsecured intercompany loan (the "Replacement
Debt") to the Company in an amount equal to such amount as may be necessary to
enable the Company to pay and discharge all Long-Term Debt including related
interest, fees and other costs shown on the December Balance Sheet or otherwise
(such amount, after reduction by not more than $35 million to reflect the
repayment or transfer of any intercompany payables to the Company, the
"Replacement Debt Amount") and shall cause the Company to pay and discharge the
Long-Term Debt with the proceeds of the Replacement Debt. On or before the
Closing Date, the Seller shall cause the
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repayment or transfer by dividend of all intercompany payables and receivables
of the Company accrued pursuant to GAAP, other than the Replacement Debt and
the OOG Payable. At Closing, the parties agree, with respect to any remaining
intercompany accounts on the Company books or Venezuelan statutory books, to
redesignate on such books the non-Company account party or parties to such
accounts to be Buyer or its designee, and to transfer or assign the related
offsetting accounts, if any, of Seller or its Affiliate to Buyer or its
designee. All Taxes arising out of or in connection with the repayment,
transfer, redesignation or assignment of all intercompany payables and
receivables, other than transfer taxes arising out of or in connection with the
repayment, transfer, redesignation or assignment of all intercompany payables
and receivables on the statutory books of the Company, shall be the sole
obligation of Seller and paid by Seller.
(c) Within 90 calendar days following the Closing Date, Buyer
shall cause the Company to prepare a balance sheet of the Company as of December
31, 1997 (such balance sheet is hereinafter referred to as the "Final Balance
Sheet"). The Final Balance Sheet shall be prepared in accordance with GAAP
(except for lack of footnotes and other presentation items) and on the basis of
procedures, methods and accounting principles that are consistent in all
material respects with the procedures, methods and accounting principles used by
the Company in the preparation of the Balance Sheet. Buyer shall give Seller
and its representatives reasonable access to the books, records and personnel of
the Business, and to all workpapers and other relevant documents and analysis,
for the purpose of reviewing and auditing the Final Balance Sheet. Seller shall
have a period of 90 calendar days after the delivery to it of the Final Balance
Sheet, to review it and to make any objections to the Final Balance Sheet in
writing to Buyer. If no written objections to the Final Balance Sheet are
delivered to Buyer within the 90-day period, the Final Balance Sheet shall be
deemed to be accepted and approved by all parties, and the Adjustment Amount, if
any, shall be paid as provided in Section 2.3(e) not later than five Business
Days following the expiration of such 90-day period, or at such other time and
date as may be mutually agreed upon in writing by Buyer and Seller. If written
objections of Seller to the Final Balance Sheet are delivered to Buyer within
the 90-day period, then Buyer and Seller shall attempt to resolve the matter or
matters in
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dispute and, if such disputes are resolved by Buyer and Seller, the Adjustment
Amount, if any, shall be paid as provided in Section 2.3(e) not later than five
Business Days following the resolution of all disputes or at such other time
and date as may be mutually agreed upon in writing by Buyer and Seller. Seller
shall quantify its objections to the extent reasonably practicable in all
written objections delivered to Buyer with respect to the Final Balance Sheet.
Notwithstanding anything to the contrary in Sections 2.3(c), 2.3(d) or 2.3(e),
nothing in Sections 2.3(c), 2.3(d) and 2.3(e) nor any agreement regarding the
Final Balance Sheet shall release, limit or impair any representations or
warranties by the parties in Articles III and IV or the parties agreements in
Section 5.2.
(d) If such disputes cannot be resolved by Buyer and Seller
within 20 calendar days after the delivery of the objections to the Final
Balance Sheet, then the specific matters in dispute shall be submitted to Ernst
& Young LLP (the "CPA Firm"), which firm shall render its opinion as to such
matters in accordance with the terms hereof. Based on that opinion, the CPA
Firm shall then send to Buyer and to Seller a written determination of the
matters in dispute and a written determination of the Adjustment Amount based
upon such opinion, whereupon the confirmed or revised Final Balance Sheet shall
be final and binding upon Buyer and Seller. The Adjustment Amount, if any,
shall be paid as provided in Section 2.3(e) not later than five Business Days
following the receipt by Buyer and Seller of those documents prepared by the CPA
Firm and evidencing that opinion or at such other time and date as may be
mutually agreed upon in writing by Buyer and Seller. All costs, fees and
expenses charged or incurred by the CPA Firm, if any, shall be borne equally by
Seller and Buyer.
(e) The "Adjustment Amount" shall equal the Working Capital
as shown on the Final Balance Sheet that has become final and binding pursuant
to this Section 2.3 (denominated in U.S. dollars based on the Exchange Rate in
effect on December 31, 1997) less the Working Capital as shown on the December
Balance Sheet. Buyer shall pay to Seller the amount, if any, by which the
Adjustment Amount is positive, or Seller shall pay to Buyer the amount, if any,
by which the Adjustment Amount is negative. Such payment shall be made by the
obligated party by wire transfer to an account designated in writing by the
party entitled to receive such amount. Buyer shall have the right to review,
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audit and adjust the amounts paid pursuant to Sections 2.2(b)(3)(iii) and
2.2(b)(5) in the same manner as provided in this Section 2.3 with respect to
the December Balance Sheet, mutatis mutandis. If the amount ultimately paid by
Maraven to the Company for the Hydrocarbons Receivables increased or decreased
from the amount of the Hydrocarbons Receivables reflected in the Final Balance
Sheet (other than as a result of any offsets or of actions taken by Buyer or
any of its Affiliates or as a result of amendments, modifications or waivers of
the OSA, in each case after the Closing), Seller shall pay Buyer the amount of
any such decrease and Buyer shall pay Seller the amount of any such increase.
(f) Buyer and Seller shall agree on the allocation of the
Initial Purchase Price and liabilities of the Company (the "Consideration")
among the Assets as follows: The allocation of the Consideration shall be
prepared by the Buyer and submitted in writing to Seller within 90 calendar
days after the date on which the Final Balance Sheet becomes final and binding
pursuant to Section 2.3 hereof. If Seller does not object in writing to the
proposed allocation within 30 calendar days after receipt of Buyer's written
proposal, Buyer's proposed allocation shall become final and binding on Seller
and the Buyer. If Seller makes timely objection to the Buyer's proposal, Buyer
and Seller shall have 30 calendar days to reach agreement or the allocation
shall be submitted to the CPA Firm, whose determination shall be final and
binding on Buyer and Seller and whose fees and expenses shall be borne equally
by Seller and Buyer.
(g) Until the Closing or earlier termination of this
Agreement, Seller shall (i) cause the Company to consult with Buyer regarding
capital expenditures by the Company, except for emergencies, requirements of
law and non-discretionary requirements of the OSA, and give due consideration
to the Buyer's request to defer or adjust the sequence of specific capital
expenditures and (ii) cause the Company to have sufficient cash to carry on the
Business from the date hereof until Closing or the earlier termination of this
Agreement.
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Section 2.4 Contingent Purchase Price Payments.
(a) Buyer shall make, or cause to be made, a respective
annual contingent purchase price payment determined annually for each of
calendar years 1998, 1999, 2000, 2001, 2002 and 2003 (a "Contingent Purchase
Price Payment") to OIEPC or its designee within seventy-five days after the end
of each such calendar year, commencing with the calendar year 1998 and
terminating with the calendar year 2003, in an amount equal to the positive
amount, if any, of the lesser of (i) (A) the Yearly Fee Calculation for such
calendar year less the Base Fee (B) multiplied by the Fee Multiplier and (ii)
$15,000,000.
(b) In a given calendar year, if the Yearly Fee Calculation
results in a number which is equal to (or less than) the Base Fee, then there
shall be no Contingent Purchase Price Payment for that calendar year. The
Contingent Purchase Price Payment for each calendar year shall be an
independent calculation and there shall be no make up, carry forward or
cumulation between years.
(c) Concurrently with the making of each annual Contingent
Purchase Price Payment, or if no such payment is made, within seventy-five days
of the end of such calendar year, Buyer shall deliver to Seller a certificate
setting forth the calculation of the Contingent Purchase Price Payment. Buyer
shall give Seller and its representatives reasonable access to the books,
records and personnel of the Business to the extent reasonably necessary for the
review and audit of such calculation. Seller shall have a period of 90 calendar
days after the delivery to it of the certificate to review it and to make any
objections in writing to Buyer. Seller shall quantify its objections to the
extent reasonably practicable in all written objections delivered to Buyer with
respect to the calculation of any Contingent Purchase Price Payment. If written
objections of Seller to the calculation of the Contingent Purchase Price Payment
for such year are delivered to Buyer within the 90-day period, then Buyer and
Seller shall attempt to resolve the matter or matters in dispute. If such
disputes cannot be resolved by Buyer and Seller within 20 calendar days after
the delivery of the objections to the calculation of the Contingent Purchase
Price Payment for such year, then the specific matters in dispute shall be
submitted to the CPA Firm, which firm shall render its opinion as to such
matters in accordance with the terms hereof. Based on that opinion, the CPA
Firm shall then send to Buyer and to Seller a written determination of the
Contingent Purchase Price Payment for such year based upon such opinion, which
shall be final and binding upon Buyer and Seller. Any additional
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<PAGE> 24
amount which the CPA Firm determines is payable by Buyer to OIEPC and any
refund of the amount paid pursuant to Section 2.4(a) which the CPA Firm
determines is refundable by OIEPC (or its designee) shall be paid not later
than five Business Days following the receipt by Buyer and Seller of those
documents prepared by the CPA Firm and evidencing that opinion or at such other
time and date as may be mutually agreed upon in writing by Buyer and Seller.
All costs, fees and expenses charged or incurred by the CPA Firm, if any, shall
be borne equally by Seller and Buyer.
(d) Buyer hereby acknowledges and agrees that Buyer shall be
responsible for making, or causing to be made, Contingent Purchase Price
Payments for each of calendar years 1998, 1999, 2000, 2001, 2002 and 2003 in all
events, including, without limitation, in the event that (i) Buyer sells,
transfers or otherwise disposes of the Shares or (ii) causes the Company to
sell, transfer or otherwise dispose of all or substantially all the assets of
the Company or the Business or to sell or assign, or allow other parties to
participate in, its rights and obligations under the OSA. Buyer agrees that in
the event that (A) Buyer sells, transfers or otherwise disposes of Shares or (B)
causes the Company to sell, transfer or otherwise dispose of all or
substantially all the assets of the Company or the Business or to sell or
assign, or allow other parties to participate in, its rights and obligations
under the OSA, Buyer shall ensure that Seller and Buyer and their respective
representatives will continue to have reasonable access to the books, records
and personnel of the Business to the extent reasonably necessary for the review
and audit of the calculation of the applicable Contingent Purchase Price
Payment. If for any reason Buyer and Seller and their respective
representatives do not have such access, Buyer agrees that the "MTF
Calculation", with respect to any calendar quarter for which such access is not
available, shall be the Maximum Total Fee for such calendar quarter pursuant to
the Current Base Fee Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows with
respect to itself, OIEPC and the Company:
Section 3.1 Organization and Authority of Seller. Seller
is a corporation duly organized, validly existing and in good standing under
the laws of the State of California and is duly qualified as a foreign
corporation and in good standing in each other jurisdiction, if any, in which
the failure to qualify could materially and adversely affect the validity of
the transactions contemplated by this Agreement.
Section 3.2 Authority. Seller has full power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement has been duly authorized, executed and delivered by
Seller and constitutes a legal, valid and binding obligation of Seller,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors' rights (expressly excluding fraudulent transfer) and
to general equity principles. Neither the execution and delivery of this
Agreement by Seller nor the consummation of the transactions contemplated
herein by Seller, OIEPC or the Company nor the compliance by Seller with its
terms and provisions will (a) violate or conflict with any provision of the
certificate of incorporation or by-laws of Seller, OIEPC or the Company; (b)
conflict with or result in the breach of any of the terms, conditions or
provisions of, or constitute a default under (or give rise to any right of
termination, cancellation or acceleration) (whether after the giving of notice
or the lapse of time or both) of any indenture, mortgage, lease or other
material agreement, contract or instrument (including the OSA) to which Seller,
OIEPC or the Company is a party or by which Seller, OIEPC or any of their or
the Company's properties or assets may be bound, other than for any conflicts,
breaches or defaults that could not reasonably be expected to have a Material
Adverse Effect on the Company; (c) violate any existing provision of Law, other
than for violations that could not reasonably be expected to have a Material
Adverse Effect on the Company; or (d) result in the creation of, or give any
Person the right to create, any Encumbrance upon the Company Shares, the OOG
Receivable or the Assets.
