<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/A
Under the Securities Exchange Act of 1934
(Amendment No. 3)
ENRON OIL & GAS COMPANY
-----------------------
(Name of Issuer)
COMMON STOCK, PAR VALUE $.01 PER SHARE
--------------------------------------
(Title of Class of Securities)
293562 10 4
--------------
(CUSIP Number)
Rex R. Rogers
Vice President and Associate General Counsel
Enron Corp.
1400 Smith Street
Houston, TX 77002
(713) 853-3069
-------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
July 20, 1999
-----------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Section 240.13d-1(e), Section 240.13d-1(f) or Section
240.13d-1(g), check the following box: [ ]
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7 for other parties
to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE> 2
SCHEDULE 13D/A
CUSIP NO. 293562 10 4 Page 2 of 6 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Enron Corp.
I.R.S. No. 47-0255140
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
N/A
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
BK, WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Oregon
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 82,270,000**
-------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 0
-------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 82,270,000**
-------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
WITH 0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
82,270,000 shares of common stock.
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
N/A
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
53.5%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
- ---------------------
**Subject to contractual restrictions on Enron's right to vote or dispose of the
shares reported, which restrictions are described in this Amendment No. 3 to
Schedule 13D.
<PAGE> 3
AMENDMENT NO. 3 TO
STATEMENT ON SCHEDULE 13D
Reference is made to the Statement on Schedule 13D (the "Statement")
filed by Enron Corp. ("Enron") with respect to its beneficial ownership of the
common stock, par value $.01 per share ("Common Stock"), of Enron Oil & Gas
Company (the "Issuer"). The following items of the Statement are amended in the
manner set forth below. Capitalized terms used but not defined herein shall have
the respective meanings set forth in the Statement.
Item 4. Purpose of Transaction.
Until the consummation of the IPO, Enron owned 99.4% of the Common
Stock of the Issuer. Pursuant to the IPO, the Issuer sold 23,000,000 shares
(after giving effect to the Issuer's June 1994 2-for-1 stock split effected as a
stock dividend). Subsequent to the completion of the IPO, the Issuer has
remained a majority-owned subsidiary of Enron, and its assets, liabilities and
results of operations are included in the consolidated financial statements of
Enron and its consolidated subsidiaries.
The Board of Directors of the Issuer consists of eleven directors. Of
these directors, five serve as executive officers of Enron:
Name Position with Enron
-------------------- -----------------------------------------
Kenneth L. Lay Director, Chairman of the Board and
Chief Executive Officer
Jeffrey K. Skilling Director, President and Chief
Operating Officer
Ken L. Harrison Director, Vice Chairman
James V. Derrick Executive Vice President and
General Counsel
Richard A. Causey Executive Vice President and Chief
Accounting, Information and
Administrative Officer
In addition, John H. Duncan, who serves as a non-employee director of
Enron and as Chairman of the Executive Committee of Enron's Board of Directors,
also serves as a director of the Issuer.
Page 3 of 6
<PAGE> 4
Enron reviews and analyzes on a continuing basis its investments in
each of its subsidiaries and other operations, including the Issuer, in order to
determine whether shareholder value for Enron's shareholders is better served by
holding those investments, disposing of or monetizing those investments or
recapitalizing or otherwise restructuring those investments. These reviews and
analyses are based upon a variety of factors, including, without limitation, the
price of, and other market conditions relating to, the Common Stock, subsequent
developments affecting the Issuer, the Issuer's business and prospects, other
investment and business opportunities available to Enron, general stock market
and economic conditions and other factors deemed relevant.
As a result of Enron's review and analysis of its investment in the
Issuer, Enron has entered into a Share Exchange Agreement, dated July 19, 1999,
by and between Enron and the Issuer(the "Exchange Agreement"), which is filed as
Exhibit D hereto. The following summary of the Exchange Agreement is qualified
by reference to the Exchange Agreement.