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Section 3.3 Capitalization of the Company; Organization
and Qualification; Subsidiaries. (a) The entire authorized capital stock of
the Company consists of 10,000 shares of common stock, par value $1.00 per
share, of which only the Company Shares are issued and outstanding. The
Company Shares have been duly authorized and are validly issued, fully paid,
nonassessable and free of preemptive rights, and were not issued in violation
of the preemptive rights of any Person. Except for the Company Shares, there
are outstanding (i) no shares of capital stock, Voting Debt or other voting
securities of the Company; (ii) no securities of the Company convertible into
or exchangeable for shares of capital stock, Voting Debt or other voting
securities of the Company; and (iii) no preemptive or other outstanding rights,
subscriptions, options, warrants, calls, contracts, demands, commitments,
convertible securities or other agreements or arrangements of any character or
nature whatsoever under which the Company or the Seller or any Affiliate of the
Seller is or may become obligated to issue, assign, transfer, deliver, sell,
purchase, redeem or acquire, or cause to be issued, assigned, transferred,
delivered, sold, purchased, redeemed or acquired, any shares of capital stock
or any Voting Debt or other voting securities of the Company, or obligating the
Company, Seller or any Affiliate of Seller to issue, grant, extend or enter
into any such subscription, option, warrant, call, right, commitment, agreement
or other arrangement. The term "Voting Debt" means any bonds, debentures,
notes or other indebtedness having the right to vote (or convertible into or
exchangeable for securities having the right to vote) for the election of
Directors of the Company.
(b) OIEPC, which is a wholly owned subsidiary of Seller, is,
and as of the Closing will be, the sole record and beneficial owner of the
Company Shares. OIEPC is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. OIEPC has, and as of
the Closing will have, good and valid title to the Company Shares free and clear
of all Encumbrances. Upon the purchase of the Company Shares as contemplated by
this Agreement, Buyer will obtain good and valid title to the Company Shares
free and clear of all Encumbrances (other than those created by, through or
under Buyer and restrictions on sales of stock under applicable securities
laws). Neither Seller nor any Affiliate of Seller is a party to any option,
warrant, purchase right, contract, commitment or other agreement or arrangement
of any
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character or nature whatsoever (other than this Agreement) that could require
Seller or any such Affiliate of Seller to sell, transfer, or otherwise dispose
of any Company Shares. Except as created by this Agreement, Seller is not a
party to any voting trust, proxy or other agreement or understanding with
respect to the voting, holding or disposition of any Company Shares.
(c) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of California, is
duly domiciled in the Republic of Venezuela as evidenced by registration in The
Second Commercial Registry of the Judicial Circuit of the Federal District and
State of Miranda ("Commercial Registry") on February 19, 1976 under No. 36 of
Volume 2-A Sgo. The Company has the requisite corporate power and authority to
own or lease its properties and carry on its business as currently owned or
conducted, other than as would not have a Material Adverse Effect on the
Company. The Company does not do business in any jurisdiction (other than
Venezuela or the State of California) in which the nature of the properties
owned or leased by it or the business transacted by it requires it to be so
registered, qualified or licensed, except to the extent that the conduct of
business in any such jurisdiction without such registration, qualification or
license would not be material to the Company, and the Company is not so
registered, qualified or licensed in any other jurisdiction.
(d) The Company does not have any direct or indirect
subsidiaries. The Company does not own any shares, equity interests or other
equity securities in any Person.
(e) The Company does not currently own or lease any assets or
properties or conduct any business or operations other than assets, properties,
business and operations which are related to or arise out of the Venezuelan DZO
Business, and the Company has no liabilities with respect to any business or
operations which are not related to or do not arise out of the Venezuelan DZO
Business.
Section 3.4 Consents and Approvals. Except for (i) the
notices to and approvals of Maraven required by subclause c) of clause 1 of the
OSA and clause 16.1 of the OSA and (ii) any consents the failure of which to
obtain would not have a Material Adverse Effect on the Company, the
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execution, delivery and performance of this Agreement by Seller and the
consummation of the transactions contemplated herein by Seller or the
continuing operations of the Company as presently conducted will not require
Seller, OIEPC or the Company to obtain any consent, waiver, authorization or
approval of, or make any filing with or give notice to, any Person.
Section 3.5 Financial Statements. Attached hereto as
Schedule 3.5 is the balance sheet (the "Balance Sheet") of the Company as of
October 31, 1997 (the "Balance Sheet Date") and the statement of income of the
Company for the 10-month period ended on the Balance Sheet Date (collectively,
the "Financial Statements"). To the knowledge of Seller, the Financial
Statements present fairly, in accordance with GAAP, the financial condition of
the Company as of such date and the results of operations of the Company for
such period; provided that, the Financial Statements are subject to normal
year-end adjustments and lack footnotes and other presentation items. To the
Knowledge of Seller or any of its Affiliates (other than the Company), there is
no item that is probable to be accrued as an "other liability" on the December
Balance Sheet.
Section 3.6 Brokers' Fees. No action has been taken by
Seller, OIEPC or the Company or any Affiliate of Seller that would give rise to
any valid claim against the Company or the Buyer or any Affiliate of Buyer for
a brokerage commission, finder's fee or other like payment with respect to the
transactions contemplated hereby.
Section 3.7 Taxes. Except for the Tax matters identified
in Schedule 3.8, (a) all Tax Returns that are required to be filed on or before
the Closing Date (taking into account applicable extensions) by or with respect
to the Company have been duly filed and each such Tax Return is or will be
complete and accurate in all material respects; (b) all Taxes shown to be due
on the Tax Returns referred to in clause (a), all Taxes for periods ending on
or before the Closing Date, whether or not shown as being due on any Tax
Return, and all Taxes for which a demand for payment or assessment has been
received by the Company or any Affiliate of the Company have been timely paid
or will be timely paid by the Seller, except for such Taxes (i) which are being
contested in good faith or (ii) as to which the failure to pay or record would
not reasonably be likely to have a Material Adverse Effect or which are
included in accrued
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Taxes (excluding any deferred Taxes) shown on the December Balance Sheet; (c)
there are no pending or, to the knowledge of the Seller, threatened actions or
proceedings for the assessment or collection of Taxes against or in respect of
the Company, except for such actions or proceedings that would not reasonably
be likely to have a Material Adverse Effect; (d) as of the Closing Date, there
will be no outstanding waivers or agreements extending the applicable statute
of limitations for any period with respect to any Taxes of the Company, except
for such waivers or agreements that would not reasonably be likely to have a
Material Adverse Effect; and (e) as of the date hereof, to the knowledge of the
Seller, OIEPC or the Company, no taxing authorities are presently conducting
any audits or other examinations of the Company or of any Tax Returns referred
to in clause (a), except for such audits or examinations that would not
reasonably be likely to have a Material Adverse Effect.
Section 3.8 Litigation and Claims. Except as set forth in
Schedule 3.8 hereto, there are no civil, criminal or administrative actions,
suits, demands, claims, hearings, proceedings, condemnations, expropriations,
arbitrations, audits or investigations (collectively, "Actions") formally
commenced, pending or, to the knowledge of the Company, OIEPC or the Seller,
threatened by or against the Company or against any of its properties or
assets, except for such Actions that would not have a Material Adverse Effect
on the Company. The Company, the Business and the Assets are not subject to
any order, writ, judgment, award, injunction, decree of any Governmental
Authority of competent jurisdiction or any arbitrator or arbitrators other than
those that would not have a Material Adverse Effect on the Company.
Section 3.9 Labor Matters. Except for the Petroleum
Industry Collective Labor Contract, the Company is not a party to or bound by
any agreement with any labor union or other labor organization or employee
representative with respect to the employees of the Company, nor is any such
agreement presently being negotiated, nor is there pending or, to the knowledge
of the Seller, OIEPC or the Company, threatened any strike, walkout, slowdown
or other work stoppage with respect to the Company's employees. Except as set
forth in Schedule 3.9, there are not in existence and, to Seller's, OIEPC's or
the Company's knowledge, there are not threatened (i) any grievance or
arbitration proceedings arising out of collective bargaining
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agreements covering employees of the Company or (ii) formal unfair labor
practice written complaints against the Company or Seller or any of their
Affiliates that relate to the Business or against the Company. No current
dispute exists with the Company concerning representation by any collective
bargaining representative with respect to the employees of the Company.
Section 3.10 Material Contracts. Schedule 3.10 hereto
sets forth a list that includes each of the following documents, contracts or
agreements (whether written or oral) currently in effect to which the Company
is a party or by which any of its assets are bound, including all amendments
thereto:
(a) the OSA and the OOG Contract (including the OOG
Receivable and the OOG Payable);
(b) any contract or agreement that provides for annual
payments of $1 million or more over the life of such contract or
agreement or for the purchase or sale of assets of $1 million or more
(such contracts and agreements, together with those listed in
paragraph (a) of this Section 3.10, the "Material Contracts");
(c) any contract or agreement to or with individual
directors of the Company;
(d) any material contract or agreement that contains any
covenant not to compete or an area of mutual interest agreement or
that purports to restrict the right of the Company to engage in any
line of business in any geographical location or that conditions such
right on the participation or approval of any third party;
(e) any unified extraction, pooling or unitization
agreements, including any production balancing and over/under lift
agreements relating thereto;
(f) all contracts and agreements relating to the OOG
Receivable or the OOG Payable; and
(g) all contracts and agreements relating to currently
existing intercompany payables and receivables between the Company and
its Affiliates which will be in effect following the Closing.
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True, correct and complete originals or copies of all written Material
Contracts (containing all amendments, corrections or modifications thereof)
have been made available to Buyer and written summaries of any oral Material
Contracts have been included in Schedule 3.10.
Section 3.11 Title to Assets. (a) All rights, benefits
and interests granted to or inuring to the benefit of the Company (or purported
to be granted to or inuring to the benefit of the Company) in or under the OSA
and OOG Contract, including the OOG Receivable (collectively, the "Company
Interests"), are owned legally and beneficially by the Company subject to the
terms of the OSA and OOG Contract, as the case may be, free and clear of any
Encumbrances (except for the applicable terms of the OSA and OOG Contract and
except as created by this Agreement). No act or omission of the Company or, to
the knowledge of Seller, OIEPC or the Company, any other Person has occurred
which would allow any party to the OSA or the OOG Contract to rescind, revoke,
terminate or modify the OSA, the OOG Contract or the OOG Receivable. The
Company is not a party to or bound by any assignment, contract, agreement or
commitment (i) to assign or transfer any interest in, or to grant or create any
Encumbrance with respect to, any of the Company Interests or (ii) that could
require the Company to sell, transfer, or otherwise dispose of any of the
Company Interests.
(b) Except as would not have a Material Adverse Effect on the
Company, the Company has good and marketable title to all the assets (other
than the Company Interests) reflected on the Balance Sheet or acquired by the
Company after the Balance Sheet Date, other than inventory used, sold or
otherwise disposed of in the ordinary course of business consistent with past
practices subsequent to the Balance Sheet Date, in each case free and clear of
any Encumbrances.
Section 3.12 Corporate Documents. True and correct
originals or copies of the Company's charter and organizational documents,
bylaws, minute books, stock register books and other corporate books and
records (containing all amendments, corrections or modifications thereof) have
been made available to Buyer. All minutes or
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resolutions which pursuant to the Commercial Code must be filed in the
Commercial Registry have in fact been filed therein, except to the extent that
the failure to file any such minutes or resolutions would not have a Material
Adverse Effect on the Company.
Section 3.13 Compliance with Law and Permits. To the
knowledge of the Seller, OIEPC and the Company and except for matters which
would not have a Material Adverse Effect on the Company and matters set forth
on Schedule 3.13, (a) the Company has complied with all Laws and Permits
applicable to the Company, the Business or the Assets and has filed with the
proper Governmental Authorities all statements and reports required by all
applicable Laws and Permits; and (b) neither the Company nor any Affiliate of
the Company has received notice of any violation of or non-compliance with any
Law or Permit applicable to the Company, the Business or the Assets.
Section 3.14 Absence of Subsequent Actions. Except as set
forth in Schedule 3.14, since the Balance Sheet Date the Company has not:
(a) purchased or redeemed any shares of capital stock or other
equity interests or other securities or declared, paid or set aside
for payment any dividend in cash or of securities or property other
than cash;
(b) changed its fiscal year end from December 31;
(c) mortgaged or pledged any portion of its Assets, except in
the ordinary course of business consistent with past practice;
(d) made any additions to or written down, sold, assigned,
transferred or otherwise disposed of any of its tangible assets or
written off or canceled any debts or claims or receivables, in whole
or in part, except in each case in the ordinary course of business
consistent with past practices;
(e) sold or otherwise disposed of any of the Assets, except in
the ordinary course of business consistent with past practice;
(f) sold, assigned, licensed, sublicensed, transferred or
allowed to lapse or expire any Intellectual Property owned by the
Company or any license thereof;
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(g) made any capital commitment in excess of $1,000,000,
individually, and not provided for in a budget approved by Maraven
under the OSA;
(h) suffered any damage, destruction or loss in excess of
$1,000,000 in the aggregate with respect to any assets of the Company;
(i) made any change in compensation of any director or officer
in excess of 5% of such compensation or made any general increases in
employee compensation or benefits with respect to any class or group
of employees except pursuant to compensation policies or procedures
set forth on Schedule 3.15;
(j) made or agreed to make any charitable contributions or
pledges therefor or incurred any other non- business expense in excess
of $100,000 in the aggregate;
(k) entered into any joint venture, partnership or similar
arrangement;
(l) made any change in its method of accounting or accounting
policies or practices;
(m) leased any properties or assets to any Person, whether by
lease, leveraged lease, lease intended as security, vendor
arrangement, conditional sales agreement or otherwise, other than in
the ordinary course of business consistent with past practice;
(n) entered into or changed any Employee Plan except in the
ordinary course of business consistent with past practice;
(o) entered into any settlement in excess of $500,000 or made
or granted any consent to any order, decree or judgment in an amount
in excess of $500,000 relating to or arising out of any Action
relating to the Company; or
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(p) paid or incurred any Company Debt other than in the
ordinary course of business consistent with past practice.
Section 3.15 Employee Plans. The Employee Plans are set
forth on Schedule 3.15. The Company does not maintain or have an obligation to
contribute to or have any liability (nor will the Company have any future
liability as a result of the Company having been an Affiliate of Seller) with
respect to any plan, program or arrangement that is or was subject to Title IV
of the United States Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or section 412 of the United Internal Revenue Code of 1986,
as amended, including any plan that is both a multiemployer plan (as defined in
Section 3(37) of ERISA) and a pension benefit plan (as defined in Section 3(1)
of ERISA) or a plan described in Section 4063(a) of ERISA.
Section 3.16 Inventory. The value of the inventory of the
Company, including reserves therefor, on the Balance Sheet reflects the lower
of cost or market for the inventory as applied in accordance with GAAP.
Section 3.17 Intellectual Property. All Intellectual
Property which is owned by Seller or any Affiliate of Seller (other than the
Company) is listed in Part I of Schedule 3.17. All Intellectual Property which
is licensed to Seller, the Company or any other Affiliate of Seller is listed
in Part II of Schedule 3.17.
Section 3.18 Insurance Policies. Schedule 3.18 sets forth
a list of all policies of fire, casualty, liability, burglary, fidelity,
worker's compensation, business interruption, umbrella and other forms of
insurance held as of December 1, 1997, by the Company or any Affiliate of the
Company that are material to the Business. Except as otherwise set forth on
Schedule 3.18, all premiums due and payable for the insurance in Schedule 3.18
have been duly paid, except for any failures to pay premiums that would not
have a Material Adverse Effect on the Company.
Section 3.19 Directors and Representatives. Schedule 3.19
contains a true and complete list of the names of all of the Company's
directors and officers and all Persons holding powers of attorney.
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Section 3.20 Other Representations or Warranties. Except
for the representations and warranties contained in this Article III, neither
Seller nor any other Person makes any other express or implied representation
or warranty on behalf of Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND GUARANTOR
Guarantor and Buyer represent and warrant to Seller as
follows:
Section 4.1 Organization and Authority of Buyer and
Guarantor. Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the Bahamas. Guarantor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
Section 4.2 Authority. (a) Buyer has full power and
authority to execute and deliver this Agreement and perform its obligations
hereunder. This Agreement has been duly authorized, executed and delivered by
Buyer and constitutes a legal, valid and binding obligation of Buyer,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors' rights (other than fraudulent transfer) and to
general equity principles. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated herein by Buyer
nor the compliance by Buyer with its terms and provisions will (a) violate any
provision of the certificate of incorporation or by-laws of Buyer; (b) conflict
with or result in the breach of any of the terms, conditions or provisions of,
or constitute a default under (or give rise to any right of termination,
cancellation or acceleration) (whether after the giving of notice or the lapse
of time or both) of any indenture, mortgage, lease, or other material
agreement, contract or instrument to which Buyer is a party or by which Buyer
or any of its properties or assets may be bound, other than for any conflicts,
breaches or defaults that are not material to the Buyer and its subsidiaries
taken as a whole; or (c) violate any existing provision of Law, other than for
violations that are not material to the Buyer and its subsidiaries taken as a
whole.
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<PAGE> 36
(b) Guarantor has full power and authority to execute and
deliver this Agreement and perform its respective obligations hereunder. This
Agreement has been duly authorized, executed and delivered by Guarantor and
constitutes a legal, valid and binding obligation of Guarantor, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights (other than fraudulent transfer) and to general equity
principles. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated herein by Guarantor nor the
compliance by Guarantor with its terms and provisions will (a) violate any
provision of the certificate of incorporation or by-laws of Guarantor; (b)
conflict with or result in the breach of any of the terms, conditions or
provisions of, or constitute a default under (or give rise to any right of
termination, cancellation or acceleration) (whether after the giving of notice
or the lapse of time or both) of any indenture, mortgage, lease, or other
material agreement, contract or instrument to which Guarantor is a party or by
which Guarantor or any of its properties or assets may be bound, other than for
any conflicts, breaches or defaults that are not material to the Guarantor and
its subsidiaries taken as a whole; or (c) violate any existing provision of
Law, other than for violations that are not material to the Guarantor and its
subsidiaries taken as a whole.
Section 4.3 Consents and Approvals. (a) The execution,
delivery and performance of this Agreement by Buyer and the consummation of the
transactions contemplated herein by Buyer will not require Buyer to obtain any
consent, waiver, authorization or approval of, or make any filing with or give
notice to, any Person.
(b) The execution, delivery and performance of this Agreement
by Guarantor and the consummation of the transactions contemplated herein by
Guarantor will not require Guarantor to obtain any consent, waiver,
authorization or approval of, or make any filing with or give notice to, any
Person.
Section 4.4 Financial Capability. On the Closing Date,
Buyer will have sufficient funds to fulfill its obligations hereunder which are
payable on the Closing Date.
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Section 4.5 Securities Act. Buyer is acquiring the
Company Shares solely for the purpose of investment and not with a view to, or
for sale in connection with, any distribution thereof in violation of the
Securities Act. Buyer acknowledges that the Company Shares are not registered
under the Securities Act or any applicable state securities law, and that such
Company Shares may not be transferred or sold except pursuant to the
registration provisions of such Securities Act or pursuant to an applicable
exemption therefrom and pursuant to state securities laws and regulations as
applicable.
Section 4.6 Brokers' Fees. No action has been taken by
the Buyer that would give rise to any valid claim against Seller or any
Affiliate of Seller for a brokerage commission, finder's fee or other like
payment with respect to the transactions contemplated by this Agreement.
Section 4.7 No Other Representations or Warranties.
Except for the representations and warranties contained in this Article IV,
neither Buyer nor Guarantor nor any other Person makes any other express or
implied representation or warranty on behalf of Buyer or Guarantor.
ARTICLE V
CERTAIN COVENANTS AND
AGREEMENTS OF SELLER AND BUYER
Section 5.1 Conduct of Business. Prior to Closing, and
except as otherwise expressly permitted hereby, as set forth in Schedule 5.1
hereto or as consented to or approved by Buyer in writing, Seller covenants and
agrees that Seller shall cause the Company:
(a) to operate the Business only in the ordinary and
usual course consistent with past practice and with Seller's
representations, warranties and covenants contained in this Agreement;
(b) not to (i) change or amend the Company's articles of
incorporation or by-laws, (ii) authorize, issue or sell any shares of
the Company's capital stock, or authorize, issue or sell any
securities convertible into, or options with respect to, or warrants
to purchase or rights to subscribe for, any shares of the Company's
capital stock, or any Voting
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Debt, or (iii) enter into any agreement obligating the Seller or the
Company to do any of the foregoing or make or propose to make any
other change in its capitalization;
(c) not to make, declare, pay or set aside for payment
any dividend on or in respect of, or declare or make any distribution
on or in respect of, any Company Shares;
(d) not to, directly or indirectly, redeem, purchase or
otherwise acquire any of the Company Shares;
(e) not to merge or consolidate with or into any other
Person;
(f) not to acquire all or any portion of the securities,
assets, business, deposits or properties of any other Person, except
for assets, deposits or properties acquired in the ordinary course of
business consistent with prior practice;
(g) not to incur any Company Debt other than in the
ordinary course of business consistent with past practice and, except
as contemplated by Section 2.3(b), not to pay, discharge or increase
the Long-Term Debt or Replacement Debt;
(h) not to terminate or amend or modify any Material
Contract or enter into any document, commitment, agreement or contract
that if entered into prior to the date hereof would be a Material
Contract;
(i) not to take any action of the type or nature referred
to in Section 3.14 (other than paragraph (h) thereof and, with respect
to paragraph (l) thereof, other than for any change required by Law)
which if taken since the Balance Sheet Date and prior to the date
hereof would be required to be disclosed in Schedule 3.14 in order for
Seller's representations and warranties in Section 3.14 to be correct;
(j) not to enter into any employment agreement or make
any change in compensation of any director, officer or employee,
except pursuant to compensation policies or procedures set forth in
Schedule 3.9 or except in the ordinary course of business consistent
with past practice; and
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(k) not to terminate, amend or modify any insurance
policy set forth in Schedule 3.18.
Section 5.2 Tax Matters.
(a) Section 338(h)(10) Election. Buyer and Seller are
eligible to and shall make a joint election under Section 338(h)(10) of the
Code and any comparable provision of applicable state or local income tax law
(collectively, the "Section 338(h)(10) Election") with respect to the purchase
by Buyer of the Company Shares. On or before the Closing Date, Buyer will
deliver to Seller an Internal Revenue Service Form 8023 (or any successor form)
and any comparable forms under applicable state or local income tax law
(collectively, the "Form"), providing for the Section 338(h)(10) Election.
Seller shall, no later than the Closing Date, cause each such Section
338(h)(10) Election Form requested by the Buyer to be executed by the Common
Parent, or Seller, as appropriate, and Seller shall deliver same to Buyer at
the Closing; provided, however, that the attachments to the Form which set
forth the allocation of the Initial Purchase Price among the assets of the
Company shall not be completed and delivered by the Buyer to Seller until ten
(10) days after the allocation becomes final and binding on Buyer and Seller
pursuant to the procedures set forth in Section 2.3(f) hereof. So long as the
attachments to the Form reflecting the allocation of the Initial Purchase Price
are consistent with the final and binding allocation determined pursuant to
Section 2.3(f) hereof, Seller shall initial the attachments and redeliver the
completed, initialed attachments to Buyer within thirty (30) days after
receiving the same. If any changes or supplements are required to the Form or
attachments thereto, Seller and Buyer shall promptly agree on such changes or
supplements. Buyer and Seller shall not take any action inconsistent with such
Form and attachments. Buyer thereafter shall duly and properly file on a
timely basis the Form, the attachments and any required supplements thereto,
and shall provide written assurance to Seller that it has done so. Seller
shall provide to Buyer such information as Buyer may request in order to
prepare and file the Form and any required attachments or supplements thereto.
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(b) All sales, use, value added or other similar transfer
taxes, if any, incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne equally by Buyer and Seller. Seller shall
at its expense file all necessary Tax Returns and other documentation in
respect to any such transfer taxes. All stock transfer taxes, if any,
recording or similar taxes or fees incurred in connection with this Agreement
and the transactions contemplated hereby shall be borne by Buyer.
(c) Federal Income Tax Returns and Combined State Income Tax
Returns for Periods Through the Closing Date. Seller shall include the income
of the Company on Seller consolidated federal income Tax Returns and combined
state income tax returns for all periods through the Closing Date and pay any
federal and state income Taxes attributable to such income. The Company shall
furnish Tax information to Seller for inclusion in Seller's federal
consolidated income Tax Return and combined state income Tax Returns for the
period which ends on the Closing Date in accordance with the Company's past
custom and practice, and Buyer will bear the cost of complying with this
provision. The income of the Company shall be allocated to the period up to
and including the Closing Date and the period after the Closing Date by
completely closing the books of the Company as of the end of the Closing Date.
(d) Separate State, Local and Foreign Income Tax Returns.
Seller will file, or cause to be filed, all separate state, local and foreign
income Tax Returns for the Company for which the Tax year ends on or before the
Closing Date. Buyer will file, or cause to be filed, all separate state, local
and foreign income Tax Returns for the Company for which the Tax year either
(i) begins before and ends after the Closing Date or (ii) begins and ends after
the Closing Date.
The amount of any liability for Taxes on or measured by net
income required to be reported on any state, local or foreign Tax Return
required to be filed by the Company after the Closing Date which includes Tax
items for a period which begins before and ends after the Closing shall be
allocated between the portion of such period ending on the Closing Date and the
portion of such period beginning on the date after the Closing Date on the
basis of the taxable income or loss of the Company as determined from the books
and records of the relevant entity for such partial period as if the Company's
books were closed on the Closing Date.
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(e) Cooperation. Seller and Buyer shall (i) each provide the
other, and Buyer shall cause the Company to provide to Seller, with such
assistance as may reasonably be requested by any of them in connection with the
preparation of any Tax Return, audit or other examination by any taxing
authority or judicial or administrative proceedings relating to liability for
Taxes, (ii) each retain and provide the other with any material records or
information which may be relevant to such Tax Return, audit or examination,
proceeding or determination, and (iii) each provide the other with any amount
required to be shown on any Tax Return of the other for any period. Without
limiting the generality of the foregoing, Buyer shall retain, and shall cause
the Company to retain until the applicable statutes of limitations (including
any extensions) have expired, copies of all Tax Returns, supporting work
schedules and other records or information in its possession which may be
relevant to such returns for all taxable periods from January 1, 1990 to the
Closing Date, inclusive, and shall not destroy or otherwise dispose of any such
records without first providing Seller with an opportunity to review and copy
the same. Following the Closing Date, Seller shall forward to Buyer all Tax
statements received by Seller with respect to the Assets for any period that
begins before and ends after the Closing Date within thirty (30) days after its
receipt thereof.