Under the Exchange Agreement, Enron has agreed to exchange 62,270,000
shares of the Common Stock for the stock of EOGI-India, Inc., which is a wholly
owned subsidiary of the Issuer and which will own all of the Issuer's China and
India operations at the time of closing (the "Exchange"). In connection with the
Exchange, the Issuer will contribute $600 million in cash to one of the Issuer's
India subsidiaries that will be transferred to Enron. These funds will be used
in connection with international operations. After the Exchange, Enron will own
20,000,000 shares of Common Stock (the "Retained Shares"), representing
approximately 21.9% of the shares of Common Stock outstanding after giving
effect to the Exchange. Subject to the restrictions on sale contained in the
Exchange Agreement described below, Enron intends to sell the Retained Shares
as soon as it is practicable; provided, however, that the timing of any such
sales will be subject to a variety of factors, including, without limitation,
the price of, and other market conditions relating to, the Common Stock,
general stock market and economic conditions, and other factors deemed relevant.
Consummation of the Exchange is subject to customary closing
conditions, including the accuracy of the representations and warranties of each
of the parties at closing, the performance of each party's covenants and
agreements under the Exchange Agreement and the receipt of opinions of counsel
to Enron and the Issuer as to the tax free nature of the Exchange. In addition,
the closing of the Exchange is conditioned on the resignation of Messrs. Lay,
Skilling, Derrick, Harrison, Causey and Duncan as directors of the Issuer.
Under the Exchange Agreement, each party has made certain
representations and warranties, with each party agreeing to indemnify the other
party for breaches of such party's representations and warranties.
Under the Exchange Agreement, Enron has agreed, commencing on July 19,
1999 and ending on the date that is six months after the closing of the Exchange
(the "Lock-Up Expiration Date"), not to, directly or indirectly, sell, transfer,
pledge or otherwise dispose of (including without limitation by issuing any debt
or equity securities exercisable or exchangeable for, or convertible into) any
Retained Shares to any person other than a wholly owned subsidiary of Enron.
However, in the event that the Issuer engages in a public offering of its equity
securities prior to the Lock-Up Expiration Date, Enron will be entitled (subject
to certain limitations contained in a Stock Restriction and Registration Rights
Agreement between Enron and the Issuer) to sell in the public offering (a) debt
or equity securities of Enron ("Convertible Securities") that are mandatorily
Page 4 of 6
<PAGE> 5
exchangeable for or mandatorily convertible into up to 10,000,000 Retained
Shares less any shares sold pursuant to clause (b) below and (b) with the prior
written consent of the Issuer, up to 10,000,000 Retained Shares less the number
of Retained Shares underlying Convertible Securities sold pursuant to clause (a)
above. In the event that Enron is entitled to sell its Retained Shares as
described above, Enron is required to sell such Retained Shares (a) in a public
offering registered under the Securities Act, (b) pursuant to Rule 144
promulgated under the Securities Act, (c) to a wholly owned subsidiary of Enron,
which would then be bound by these restrictions, (d) pursuant to any merger
approved by the Issuer's board of directors or (e) any tender offer or exchange
offer recommended by the Issuer's board of directors.
In addition, under the Exchange Agreement, Enron has agreed that,
commencing on July 19, 1999 and ending on the later of (a) the second
anniversary of the closing of the Exchange and (b) the earliest date that Enron
ceases to beneficially own more than 5% of the issued and outstanding shares of
Common Stock (the "Standstill Expiration Date"), unless specifically requested
in advance by the Issuer's board of directors, neither Enron nor any of its
subsidiaries will directly or indirectly (1) acquire, offer to acquire or agree
to acquire, or cause or recommend that any other person acquire, directly or
indirectly, by purchase, gift, through the acquisition or control of another
person or otherwise, any voting securities of the Issuer, (2) make or in any way
participate in, directly or indirectly, any solicitation of proxies to vote or
become a participant in any election contest or seek to advise or influence any
person with respect to the voting of any voting securities of the Issuer, (3)
propose or nominate any nominee for director of the Issuer, (4) submit any
stockholder proposal to be voted upon by the stockholders of the Issuer, (5)
deposit any voting securities in a voting trust or subject any such voting
securities to any arrangement or agreement with respect to the voting of such
securities, (6) propose any business combination involving the Issuer or make or
propose a tender or exchange offer or any other offer for any of the Issuer's
voting securities, or arrange, or participate in the arrangement of, financing
thereof, (7) disclose an intent, purpose, plan or proposal with respect to the
Issuer or its voting securities inconsistent with the provisions of the Exchange
Agreement, (8) after the closing of the Exchange, otherwise act, alone or in
concert with or on behalf of others, to seek directly or indirectly to control
the officers or board of directors of the Issuer (provided that prior to the
closing of the Exchange, Enron will not take any action with respect thereto
that is inconsistent with the Exchange Agreement, its implementation or the
effectuation of the purposes of the Exchange Agreement), or (9) encourage or
assist any other person in connection with any of the foregoing. In addition,
Enron has agreed that, during the period from the date of closing of the
Exchange until the Standstill Expiration Date, at any meeting of the
stockholders of the Issuer with respect to which Enron owns Retained Shares
entitled to vote, Enron will attend such meeting in person or by proxy and will
vote all of its Retained Shares in the manner, if any, recommended by the
Issuer's board of directors.