Any information obtained by a party or its Affiliates from
another party or its Affiliates in connection with any Tax matters to which
this Agreement applies shall be kept confidential, except as may be otherwise
necessary in connection with the filing of Tax Returns or claims for refund or
in conducting an audit or other proceeding.
(f) Tax Proceedings. Following the Closing Date, Seller
shall control the conduct of all stages of any audit or other administrative or
judicial proceeding with respect to Taxes reportable on any Tax Return filed by
Seller or any affiliate of Seller or on any Tax Return filed by the Company for
any taxable period ending on or prior to the Closing Date except with respect
to matters subject to Buyer's indemnification obligations in Section 5.2(m)
hereof. Buyer shall control the conduct of all other audits or administrative
or judicial proceedings with respect to the Tax liability of the Company.
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(g) Carrybacks. Buyer agrees to use commercially reasonable
efforts to cause the Company to carry forward any loss, credit, or deduction
incurred or generated in, or attributable to, any post-Closing period that would
affect any Tax Return of Seller or any of its subsidiaries or Affiliates for any
pre-Closing period.
(h) Refunds. If after the Closing Date, Buyer or any of its
Affiliates (including the Company) receives a refund or utilizes a credit of any
Tax attributable to the Company for a pre-Closing period and such refund or
credit (or interest thereon) is not reflected or provided for in the Final
Balance Sheet, Buyer shall pay to Seller (within 15 calendar days after such
receipt) an amount equal to the refund received or credit utilized together with
any interest received or credited thereon by the applicable Tax authority (net
of any Taxes imposed on Buyer, the Company or any of their respective Affiliates
with respect thereto). Buyer shall, and shall cause its Affiliates (including,
after the Closing Date, Company) to, pursue any claim for such refund or credit
reasonably requested by Seller; provided that Seller shall bear the cost
thereof. If there is an adjustment to such refund or credit (or interest
thereon), any payment theretofore made pursuant to this Section 5.2(h) shall be
adjusted (by means of a refund to the payor or an additional payment to the
payee).
(i) Payments. All Taxes of or with respect to the Company
shall be paid to the appropriate Tax authority by the party that is responsible
therefor under the applicable Tax law.
(j) Nature of Payments. Any payment from the Buyer, the
Company or any of their respective Affiliates to the Seller or its Affiliates
pursuant to this Section 5.2 shall be treated for Tax purposes as an increase
in the Initial Purchase Price, and any payment from the Seller or any of its
respective Affiliates to the Buyer or its Affiliates pursuant to this Section
5.2 shall be treated for Tax purposes as a decrease in the Initial Purchase
Price.
(k) Survival of Agreements. All covenants and agreements set
forth in this Section 5.2 shall survive the Closing Date until 30 calendar days
after the expiration of all applicable statutes of limitation (including any and
all extensions thereof).
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(l) Seller shall be liable for, and agrees to defend, hold
harmless and indemnify Buyer and its Affiliates (including, after the Closing
Date, the Company) from and against any and all Claims with respect to any Taxes
of any corporation or other Person, other than the Company, that is or was a
member or parent of any affiliated group of corporations or other Persons that
included Seller or the Company, including any Taxes for which the Company is or
may be or become liable for under any successor or transferee liability law or
other similar law or under Treasury Regulation Section 1.1502-6 or
1.1502-78(b)(2) or any similar provision under any applicable foreign, state or
local law.
The indemnification obligations of Seller contained in this
Section 5.2(l) are separate from the Seller's obligations in Article VIII and
are not subject to the limitations on the amount of indemnification contained
in Article VIII.
(m) Following the Closing, Buyer shall be liable for, and
agrees to defend, hold harmless and indemnify Seller and its Affiliates from
and against any and all Claims with respect to any Taxes assessed against the
Company by any municipality in Venezuela which relate to amounts billed to
Maraven under the OSA prior to the Closing to recover the cost of capital
expenditures.
The indemnification obligations of Buyer contained in this
Section 5.2(m) are separate from Buyer's obligations in Article VIII and are
not subject to the limitations on the amount of indemnification contained in
Article VIII.
Section 5.3 Registrations, Filings and Consents. Seller
and Buyer shall cooperate and use their respective reasonable best efforts to
fulfill the conditions precedent to the other party's obligations hereunder,
including but not limited to, securing as promptly as practicable all consents,
approvals, waivers and authorizations required, necessary or desirable in
connection with the transactions contemplated hereby.
Section 5.4 Confidentiality. Neither party hereto shall
disclose to any Person any information relating
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to this Agreement, the negotiations leading to this Agreement or the
transactions contemplated hereby (including any review or audit contemplated by
Section 2.4) or any information obtained from the other party hereto in
connection with this Agreement, the negotiations leading to this Agreement or
the transactions contemplated hereby (including any review or audit
contemplated by Section 2.4), unless such information at the time of disclosure
(i) is or was in the public domain, (ii) was known to either party prior to its
disclosure by the other party, (iii) is disclosed to either party by a third
Person who did not receive such information on a confidential basis or (iv) is
required to be disclosed by either party or by its Affiliates, directors,
officers, employees or other agents in connection with legal or governmental
proceedings or filing or disclosure requirements arising under Law or rules of
the New York Stock Exchange or other public securities exchange on which the
securities of the parties or their Affiliates are listed. Each party hereto
may disclose such information to its Affiliates, directors, officers,
employees, counsel, insurance brokers, accountants or other agents or
representatives provided such party causes such persons to keep such
information confidential. Notwithstanding the foregoing, in the event that (i)
Buyer sells, transfers or otherwise disposes of Shares or (ii) causes the
Company to sell, transfer or otherwise dispose of all or substantially all of
the assets of the Company or the Business or sells, assigns or allows other
Persons to participate in its rights and obligations under the OSA, including
SOFIP or any Affiliate thereof, Buyer shall have the right to disclose such
information as it reasonably considers appropriate and necessary, including
information relating to the Contingent Purchase Price Payments, without
Seller's consent; provided, however, that in such event prior to disclosing
such information Buyer shall cause the proposed recipient of such information
to enter into a confidentiality agreement, which confidentiality agreement
shall include, at a minimum, provisions substantially consistent with the
provisions set forth in this Section 5.4.
Section 5.5 Guarantee of OSA. On or prior to the Closing
Date, Buyer or an Affiliate of Buyer reasonably acceptable to Maraven shall
enter into a guarantee agreement with Maraven in form and substance reasonably
satisfactory to Maraven.
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Section 5.6 Employee Matters; Benefit Plans.
(a) "National Employee" means an employee employed
directly by the Company who is paid on the local national employee payroll
immediately prior to the Closing. A list of the names and positions of all
National Employees is provided in Schedule 5.6(a). At the Closing, Seller shall
deliver to Buyer a revised list updating such information as of the Closing
Date. All National Employees employed by the Company immediately prior to the
Closing shall continue to be National Employees immediately after the Closing at
the same pay and substantially in the same jobs and positions as were in effect
for such National Employees immediately prior to Closing. Buyer shall cause the
Company to continue to make available to National Employees after Closing
benefit plans, programs and payroll practices substantially equivalent in the
aggregate to the benefit plans, programs and payroll practices in effect
immediately before Closing, as may be modified or terminated from time to time
in the ordinary course of the Company's business. The Company shall retain all
employment and employee benefit obligations relating to the National Employees
and any former national payroll employees.
(b) "Expatriate Employee" means a U.S. citizen or Person
of another nationality who is paid on a U.S. dollar payroll of Seller,
Occidental Oil and Gas Company or OXY USA Inc., who performs work in Venezuela
for the Company, and who (i) resides in Venezuela, or (ii) is on a rotational
status traveling on a specified schedule to and from Venezuela or (iii) is on
temporary assignment in Venezuela for the Company and in each case who
continues in such assignment immediately prior to the Closing; provided that
Seller, Occidental Oil and Gas Company and OXY USA Inc. shall replace any U.S.
citizen or other Person who does not continue in such assignment with an
appropriately experienced and skilled replacement prior to Closing to the same
extent that Seller would be required to replace a Remaining Expatriate after
Closing pursuant to the Transition Services Agreement. A complete list of the
names, positions and base salaries of the Expatriate Employees is provided in
Schedule 5.6(b). At the Closing, Seller shall deliver to Buyer a revised list
updating such information as of the Closing Date.
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(c) Not less than seven Business Days prior to Closing,
Buyer shall offer continued employment to each Expatriate Employee (with one
exception agreed to by the parties prior to the date hereof) at a base salary
not less than such employee's base salary effective at December 1, 1997, and
with expatriate allowances and other programs, benefit plans, and terms and
conditions of employment afforded to similarly situated employees of Buyer.
Seller shall cooperate in making such offers and, if requested by Buyer, shall
assist in the communication of such offers. Buyer shall immediately notify
Seller of the name of any Expatriate Employee who accepts an offer of
employment with Buyer (collectively, the "Transferring Expatriates") and shall
provide Seller with a copy of documentation evidencing such acceptance.
Effective immediately following the Closing or the date of acceptance of
employment if later, Buyer shall employ the Transferring Expatriates and shall
assume all employment obligations with respect to the Transferring Expatriates
occurring after Closing.
(d) Effective as of the Closing Date, if Buyer elects to
terminate any Transferring Expatriate (other than for "cause", e.g., misconduct
or failure properly to perform his or her duties) within twelve months of the
Closing Date, Buyer shall pay the terminated Transferring Expatriate severance
benefits not less than those provided under the severance pay program in effect
for that Transferring Expatriate on the date hereof.
(e) Expatriate Employees who do not accept employment
offers by Buyer prior to the date two weeks after Closing ("Remaining
Expatriates") shall continue to be employees of Seller. The Remaining
Expatriates shall be made available during continued employment by Seller on
the terms and conditions and subject to the limitations set forth in the
Transition Services Agreement.
(f) "Employees" means, collectively, the National
Employees and the Transferring Expatriates. Subject to the above provisions of
this Section 5.6, Employees collectively shall continue to be employed by the
Company or the Buyer, as the case may be, following Closing.
(g) To the extent permitted by Law, Buyer shall cause
prior employment service of Transferring Expatriates, as such service is
recognized by Seller, to be counted immediately after Closing as follows:
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(i) for vesting purposes only in connection with the
qualified pension plan and savings plan covering Buyer's employees;
and
(ii) for calculation of benefits pursuant to the severance
plan and vacation plan covering Buyer's employees; provided that any
Transferring Expatriate who previously accepted voluntary severance
from Seller or any of its Affiliates, and was later rehired by Seller
or any of its Affiliates, shall not be entitled to any credit towards
the severance plan, but shall be treated as a new employee for all
purposes of such plan.
No preexisting condition limitations and restrictions and no
waiting periods shall be imposed on any Transferring Expatriate upon admittance
into any health or life insurance plans maintained by Buyer, the Company or any
of their Affiliates to the extent that the preexisting conditions, restrictions
or waiting periods were waived, satisfied or not applicable with respect to the
Transferring Expatriate under Seller's health or life insurance plans in which
the Transferring Expatriate was a member or covered immediately prior to the
Closing.
(h) As of the Closing Date, Transferring Expatriates
shall cease to accrue service credit, except as expressly provided herein,
under any and all of the welfare plans of Seller or its Affiliates, under any
and all of the pension plans of Seller or its Affiliates, and any and all of
the non-ERISA plans or programs of Seller or its Affiliates, in which
participation had been available to such Transferring Expatriate prior to
Closing.
(i) In the event that any Transferring Expatriate makes a
workers' compensation claim subsequent to the Closing Date for any alleged
injury or illness (including occupational injuries or illnesses) which shall
have occurred both prior to and after the Closing Date, then Buyer and Seller
shall share the liabilities equitably.
(j) Seller shall advise "contract employees" to give due
consideration to all employment offers by the Buyer.
(k) Seller shall indemnify the Company for all Claims
under all guarantees by the Company of residential
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leases for Remaining Expatriates. The indemnification obligations of Buyer
contained in this Section 5.6(k) are separate from Buyer's obligations in
Article VIII and are not subject to the limitations on the amount of
indemnification contained in Article VIII.
Section 5.7 Assets Not Transferred with the Company
Shares. Buyer hereby acknowledges and agrees that the following items will not
be transferred or assigned to the Buyer in connection with the purchase of the
Company Shares contemplated hereby, and that Seller shall have no obligation to
effect the transfer of such items to the Buyer: (i) any right, title or
interest in or to the "Occidental" or "Oxy" name or any other tradename, trade
mark or service mark owned or used by Occidental or the Company and identified
in Schedule 5.7 hereto; and (ii) any rights to or under the software licenses
currently used by the Company in the Business and identified in Schedule 5.7
hereto, except as provided in the license agreement attached hereto as Exhibit
6.1(g)(i) and as provided in Section 3.17 hereof. The Company shall no longer
be an insured under the insurance policies currently maintained by Occidental
or any of its Affiliates (other than the Company) for occurrences after the
Closing. The Buyer agrees to use its commercially reasonable efforts to
eliminate the name "Occidental" from the name of the Company as promptly as
practicable after the Closing Date. After the Closing, the Buyer shall cause
the Company to transfer all right, title and interest in and to the Occidental
logo registered in Venezuela to Seller if such transfer cannot be effected
prior to the Closing.
Section 5.8 Continued Use of Intellectual Property and
Hardware. The Company shall be granted a license to use the Intellectual
Property listed in Part I of Schedule 3.17 by the owner thereof pursuant to the
form of License Agreement attached hereto as Exhibit 6.1(g)(i). Seller shall
use all reasonable efforts to cause all licenses of the Intellectual Property
listed in Part II of Schedule 3.17 to be assigned to the Company (or newly
licensed in favor of the Company) prior to or as soon as possible after the
Closing Date and Buyer shall pay any additional licensing fees necessary in
connection with the assignment (or such new license).
Section 5.9 Reagor Lawsuit. Seller shall indemnify Buyer
and each of its Affiliates against and in respect of all Claims sustained or
incurred by the Company
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arising out of the claims alleged or asserted in the lawsuit filed by Cameron
Reagor against the Company in Venezuela, File #10.657, Juzgado Primero de
Primera Instancia del Trabajo del Estado Zulia, and shall defend the Company by
appropriate proceedings. In connection with Seller's defense of the Company,
Buyer shall give to Seller and its counsel reasonable access to all business
records and other documents relevant to such defense, and shall permit them to
consult with the employees and counsel of the Company, and shall otherwise
cooperate with Seller in such defense as may be reasonably requested by the
Seller from time to time.
Section 5.10 Further Assurances. At any time after the
Closing Date, each of Seller and Buyer shall, and Buyer agrees to cause the
Company to, promptly execute, acknowledge and deliver any other assurances or
documents reasonably requested by Seller or Buyer, as the case may be, and
necessary for each of Seller and Buyer, as the case may be, to satisfy its
obligations hereunder or obtain the benefits contemplated hereby.
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to Obligations of Buyer. The
obligation of Buyer to consummate the transactions contemplated hereby shall be
subject to the satisfaction or waiver by Buyer in writing on or prior to the
Closing Date of each of the following conditions:
(a) Each of the representations and warranties of Seller
contained in this Agreement shall be true in all material respects
when made and as of the Closing Date, with the same effect as though
such representations and warranties had been made on and as of the
Closing Date (except representations and warranties that are made as
of a specific date need be true in all material respects only as of
such date); each of the covenants and agreements of Seller to be
performed on or prior to the Closing Date shall have been duly
performed in all material respects; and Buyer shall have received at
Closing a certificate to that effect dated as of the Closing Date and
executed on behalf of Seller by its President or any of its Vice
Presidents and its Secretary or any of its Assistant Secretaries.
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(b) All approvals, authorizations and consents of any
Governmental Authority or any other Person necessary for the
consummation by Seller and its Affiliates or, as contemplated by
Section 4.3 hereof, by Buyer and its Affiliates of the transactions
contemplated herein shall have been obtained in form and substance
reasonably satisfactory to Buyer (other than the approvals of Maraven
which have been obtained; provided that no action by Maraven after the
date hereof is taken which modifies or amends such approvals in a
manner adverse to either of the parties hereto or rescinds such
approvals).
(c) No action, suit, proceeding or investigation
(excluding any such matter initiated by Buyer or any of its
Affiliates) by or before any court or other Governmental Authority
shall have been taken, instituted or, to the knowledge of Seller,
Buyer or any of their respective Affiliates, threatened against
Seller, Buyer or any of their respective Affiliates, to restrain,
prohibit, invalidate or delay any of the transactions contemplated
hereby.
(d) There shall not be any injunction, judgment, order,
decree or ruling in effect preventing consummation of any of the
transactions contemplated by this Agreement.
(e) Buyer shall have received from Seller an opinion of
counsel to Seller in the form attached hereto as Exhibit 6.1(e).
(f) Buyer shall have received from Seller resignations of
all directors of the Company who are not also employees of the
Company.
(g) Buyer shall have received from Seller and the
appropriate Affiliates of Seller (i) the License Agreement, in
substantially the form attached hereto as Exhibit 6.1(g)(i), (ii) the
Transition Services Agreement, in substantially the form attached
hereto as Exhibit 6.1(g)(ii), (iii) a release of all contracts or
agreements between the Company and any Affiliate of the Company and
(iv) an Affidavit of Non-Foreign Status in form necessary to avoid any
withholding requirement under Section 1445 of the Code.
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(h) Buyer shall have received a copy of the resolutions
of the Board of Directors of Seller, certified by an appropriate
officer of Seller, authorizing the execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby.
Section 6.2 Conditions to Obligations of Seller. The
obligation of Seller to consummate the transactions contemplated hereby shall
be subject to the satisfaction or waiver by Seller in writing on or prior to
the Closing Date of each of the following conditions:
(a) Each of the representations and warranties of Buyer
contained in this Agreement shall be true in all material respects
when made and as of the Closing Date, with the same effect as though
such representations and warranties had been made on and as of the
Closing Date (except representations and warranties that are made as
of a specific date need be true in all material respects only as of
such date); each of the covenants and agreements of Buyer to be
performed on or prior to the Closing Date shall have been duly
performed in all material respects; and Seller shall have received at
the Closing a certificate to that effect dated as of the Closing Date
and executed on behalf of Buyer by its President or any of its Vice
Presidents and its Secretary or any of its Assistant Secretaries.
(b) All approvals, authorizations and consents of any
Governmental Authority or any other Person necessary for the
consummation by Buyer and its Affiliates, or as contemplated by
Section 3.4 hereof, by Seller and its Affiliates of the transactions
contemplated herein shall have been obtained.
(c) No action, suit, proceeding or investigation
(excluding any such matter initiated by Seller or any of its
Affiliates) by or before any court or other Governmental Authority
shall have been taken, instituted or, to the knowledge of Seller,
Buyer or any of their respective Affiliates, threatened against
Seller, Buyer or any of their respective Affiliates, to restrain,
prohibit or invalidate or delay any of the transactions contemplated
hereby.
(d) [Reserved.]
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(e) Occidental and any Affiliate of Occidental other than
the Company shall have been unconditionally released from any and all
guarantee obligations that Occidental or such Affiliate has with
respect to Occidental's guarantee under the Marginal Oil Fields
Reactivation Form of Guarantee, dated August 25, 1993, between
Occidental and Maraven.
(f) Buyer or an Affiliate of the Buyer acceptable to
Maraven shall have entered into a guarantee agreement with Maraven in
form and substance satisfactory to Maraven.
(g) There shall not be any injunction, judgment, order,
decree or ruling in effect preventing consummation of any of the
transactions contemplated by this Agreement.
(h) Seller shall have received from Buyer an opinion of
counsel to Buyer in the form attached hereto as Exhibit 6.2(h).
(i) Seller shall have received a copy of the resolutions
of the Board of Directors of Buyer, certified by an appropriate
officer of Buyer, authorizing the execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be
terminated at any time prior to Closing:
(a) by agreement of Seller and Buyer;
(b) by Seller or Buyer, by giving written notice of such
termination to the other party hereto, if (i) any condition to the
terminating party's obligations hereunder has not been satisfied or
waived and (ii) the Closing shall not have occurred on or prior to
April 30, 1998; provided that the terminating party is not in material
breach of its obligations under this Agreement;
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(c) by Buyer or Seller if there has been a material
breach of any representation, warranty, covenant or agreement made to
or for the benefit of the terminating party in this Agreement, which
breach cannot be or has not been cured within 30 days after the giving
of written notice to the breaching party of such breach.
Section 7.2 Effect of Termination. In the event of the
termination of this Agreement in accordance with Section 7.1 hereof, this
Agreement shall thereafter become void and have no effect, and no party hereto
(or any of their respective Affiliates, representatives, directors, officers or
employees) shall have any liability to the other party hereto, provided that
nothing herein will relieve any party from liability for any breach of this
Agreement prior to such termination.
ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
Section 8.1 Survival of Representations, Warranties,
Covenants and Agreements. Notwithstanding any otherwise applicable statute of
limitations, the representations, warranties, covenants and agreements included
or provided for herein shall survive Closing until one year after the Closing
Date; provided, however, that any covenant or agreement that by its express
terms cannot be performed within such time period shall survive Closing until
the date or time specified therein; provided, further that (i) any
representation or warranty contained in Section 3.7 shall survive Closing until
the expiration of the applicable statute of limitations (including any waivers
or extensions thereof) with respect to such matters, (ii) any representation or
warranty contained in the first two sentences of Section 3.2, in Section
3.3(a), in Section 3.3(b), in the first sentence of Section 3.3(c) or in
Section 3.11(a) shall survive Closing until the sixth anniversary of the
Closing Date and (iii) any representation or warranty contained in Section
3.3(e) shall survive the Closing until the tenth anniversary of the Closing
Date.
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Section 8.2 Indemnification.
(a) For a period commencing on the Closing Date and ending,
as the case may be, upon the expiration of the periods specified in Section 8.1
hereof, Seller, on the one hand, or Buyer, on the other hand (the "Indemnifying
Party"), shall, subject to the limitations set forth in Section 8.7 hereof,
indemnify respectively Buyer and each of its Affiliates (including the Company)
and their respective officers, directors, employees and agents, on the one
hand, or Seller and each of its Affiliates, officers, directors, employees and
agents, on the other hand, as the case may be (each of such persons and
entities, an "Indemnified Party"), against in the case of Seller's indemnity,
those matters set forth in Schedule 8.2(a) hereto, in the case of Buyer's
indemnity, against and in respect of all Claims sustained or incurred arising
out of Occidental's and its Affiliates' guarantees referred to in Section
6.2(e) hereof (excluding any Claims for which Seller is obligated on account of
Seller's representations, warranties, covenants and indemnities under this
Agreement), and in the case of each of Seller's and Buyer's indemnity, against
and in respect of all Claims sustained or incurred arising out of any breaches
of the Indemnifying Party's representations, warranties, covenants and
agreements set forth in this Agreement.
(b) Except for the covenants and agreements of the parties in
Sections 2.2 (other than subsection 2.2(d), except as it relates to Buyer's
obligations under Section 2.2), 2.3, 2.4, 5.2(l), 5.2(m), 5.6(k) and 5.9, the
indemnity provided herein as it relates to this Agreement and the transactions
contemplated hereby shall be the sole and exclusive remedy of the parties
hereto, their Affiliates, successors and assigns with respect to any and all
claims for losses, damages, liabilities, costs and expenses sustained or
incurred arising out of this Agreement and the transactions contemplated
hereby.
Section 8.3 Method of Asserting Claims, etc.
(a) All claims for indemnification by any Indemnified
Party hereunder shall be asserted and resolved as set forth in this Section
8.3.
(b) In the event that any written claim or demand for
which an Indemnifying Party would be liable to any Indemnified Party hereunder
is asserted against or sought to
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be collected from any Indemnified Party by a third party, such Indemnified
Party shall promptly, but in no event later than the 30th day after receipt by
the Indemnified Party of such claim or demand, notify the Indemnifying Party of
such claim or demand and the amount or the estimated amount thereof to the
extent then feasible (which estimate shall not in any manner prejudice the
right of the Indemnified Party to indemnification to the fullest extent
provided hereunder) (the "Third Party Claim Notice") and in the event that an
Indemnified Party shall assert a claim for indemnity under this Article VIII,
not including a third party claim, the Indemnified Party shall, within 30 days
of the discovery of the facts or circumstances giving rise thereto, notify the
Indemnifying Party following its discovery of such facts or circumstances;
provided that the failure to notify on the part of the Indemnified Party in the
manner set forth herein shall not foreclose any rights otherwise available to
such Indemnified Party hereunder, except to the extent that the Indemnifying
Party is prejudiced by such failure to notify in the manner set forth herein.