The Issuer has agreed not to issue or dispose of any shares of its
capital stock (other than pursuant to currently outstanding options under
employee or director stock option plans) prior to the closing of the Exchange
unless, after such issuance or disposition, Enron continues to own at least a
majority of the outstanding shares of Common Stock, on a fully diluted basis
(excluding for this purpose options or other convertible or exchangeable
securities that either will not vest until after December 31, 1999 or that have
an exercise price, conversion price or exchange ratio of $22 per share or more).
Page 5 of 6
<PAGE> 6
Item 7. Material to be Filed as Exhibits.
A. Stock Restriction and Registration Agreement dated as of
August 23, 1989 by and between Enron and the Issuer
(incorporated by reference to Exhibit 10.2 to the Registration
Statement on Form S-1 of the Issuer, Registration Statement
No. 33-30678, filed August 24, 1989.
B. Amendment to Stock Restriction and Registration Agreement
dated December 9, 1997 by and between Enron and the Issuer
(incorporated by reference to Exhibit 10.7 to Annual Report on
Form 10-K of the Issuer for the year ended December 31, 1997).
C. Equity Participation and Business Opportunity Agreement, dated
December 9, 1997, between Enron and the Issuer (incorporated
by reference to Exhibit 10 to the Registration Statement on
Form S-3 of the Issuer, Registration Statement No. 333-44785,
filed January 23, 1998).
D. Share Exchange Agreement dated as of July 19, 1999 by and
between Enron and the Issuer.
After reasonable inquiry and to the best knowledge and belief of the
undersigned, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Date: July 20, 1999 ENRON CORP.
By: /s/ TIMOTHY J. DETMERING
-------------------------------
Timothy J. Detmering
Vice President
Page 6 of 6
<PAGE> 7
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
D Share Exchange Agreement
</TABLE>
<PAGE> 1
EXHIBIT D
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (this "Agreement") is entered into as of
this 19th day of July, 1999 by and between Enron Corp., an Oregon corporation
("Enron"), and Enron Oil & Gas Company, a Delaware corporation ("EOG"). Enron
and EOG are referred to collectively herein as the "Parties" and individually as
a "Party."
RECITALS
WHEREAS, Enron owns 82,270,000 shares of common stock, par value $.01
per share of EOG ("EOG Common Stock"), or approximately 53.5% of the outstanding
EOG Common Stock;
WHEREAS, Enron Oil & Gas International, Inc., a Delaware corporation
and a wholly owned subsidiary of EOG ("EOG International"), owns (a) all of the
issued and outstanding capital stock (the "EOG India Shares") of EOGI-India,
Inc., a Delaware corporation ("EOG India HoldCo"); (b) all of the issued and
outstanding capital stock (the "EOG China Sichuan Shares") of EOGI-China
(Sichuan), Inc., a Delaware corporation ("EOG China Sichuan"), and (c) all of
the issued and outstanding capital stock (the "EOG China Delaware Shares") of
EOGI-China, Inc., a Delaware corporation ("EOG China Delaware");
WHEREAS, EOG India HoldCo owns all of the issued and outstanding
capital stock of Enron Oil & Gas India Ltd., a Cayman Islands corporation ("EOG
India Cayco");
WHEREAS, EOG China Sichuan owns all of the issued and outstanding
capital stock of EOGI China Company, a Cayman Islands corporation ("EOG China
Cayco"), and EOG China Cayco owns all of the issued and outstanding capital
stock of Enron Oil & Gas China Ltd., a Cayman Islands corporation ("EOG China
Limited");
WHEREAS, EOG China Delaware owns all of the issued and outstanding
capital stock of Enron Oil & Gas China International Ltd., a Cayman Islands
corporation ("EOG China International");
WHEREAS, subject to the terms and conditions set forth in this
Agreement, Enron desires to transfer to EOG 62,270,000 of the shares of EOG
Common Stock owned by Enron in exchange for all of the EOG India Shares; and
WHEREAS, this Agreement and the transactions contemplated hereby have
been unanimously approved by the Board of Directors of EOG and unanimously
recommended to the Board of Directors by a committee of the Board of Directors
consisting solely of two directors not employed by, or otherwise having any
relationship with, Enron or EOG other than as directors of EOG (the "Special
Committee");
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained, and other good and
valuable consideration, the receipt of which are hereby acknowledged, the
Parties hereby agree as follows:
ARTICLE 1.