The Indemnifying Party shall have thirty (30) days from the personal delivery
or mailing of the Third Party Claim Notice or the notice relating to a claim
for indemnity under this Article VIII other than a third party claim (the
"Notice Period") to notify the Indemnified Party (i) whether or not the
Indemnifying Party disputes the liability of the Indemnifying Party to the
Indemnified Party hereunder with respect to such claim or demand and (ii)
whether or not it desires to defend the Indemnified Party against such claim or
demand. In the event that the Indemnifying Party notifies the Indemnified
Party that it does not desire to defend the Indemnified Party against such
claim or demand, the Indemnified Party shall have all rights and remedies at
law or in equity against the Indemnifying Party for any breach of the
Indemnifying Party's indemnification obligations hereunder. In the event that
the Indemnifying Party notifies the Indemnified Party within the Notice Period
that it desires to defend the Indemnified Party against such claim or demand,
the Indemnifying Party shall have the right to defend the Indemnified Party by
appropriate proceedings. If any Indemnified Party desires to participate in,
but not control, any such defense or settlement it may do so at its sole cost
and expense. The Indemnified Party shall not settle a claim or demand without
the consent of the Indemnifying Party. The Indemnifying Party shall not,
without the prior written consent of the Indemnified Party, settle, compromise
or offer to settle or
-50-
<PAGE> 56
compromise any such claim or demand on a basis which provide for a finding or
acknowledgment of responsibility or liability on the part of the Indemnified
Party or which provides for or would result in any sanction or restriction or
in the imposition of a consent order, injunction or decree which would restrict
the future activity or conduct of, or which would otherwise have a Material
Adverse Effect on, the Indemnified Party or any Affiliate thereof. To the
extent the Indemnifying Party shall control or participate in the defense or
settlement of any third party claim or demand, the Indemnified Party will give
to the Indemnifying Party and its counsel reasonable access to all business
records and other documents relevant to such defense or settlement, and shall
permit them to consult with the employees and counsel of the Indemnified Party.
The Indemnified Party shall use its commercially reasonable efforts as may be
requested by the Indemnifying Party in the defense of all such claims, and in
connection therewith shall be entitled to reimbursement by the Indemnifying
Party of expenses related to such efforts undertaken.
(c) Payments of all amounts owing by an Indemnifying Party as a
result of a third party claim shall be made within five Business Days after the
earlier of (i) the settlement of the third party claim and (ii) the expiration
of the period of appeal of a final adjudication of the third party claim.
Payments of all amounts owing by an Indemnifying Party other than as a result
of a third party claim shall be made within five Business Days after the later
of (i) the expiration of the Notice Period or (ii) if contested through dispute
resolution proceedings, the expiration of the period for appeal of a final
adjudication of the Indemnifying Party's liability to the Indemnified Party
under this Agreement. Notwithstanding the above, if the Indemnifying Party has
not contested its indemnity obligations hereunder and has not elected to assume
the defense of a third party claim, the Indemnifying Party shall reimburse
(promptly after the receipt of each invoice therefor together with reasonable
support for such expenditures) the Indemnified Party for the reasonable costs
and expenses incurred by the Indemnified Party in contesting the third party
claim.
Section 8.4 Subrogation Rights. If the Indemnified Party
is one of the parties to be Indemnified by the Buyer and the Indemnified Party
has a right against a Person (other than one of the other parties to be
-51-
<PAGE> 57
Indemnified by the Buyer) with respect to any damages or other amounts paid to
the Indemnified Party by the Buyer, then the Buyer shall, to the extent of such
payment, be subrogated to the right of such Indemnified Party. If the
Indemnified Party has a right against a Person (other than one of the other
parties to be Indemnified by the Seller) with respect to any damages or other
amounts paid to such Indemnified Party by the Seller, then the Seller shall, to
the extent of such payment, be subrogated to the right of such Indemnified
Party. Notwithstanding anything herein to the contrary, no Indemnifying Party
shall be subrogated to any insurance rights of any Indemnified Party.
Section 8.5 Insurance Proceeds; Interest. In determining
the amount of any loss, liability or expense for which any party is entitled to
indemnification under this Article VIII, the gross amount thereof (a) will be
reduced by any insurance proceeds realized by such party from third party
insurers,(b) will be increased by (i) to the extent such payment is based on
amounts paid by the Indemnified Party, interest on such amount at the rate
quoted as of the date such amounts are paid on London Interbank Market for
30-day borrowings, plus 1-1/2%, from the date such amounts are paid until
payment is made as required hereunder and (ii) to the extent such payment is
based on losses incurred by the Indemnified Party, interest on such lost amount
at the rate quoted as of the date of such loss on London Interbank Market for
30-day borrowings, plus 1-1/2%, from the date of such loss until payment is
made as required hereunder and (c) will be reduced by any Tax benefits realized
by such party in connection with such loss, liability or expense to the extent
such Tax benefit results directly from the incurrence of such loss, liability
or expense.
Section 8.6 Investigation and Due Diligence. No
investigation, examination, audit, inspection or other due diligence prior to
the Closing shall affect the parties' respective rights to indemnity pursuant
to this Agreement.
Section 8.7 Deductible; Maximum Liability
(a) No claim for indemnification shall be brought under
this Article VIII against an Indemnifying Party unless and until the aggregate
amount of all claims for indemnification under this Article VIII against such
Indemnifying Party exceeds $5,000,000, and then only for that portion of the
aggregate amount of all such claims which exceeds $5,000,000.
-52-
<PAGE> 58
(b) The indemnification obligations of either party under
this Article VIII shall be limited to a maximum aggregate liability of
$30,000,000; provided, however, that the indemnification obligations of Seller
relating to the representations, warranties and other obligations referenced in
clause (ii) and (iii) of the second proviso in Section 8.1 hereof shall be
limited to a maximum aggregate liability equal to the Purchase Price.
(c) No indemnity shall be recoverable with respect to any
individual claim or group of related claims unless the amount (exclusive of
fees and expenses of counsel) thereof equals at least $10,000, and no such
claims shall count toward the deductible referred to in paragraph (a) of this
Section 8.7.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Amendment and Modification; Waiver. This
Agreement may be amended or modified only in writing, signed by Seller and
Buyer.
Section 9.2 Expenses. Except as otherwise expressly
provided herein, whether or not the transactions contemplated hereby are
consummated, the parties shall bear their own respective expenses (including,
but not limited to, all compensation and expenses of counsel, financial
advisors, consultants, actuaries and independent accountants) incurred in
connection with this Agreement and the transactions contemplated hereby.
Section 9.3 Assignment. No party to this Agreement may
assign any of its rights or obligations under this Agreement without the prior
written consent of the other party hereto.
Section 9.4 Entire Agreement. This Agreement including
the exhibits and schedules hereto contains the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral or written, with respect to such
matters.
-53-
<PAGE> 59
Section 9.5 Parties in Interest; No Third Party
Beneficiaries. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, express or implied, is intended to confer upon any
Person other than Seller, Buyer or the Company or their successors or permitted
assigns any rights or remedies under or by reason of this Agreement, including,
without limitation, any right to employment whether directly or as a third
party beneficiary, or continued employment for any specified period, of any
nature or kind whatsoever.
Section 9.6 Counterparts. This Agreement and any
amendments hereto may be executed in one or more counterparts, each of which
shall be deemed to be an original by the parties executing such counterpart,
but all of which shall be considered one and the same instrument.
Section 9.7 Interpretation. It is expressly agreed that
this Agreement shall not be construed against any party, and no consideration
shall be given or presumption made, on the basis of who drafted this Agreement
or any particular provision hereof or who supplied the form of Agreement. Each
party agrees that it has been purposefully drawn and correctly reflects their
understanding of the transaction that it contemplates. In construing this
Agreement:
(a) examples shall not be construed to limit, expressly
or by implication, the matter they illustrate;
(b) the word "includes" and its derivatives means
"includes, but is not limited to" and corresponding derivative
expressions;
(c) a defined term has its defined meaning throughout
this Agreement and each Appendix, Exhibit and Schedule to this
Agreement, regardless of whether it appears before or after the place
where it is defined;
(d) each Exhibit and Schedule to this Agreement is a part
of this Agreement, but if there is any conflict or inconsistency
between the main body of this Agreement and any Exhibit or Schedule,
the provisions of the main body of this Agreement shall prevail; and
-54-
<PAGE> 60
(e) the section and paragraph headings and table of
contents contained in this Agreement are for reference purposes only
and shall not in any way affect the meaning or interpretation of this
Agreement.
Section 9.8 Notices. All notices hereunder shall be
deemed given if in writing and delivered personally or sent by telecopy or by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other addresses as shall be specified by like
notice):
(a) if to Seller, to:
Occidental Petroleum Corporation
10889 Wilshire Boulevard
Los Angeles, California 90024
Facsimile: (310) 443-6333
Attention: General Counsel
With a copy to:
Sullivan & Cromwell
444 South Flower Street
Los Angeles, California 90071
Facsimile: (213) 683-0457
Attention: Alison S. Ressler
(b) if to Buyer, to:
Union Texas Venezuela, Limited
1330 Post Oak Boulevard
Houston, Texas 77056
Facsimile: (713) 968-2815
Attention: Newton W. Wilson, III
With a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Facsimile: (713) 651-5246
Attention: George F. Kutzschbach
(c) If to Guarantor, to:
Union Texas International Corporation
1330 Post Oak Boulevard
Houston, Texas 77056
Facsimile: (713) 968-2720
Attention: Arthur W. Peabody
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<PAGE> 61
With a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Facsimile: (713) 651-5246
Attention: George F. Kutzschbach
Any notice given by mail or facsimile shall be effective when
received.
SECTION 9.9 GOVERNING LAW; SUBMISSION TO JURISDICTION;
SELECTION OF FORUM. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REFERENCE TO THE
CHOICE OF LAW PRINCIPLES THEREOF. EACH PARTY HERETO AGREES THAT IT SHALL BRING
ANY ACTION OR PROCEEDING IN RESPECT OF ANY CLAIM ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR THE TRANSACTIONS CONTAINED HEREIN OR CONTEMPLATED HEREBY,
WHETHER IN TORT OR CONTRACT OR AT LAW OR IN EQUITY, EXCLUSIVELY IN THE UNITED
STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA OR THE SUPERIOR
COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES (THE "CHOSEN
COURTS") AND (I) IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE
CHOSEN COURTS, (II) WAIVES ANY OBJECTION TO LAYING VENUE IN ANY SUCH ACTION OR
PROCEEDING IN THE CHOSEN COURTS, (III) WAIVES ANY OBJECTION THAT THE CHOSEN
COURTS ARE AN INCONVENIENT FORUM OR DO NOT HAVE JURISDICTION OVER ANY PARTY
HERETO AND (IV) AGREES THAT SERVICE OF PROCESS UPON SUCH PARTY IN ANY SUCH
ACTION OR PROCEEDING SHALL BE EFFECTIVE IF NOTICE IS GIVEN IN ACCORDANCE WITH
SECTION 9.8 OF THIS AGREEMENT.
Section 9.10 Severability. The provisions of this
Agreement shall be deemed severable and the invalidity or unenforceability of
any provision shall not affect the validity or enforceability of the other
provisions hereof. If any provision of this Agreement, or the application
thereof to any person or entity or any circumstance, is invalid or
unenforceable, (a) a suitable and equitable provision shall be substituted
therefor in order to carry out,
-56-
<PAGE> 62
so far as may be valid and enforceable, the intent and purpose of such invalid
or unenforceable provision and (b) the remainder of this Agreement and the
application of such provision to other persons, entities or circumstances shall
not be affected by such invalidity or unenforceability, nor shall such
invalidity or unenforceability affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
Section 9.11 Attorney's Fees. The prevailing party in any
legal proceeding brought under or to enforce this Agreement shall be
additionally entitled to recover court costs, reasonable costs of arbitration
and reasonable attorneys' fees from the nonprevailing party.
Section 9.12 Time of Essence. Time is of the essence in
this Agreement. If the date specified in this Agreement for giving any notice
or taking any action is not a Business Day (or if the period during which any
notice is required to be given or any action taken expires on a date which is
not a Business Day), then the date for giving such notice or taking such action
(and the expiration date of such period during which notice is required to be
given or action taken) shall be the next day which is a Business Day.
* * *
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<PAGE> 63
IN WITNESS WHEREOF, this Agreement has been signed on behalf
of each of the parties hereto as of the date first written above.
OCCIDENTAL OIL AND GAS CORPORATION
By /s/ STEPHEN I. CHAZEN
------------------------------------------
Name: Stephen I. Chazen
Title: Executive Vice President/Business
Development
UNION TEXAS VENEZUELA, LIMITED
By /s/ CHARLES W. LATCH
------------------------------------------
Name: Charles W. Latch
Title: Senior Vice President
UNION TEXAS INTERNATIONAL CORPORATION
By /s/ NEWTON W. WILSON, III
-----------------------------------------
Name: Newton W. Wilson, III
Title: Vice President
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<PAGE> 64
STOCK PURCHASE AGREEMENT BETWEEN
OCCIDENTAL OIL AND GAS CORPORATION,
UNION TEXAS VENEZUELA LIMITED AND
UNION TEXAS INTERNATIONAL CORPORATION,
DATED AS OF JANUARY 27, 1998
The following describes the schedules and exhibits to the Stock Purchase
Agreement, which are omitted herein, but which will be furnished upon request:
Schedules:
Schedule 2.3 - December 31, 1997 Balance Sheet
Schedule 3.5 - Financial Statements
Schedule 3.8 - Litigation and Claims
Schedule 3.9 - Labor Matters
Schedule 3.10 - Material Contracts
Schedule 3.14 - Absence of Subsequent Actions
Schedule 3.13 - Compliance with Law and Permits
Schedule 3.15 - Employee Plans
Schedule 3.17 - Intellectual Property
Schedule 3.18 - Insurance Policies
Schedule 3.19 - Directors and Representatives
Schedule 5.1 - Conduct of Business
Schedule 5.6 (a) - National Employees
Schedule 5.6 (b) - Expatriate Employees
Schedule 5.7 - Assets Not Transferred
Schedule 8.2 (a) - Indemnification
Exhibits:
Exhibit 1 - OSA
Exhibit 6.1 (e) - Opinion of Seller's Counsel
Exhibit 6.1 (g) (i) - License Agreement
Exhibit 6.1 (g) (ii) - Transition Services Agreement
Exhibit 6.2 (h) - Opinion of Buyer's Counsel
<PAGE> 1
EXHIBIT 99.1
- -------------------------------------------------------------------------------
[UNION TEXAS PETROLEUM LOGO]
===============================================================================
UNION TEXAS PETROLEUM UPDATES INCIDENT IN KARACHI
Houston, November 12, 1997 -- Union Texas Petroleum Holdings, Inc. has
issued the names of the five employees who were fatally wounded in an incident
today in Karachi. The five employees were in a vehicle that was fired upon by
unknown assailants in Karachi. The names of the deceased are:
o Ephraim Egbu, Senior Auditor, of Houston
o Joel Enlow, Manager - Audit Projects, of Houston
o Larry Jennings, Manager - Audit, of Houston
o Anwar Murza, Driver, of Karachi
o Tracy Ritchie, Senior Audit Supervisor, of Houston.
Union Texas said that the families of the deceased have been contacted.
"Speaking for everyone here at Union Texas, we are deeply saddened by
the loss of our fellow employees," said Chairman and CEO John Whitmire. "Our
heartfelt sympathies go out to their families and their friends here at Union
Texas. We are helping the families at this terrible time and providing
assistance to them."
"In Houston and Karachi, we are also providing grief counseling for our
employees to help them deal with this terrible tragedy. We are a close-knit
group of employees and we all feel this loss deeply," Whitmire said.
At the time of the incident, the Union Texas vehicle was in route to
Union Texas' Karachi office. The four Houston-based employees were in Karachi to
assist with routine accounting and auditing projects.
Union Texas said that it does not know the reason for the attack and is
fully cooperating with the local officials in their investigation.
Union Texas Petroleum has been active in exploring for, developing and
producing oil and gas in Pakistan for over 20 years. The company has offices in
Karachi and field operations in the Sindh province. Union Texas has
approximately 600 employees in Pakistan, 21 of whom are
<PAGE> 2
expatriate employees from the U.S. and other countries. The company has been a
leader in supporting the communities in Pakistan where it has operations and
has funded the construction of numerous schools, colleges for young women and
young men, medical clinics, and mosques and has provided relief during natural
disasters and other emergencies in Pakistan.
# # #
For additional information, contact:
Carol Cox, media John Zimmerman, analysts and investors
713-968-2714 713-968-2740
2
<PAGE> 1
EXHIBIT 99.2
- -------------------------------------------------------------------------------
[UNION TEXAS PETROLEUM LOGO]
===============================================================================
UNION TEXAS PETROLEUM EXPANDS BOARD FROM 11 MEMBERS TO 12,
APPOINTS AMBASSADOR ROBERT BARRY TO BOARD
Contact: Carol Cox
713-968-2714
Houston, January 5, 1998 -- Union Texas Petroleum Holdings, Inc. (NYSE:
UTH) today announced the expansion of its Board of Directors from 11 members to
12. With the expansion of the Board, Union Texas has appointed Ambassador Robert
L. Barry, who served as the U.S. ambassador to Indonesia from 1992 - 1995, to
its Board.
Ambassador Barry joined the U.S. Foreign Service in 1961, where he held
numerous positions of increasing responsibility in the U.S. State Department and
worked overseas in the former Soviet Union, Yugoslavia and Germany. From
1981-1984, he served as Ambassador to Bulgaria and from 1985-1987 as Ambassador
to the Stockholm Conference on Disarmament in Europe. From 1987 - 1989, he
served as Deputy Director of the Voice of America. During 1989 - 1992,
Ambassador Barry worked with Deputy Secretary of State Lawrence Eagleburger in
developing U.S. assistance programs for the former Soviet Union and East Central
Europe. As Ambassador to Indonesia from 1992 - 1995, Ambassador Barry worked
closely with U.S. businesses, particularly in the energy sector.
Upon his retirement in August 1995, Ambassador Barry became a principal
in Phoenix International, an electric power development company focused on
projects in Indonesia. His international consulting firm, Robert Barry and
Associates, specializes in Indonesia, Eastern Europe and the newly independent
states of the former Soviet Union. During 1996, he served as clinical professor
of environmental and management studies at Northwestern University's Kellogg
Graduate School of Management in Chicago. While there, he completed Kellogg's
senior management development
<PAGE> 2
course. Ambassador Barry is a senior associate at Washington's Center for
Strategic and International Studies.
Ambassador Barry is a graduate of Dartmouth College and received his
master's degree from Columbia University. He also studied Soviet and Eastern
European affairs at Oxford University. He served in the U.S. Navy as a destroyer
officer from 1957 - 1960.
"We are delighted to welcome Ambassador Barry to our Board," said Union
Texas Chairman and CEO John Whitmire. "His experience and guidance in world
affairs and the international business arena will be very helpful to Union Texas
as we continue to grow our global operations."
One of the largest independent producers located in the U.S.,
Houston-based Union Texas Petroleum Holdings, Inc. (NYSE:UTH) explores for and
produces oil and gas overseas primarily in the U.K. North Sea, Indonesia and
other strategic areas. The company has petrochemical operations in Louisiana.
For additional information, contact:
Carol Cox, media John Zimmerman, analysts and investors
713-968-2714 713-968-2740
A photograph of Ambassador Barry is available by contacting Union Texas
at 713-968-2716.
<PAGE> 1
EXHIBIT 99.3
- -------------------------------------------------------------------------------
[UNION TEXAS PETROLEUM LOGO]
===============================================================================
UNION TEXAS PETROLEUM REPORTS 1997 RESULTS
COMPANY REPLACES 135% OF 1997 WORLDWIDE PRODUCTION
Contact: Carol Cox
713-968-2714
Houston, January 27, 1998 -- Union Texas Petroleum Holdings, Inc. (NYSE:
UTH) today reported 1997 earnings of $1.60 per share, compared to $1.75 per
share in 1996. Net income for 1997 was $136 million, versus $152 million in
1996. Sales and operating revenues for 1997 totaled $909 million, compared to $1
billion in 1996.
During 1997's third quarter, Union Texas recorded certain one-time
non-cash tax items, which together provided a $29 million net benefit. Excluding
these items, earnings for 1997 were $1.26 per share or $107 million in net
income. Union Texas said its 1997 performance was adversely affected by an
anticipated decline in liquefied natural gas (LNG) sales volumes in Indonesia,
higher exploration expenses and lower crude oil prices, partially offset by
lower interest expense and higher ethylene margins in the U.S.
Commenting on the company's performance during 1997, Chairman and CEO
John Whitmire said, "Although lower crude oil prices and the anticipated decline
in LNG sales volumes affected our financial performance for 1997, Union Texas
made excellent progress during the year in growing our worldwide businesses. We
created new operated core areas for Union Texas in Venezuela, Kazakhstan and the
Caspian Sea, which are among the premier oil regions in the world. We also
replenished our exploration portfolio with a focus on developing a more balanced
program. Overall, we added 11 new concessions to our exploration program in
1997, including China's Bohai Bay where we've participated in two oil
discoveries. We made significant progress on development projects at the U.K.
North Sea's Britannia field and the Alpine field on Alaska's North Slope.
Together, our new operations at Venezuela's Boqueron area, Britannia and Alpine
are expected to account for approximately 35,000 barrels of oil equivalent a day
net to Union Texas by 2000."
1
<PAGE> 2
For the full year 1997, Union Texas' worldwide oil and gas sales volumes
fell 10% from 47.2 million barrels of oil equivalent in 1996 to 42.4 million
barrels in 1997 due principally to an 18% decline in the amount of natural gas
supplied by the company and its co-venturers to an Indonesian LNG plant. The
decrease in Indonesian gas volumes was partially offset by higher oil sales
volumes from the U.K. North Sea's Alba field and from Union Texas' operations in
Pakistan. Union Texas said its average sales price for oil worldwide declined
from $19.37 per barrel in 1996 to $17.52 in 1997. The company's average sales
price for Indonesian LNG in 1997 was $3.45 per thousand cubic feet of gas,
compared to $3.52 in 1996.
At its petrochemicals operations in Louisiana, Union Texas' ethylene
margins rose in 1997, averaging 9 cents per pound of ethylene, up from 6 cents
in 1996. The higher margins primarily were driven by increased ethylene sales
prices and lower feedstock costs.
Union Texas attributed the higher exploration expenses in 1997 compared
to 1996 to its significantly increased level of worldwide exploration
activities. During 1997, Union Texas participated in 15 exploratory wells, up
from 13 in 1996. Of the 15 exploration wells in 1997, five resulted in
discoveries, including two in China's Bohai Bay and three in Pakistan's Badin
area. The unsuccessful wells included the Monte Foi prospect in Italy, the Marvi
well in Eastern Pakistan, and the Sidi Limane-1 prospect in Algeria. In Algeria,
the venture plans to begin drilling its second well during the first quarter of
1998.
FOURTH QUARTER RESULTS
For the fourth quarter of 1997, Union Texas reported a net loss of $1
million, or a loss of 2 cents per share. In the same period of 1996, the company
had earnings of 47 cents per share on $40 million in net income. Union Texas
said the loss in 1997's fourth quarter was due to higher exploration expenses,
lower oil and gas prices and an anticipated decline in LNG sales volumes. Sales
and operating revenues for 1997's fourth quarter were $233 million, versus $300
million for 1996's corresponding quarter.
2
<PAGE> 3
RESERVES INCREASE IN 1997
Union Texas' proved worldwide reserves at year-end 1997 rose to 459
million barrels of oil equivalent, up from 443 million barrels at the end of
1996. The growth in reserves reflected Union Texas' acquisition of an operating
service contract for the Boqueron area in Venezuela, which accounted for about
40 million barrels in proved reserves recorded in 1997. The increase in reserves
also included revisions at the company's operations in Pakistan and the U.K.
North Sea. Union Texas replaced approximately 135% of its 1997 worldwide
production, which was approximately 44.2 million barrels of oil equivalent. Over
the three-year period of 1995-97, the company replaced about 134% of its
worldwide production at a cost of $6.13 per barrel of oil equivalent.
STOCK BUYBACK
During the first quarter of 1997, Union Texas completed a stock buyback
program to repurchase 2 million shares of its common stock that was announced in
October 1996. The company repurchased the remaining 1,821,264 shares of common
stock under the buyback program in 1997's first quarter. "Since 1994, the
company has bought 4 million shares of stock for $76.9 million, including 3.4
million shares since January 1996. We feel that the repurchase of our shares
represented an attractive investment opportunity for our company," said
Whitmire.
One of the largest independent producers located in the U.S.,
Houston-based Union Texas Petroleum Holdings, Inc. (NYSE:UTH) explores for and
produces oil and gas overseas primarily in the U.K. North Sea, Indonesia, and
other strategic areas. The company has petrochemical operations in Louisiana.
This news release contains forward-looking statements within the
meaning of the Securities Litigation Reform Act that involve risks and
uncertainties, including price volatility, exploration, development, operational
and implementation risks, and other factors described from time to time in the
company's publicly available SEC reports, which could cause actual results to
differ materially.
3
<PAGE> 4
Comparative financial highlights follow (amounts in millions, except
per share data):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
DECEMBER 31
-----------
1997 1996
---- ----
<S> <C> <C>
Net income (loss)................................$ (1) $ 40
Earnings (loss) per share(a).....................$ (.02) $ .47
Sales and operating revenues.....................$ 233 $ 300
Average common shares outstanding................ 85.1 86.5
</TABLE>
<TABLE>
<CAPTION>
FULL YEAR ENDED
DECEMBER 31
-----------
1997 1996
---- ----
<S> <C> <C>
Net income.......................................$ 136 $ 152
Earnings per share(a)............................$ 1.60 $ 1.75
Sales and operating revenues.....................$ 909 $ 1,008
Average common shares outstanding................ 85.1 87.2
</TABLE>
Additional financial and operating information appears on the attached pages.
4
<PAGE> 5
UNION TEXAS PETROLEUM
FINANCIAL SUMMARY
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOURTH QUARTER FULL YEAR
-------------- ---------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales and operating revenues $ 233 $ 300 $ 909 $1,008
Net income (loss) $ (1) $ 40 $ 136 $ 152
Major operations(b)
Indonesia $ 23 $ 22 $ 106 $ 121
U.K. North Sea $ 23 $ 34 $ 68(c) $ 85
Pakistan -- $ 7 $ 19 $ 27
Petrochemicals $ 4 $ 2 $ 20 $ 15
Earnings (loss) per share $ (.02) $ .47 $ 1.60 $ 1.75
of common stock
Discretionary cash flow(d) $ 107 $ 115 $ 404 $ 401
Major operations(b)
Indonesia $ 39 $ 38 $ 162 $ 177
U.K. North Sea $ 58 $ 78 $ 216 $ 224
Pakistan $ 17 $ 10 $ 50 $ 39
Petrochemicals $ 8 $ 5 $ 37 $ 29
Average common shares outstanding 85.1 86.5 85.1 87.2
See footnotes on page 8
</TABLE>
5
<PAGE> 6
UNION TEXAS PETROLEUM
DISCRETIONARY CASH FLOW SUMMARY(d)
(AMOUNTS IN MILLIONS)
<TABLE>
<CAPTION>
FOURTH QUARTER FULL YEAR
-------------- ---------
1997 1996 1997 1996
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net income (loss) $ (1) $ 40 $ 136 $ 152
Less: Equity income $ 3 $ 4 $ 21 $ 26
Add:
DD&A $ 63 $ 60 $ 216 $ 212
Deferred taxes $ (12) $ (10) $ (63) $ (33)
Exploration expenses $ 52 $ 19 $ 99 $ 52
Equity DCF(e) $ 8 $ 10 $ 37 $ 44
Discretionary cash flow $ 107 $ 115 $ 404 $ 401
See footnotes on page 8
</TABLE>
OPERATING SUMMARY(f)
<TABLE>
<CAPTION>
FOURTH QUARTER FULL YEAR
-------------- ---------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net crude oil sales (MBBLS/D)
U.K. North Sea 47 47 43 43
Indonesia 6 5 6 6
Pakistan 7 9 7 6
Average crude oil prices (per BBL)
U.K. North Sea $ 16.89 $ 21.82 $ 17.28 $ 19.60
Indonesia $ 19.60 $ 22.60 $ 19.71 $ 19.49
Pakistan $ 16.90 $ 20.07 $ 17.09 $ 17.75
Net natural gas sales (MMCF/D)
Indonesian LNG 169 197 179 218
U.K. North Sea 25 85 28 46
Pakistan 39 39 37 41
Average natural gas prices (per MCF)
Indonesian LNG $ 3.15 $ 3.97 $ 3.45 $ 3.52
U.K. North Sea(g) $ 2.89 $ 3.33 $ 2.92 $ 2.83
Pakistan $ 1.53 $ 1.53 $ 1.61 $ 1.61
Ethylene (per LB)
Sales price $ .22 $ .24 $ .24 $ .22
Margins $ .05 $ .05 $ .09 $ .06
Sales volumes (MLBS/D)(h) 1,409 1,427 1,301 1,392
See footnotes on page 8
</TABLE>
6
<PAGE> 7
UNION TEXAS PETROLEUM
CONSOLIDATED STATEMENT OF OPERATIONS
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOURTH QUARTER FULL YEAR
-------------- ---------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Sales and operating revenues $ 233 $ 300 $ 909 $ 1,008
Interest income and other revenue -- -- 3 2
Net earnings of equity investees 3 4 21 26
------- ------- ------- -------
Total revenues 236 304 933 1,036
Costs and other deductions:
Product costs and operating expenses 84 99 315 341
Exploration expenses 52 19 99 52
Depreciation, depletion and amortization 63 60 216 212
Selling, general and administrative
expenses 7 8 27 27
Interest expense(i) -- 5 7 25
------- ------- ------- -------
Income before taxes 30 113 269 379
Income taxes 31 73 133 227
------- ------- ------- -------
Net income (loss) $ (1) $ 40 $ 136 $ 152
======= ======= ======= =======
Earnings (loss) per share of common $ (.02) $ .47 $ 1.60 $ 1.75
======= ======= ======= =======
stock
Dividends per share of common stock $ .05 $ .05 $ .20 $ .20
======= ======= ======= =======
Weighted average number of shares
outstanding 85.1 86.5 85.1 87.2
======= ======= ======= =======
See footnotes on page 8
</TABLE>
SELECTED BALANCE SHEET DATA
(AMOUNTS IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31, 1997 December 31, 1996
<S> <C> <C>
Total assets $ 2,022 $ 1,942
Long-term debt $ 626 $ 558
Shareholders' equity $ 669 $ 586
</TABLE>
7
<PAGE> 8
FOOTNOTES
(a) The amounts shown for earnings per share are basic, undiluted amounts.
Diluted earnings per share are $(.02) and $.46 for the fourth quarter of
1997 and 1996, respectively, and $1.59 and $1.74 for the full year 1997 and
1996, respectively.
(b) Excludes corporate items and other worldwide exploration ventures.
(c) Includes a $14 million charge related to changes in U.K. corporate taxes.
(d) Discretionary cash flow (DCF) is net income (less equity income) excluding
depreciation, deferred taxes, and exploration expenses plus the company's
estimated share of discretionary cash flow from its equity interests.
(e) Equity DCF reflects the company's estimated share of discretionary cash
flow primarily from its equity interest in the Unimar partnership.
(f) Excludes the Unimar equity partnership.
(g) Excludes capacity charge of $39 million and $36 million in 1997 and 1996,
respectively, from the North and South gas fields in the U.K. North Sea.
(h) Represents Union Texas' 41.67% net interest in the jointly-owned Geismar
ethylene plant in Louisiana.
(i) Interest expense is net of amounts capitalized of $12 million and $7 million
in the fourth quarter of 1997 and 1996, respectively, and $41 million and
$26 million for the full year 1997 and 1996, respectively.
# # #
For additional information, contact:
Carol Cox, media John Zimmerman, analysts and investors
713-968-2714 713-968-2740
8
<PAGE> 1
EXHIBIT 99.4
- --------------------------------------------------------------------------------
[UNION TEXAS PETROLEUM LOGO]
- --------------------------------------------------------------------------------
UNION TEXAS PETROLEUM PLANS $413 MILLION CAPITAL BUDGET FOR 1998,
UP ABOUT 60% FROM 1997 FOR OIL AND GAS DEVELOPMENT PROJECTS
Contact: Carol Cox
713-968-2714
Houston, February 5, 1998 - - The Board of Directors of Union Texas
Petroleum Holdings, Inc. (NYSE: UTH) has approved a $413 million capital
spending program for 1998, up about 60% from $262 million spent in 1997. The
increased capital program for 1998 reflects significant growth in oil and gas
development projects at Union Texas' worldwide operations, including activities
in Venezuela, Alaska and the U.K. North Sea.
"Union Texas capitalized on several exciting growth opportunities
during 1997 and early 1998, including the DZO and Boqueron properties in
Venezuela," said Chairman and CEO John Whitmire. "Our 1998 budget is focused on
adding value to these projects with development activities which will contribute
substantially to Union Texas' worldwide production profile. We also are moving
forward with development projects at our interests in Alaska's Alpine oil field
and the U.K. North Sea's Britannia gas field."
$284 MILLION BUDGETED FOR DEVELOPMENT PROJECTS IN 1998
Union Texas' 1998 capital plans call for approximately $284 million for
oil and gas development projects, more than double 1997's development spending
of about $132 million. A major component of Union Texas' 1998 development budget
is the company's two new operations in Venezuela. Union Texas has earmarked
approximately $79 million in development spending for its operations in
Venezuela during 1998. Union Texas and its partner, Preussag Energie GmbH of
Germany, were the successful bidder for the Boqueron operating service contract
awarded under Venezuela's Third Operating Agreement Round in June 1997. Union
Texas will serve as operator with a 66.67% working interest in the producing oil
field, situated in eastern Venezuela. During 1998, development work at Boqueron
will include development drilling and the construction of production facilities.
Union Texas expects to boost Boqueron's
Page 1
<PAGE> 2
current production of about 8,500 grossbarrels of oil to 50,000 - 60,000
gross barrels within three to five years.
In western Venezuela, Union Texas has recently acquired all of the
stock of Compania Occidental de Hidrocarburos, Inc., a U.S. affiliate of
Occidental Oil & Gas Corporation, which operates the DZO unit. During 1998,
capital spending at DZO will be focused on development drilling. Union Texas
will operate the DZO unit with a 100% working interest in the field which
currently produces about 23,000 gross barrels of oil a day. Union Texas expects
to ramp up production at DZO to a peak rate of about 55,000 gross barrels a day
within five years.
On Alaska's North Slope, Union Texas has budgeted about $50 million for
development spending at the Alpine oil field in the Western Colville area during
1998, up from $9 million spent in 1997. The company has a 22% working interest
in Alpine, a large new oil field being developed by Union Texas and its
co-venturers. Alpine is anticipated to begin producing at an initial rate of
40,000 gross barrels of oil a day in early 2000, increasing to 70,000 gross
barrels in 2001. Development activities on the North Slope for the Alpine
project during 1998 will concentrate on drilling one or two horizontal wells,
construction of a gravel road and pads, and directional boring under the
Colville River for the pipeline crossing. The project will be moving into the
module fabrication phase during 1998.
Union Texas' 1998 development plans also include approximately $24
million for the U.K. North Sea's Britannia gas development project, in which
Union Texas has a 9.42% unit interest. One of the largest gas development
projects in the United Kingdom, Britannia is slated to begin production in the
second half of 1998. The field's platform is designed to handle gross peak
production of up to 740 million cubic feet of gas and up to 70,000 barrels of
condensate and natural gas liquids per day. Other development projects in the
U.K. North Sea for 1998 include about $32 million to develop reserves in the
Alba oil field's southern portion through extended-reach drilling from the
field's platform located in the northern sector. Union Texas has a 15.5% working
interest in Alba.
The company has budgeted about $42 million on development projects at
its interests in Indonesia and about $30 million on development activities at
its operations in Pakistan.
Page 2
<PAGE> 3
$82 MILLION EARMARKED FOR EXPLORATION IN 1998
Union Texas has earmarked approximately $82 million for worldwide
exploration activities during 1998, compared to $96 million spent in 1997. The
company's 1998 exploration program is centered on drilling and seismic
activities in a number of areas, including China's Bohai Bay where Union Texas
has recently participated in two oil discoveries, as well as programs in
Algeria, Tunisia, Bolivia, Trinidad, Yemen and elsewhere. Union Texas also will
be participating in exploration programs in the United Kingdom, Indonesia and
Pakistan where the company currently has producing operations. Overall, Union
Texas expects to participate in about 20-25 exploration wells during 1998, up
from 15 wells in 1997. Of the exploration wells scheduled for 1998, 10 are in
Union Texas' new exploration ventures with the remaining wells in its current
producing areas.
In addition to its exploration drilling activities in 1998, Union Texas
plans to conduct or participate in a number of seismic surveys to determine
future exploration programs. Union Texas and its partner Oman Oil Company
Limited have recently acquired more than 1,300 kilometers of 2-D seismic data
over Block A in western Kazakhstan, where the companies plan to drill two
exploration wells beginning in late 1998. Union Texas will also be participating
in seismic studies in Italy, Trinidad, Greece, Indonesia and China during 1998.
PETROCHEMICALS CAPITAL SPENDING GROWS TO $39 MILLION IN 1998
At its petrochemicals operations in Louisiana, Union Texas is slating
about $39 million for capital projects for 1998, up from $29 million spent in
1997. Key projects for Union Texas' petrochemicals operations in 1998 will focus
on the expansion and enhancement of the company's supply and distribution
systems.
One of the largest independent producers located in the U.S.,
Houston-based Union Texas Petroleum Holdings, Inc. (NYSE:UTH) explores for and
produces oil and gas overseas primarily in the U.K. North Sea, Indonesia,
Venezuela, Pakistan and other strategic areas. The company has petrochemical
operations in Louisiana.
This news release contains forward-looking statements within the
meaning of the Securities Litigation Reform Act that involve risks and
uncertainties, including price volatility, exploration, development, operational
and implementation risks, and other factors described from time to time in the
company's publicly available SEC reports, which could cause actual results to
differ
Page 3
<PAGE> 4
materially. The capital spending budget is subject to revision based upon
results of activities, market conditions, acquisition opportunities and other
factors.
For additional information, contact:
Carol Cox, media John Zimmerman, analysts and investors
713-968-2714 713-968-2740
Page 4
<PAGE> 5
UNION TEXAS PETROLEUM HOLDINGS, INC.
CAPITAL SPENDING1
(Dollars in Millions)
PLANNED 1998 1997
------------ ----
Venezuela
Development $ 79 $ 3
United Kingdom
Exploration 8 6
Britannia Development 24 41
Alba Development 32 18
Other Development 7 11
Indonesia
Exploration 6 6
Development 42 39
Alaska
Exploration 4 5
Development 50 9
Pakistan
Exploration 9 17
Development 30 10
Central Asia
Exploration 1 11
Development 20 -
Other Exploration2 54 52
Petrochemicals 39 29
Corporate 8 5
-------- --------
Total Capital Spending $413(3) $262(4)
1. Includes the company's equity interests in the Unimar partnership and
excludes capitalized interest.
2. Includes China, Algeria, Tunisia and other new ventures.
3. Excludes $ 204.5 million for the acquisition of a 100% working interest in
the DZO operating service contract in Venezuela.
4. Excludes $117 million for the acquisition of a 66.67% working interest in
the Boqueron operating service contract in Venezuela.
# # #
Page 5