DEFINITIONS
Capitalized terms not otherwise defined herein used in this Agreement
shall have the meanings ascribed to them in this Article 1.
"Acquired Companies" means collectively EOG India HoldCo, EOG China
Sichuan (until the merger contemplated by Section 2.1(a) has been consummated),
EOG China Delaware, EOG India Cayco, EOG China Cayco, EOG China International
and EOG China Limited.
"Affiliate" shall mean with respect to any Person, any Person which,
directly or indirectly, controls, is controlled by, or is under a common control
with, such Person. The term "control" (including the terms "controlled by" and
"under common control with") as used in the preceding sentence means the
possession, directly or indirectly, of the power to direct or cause the
direction of management and policies of a Person, whether through the ownership
of voting securities, by contract, or otherwise. Notwithstanding the foregoing,
unless otherwise expressly stated and except for purposes of the definition of
Unitary Tax, for purposes of this Agreement (a) EOG and its Subsidiaries shall
not be deemed to be Affiliates of Enron, (b) any Person who would be an
Affiliate of EOG solely because such Person is an Affiliate of Enron shall not
be deemed to be an Affiliate of EOG and (c) Enron shall not be deemed to be an
Affiliate of EOG.
"Aircraft Agreements" means collectively (a) the Aircraft Sublease
Agreement, dated as of June 12, 1997, among Wilmington Trust Company, Enron and
EOG, (b) the N5731 Aircraft Subleasing Agreement, dated as of December 23, 1997,
among Wilmington Trust Company, ECT Investing Partners L.P., Enron and EOG and
(c) the N5732 Aircraft Subleasing Agreement, dated as of December 23, 1997,
among Wilmington Trust Company, ECT Investing Partners L.P., Enron and EOG.
"EOG Group" means the affiliated group of corporations of which EOG is
the common parent corporation within the meaning of section 1504(a) of the Code,
and any analogous definition under applicable state Income Tax law of a group of
corporations filing a Tax Return relating to consolidated or combined Tax
liability or a Unitary Tax Return of which EOG is the common parent corporation.
"Business Day" shall mean any day other than a day on which banks in
the State of Texas are authorized or obligated to be closed.
2
<PAGE> 3
"Business Opportunity Agreement" shall mean the Equity Participation
and Business Opportunity Agreement between EOG and Enron dated December 9, 1997,
as amended, as the same may be further amended from time to time.
"Claim" shall mean all demands, claims, actions, investigations,
proceedings and arbitrations, whether or not ultimately determined to be valid.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Enron Benefit Plans" shall mean collectively, each Plan and each other
program, contract, fringe benefit or arrangement providing for bonuses,
remuneration, pensions, deferred compensation, retirement plan payments, profit
sharing, incentive or other pay, hospitalization or medical expenses or
insurance sponsored by Enron for its employees and its participating employer
companies (including EOG and its Subsidiaries) and their employees.
"Enron Group" means the affiliated group of corporations of which Enron
is the common parent corporation within the meaning of section 1504(a) of the
Code, and any analogous definition under applicable state Income Tax law of a
group of corporations filing a Tax Return relating to consolidated or combined
Tax liability or a Unitary Tax Return of which Enron is the common parent
corporation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated and rulings issued thereunder.
"Fully Diluted EOG Shares" means, on any given date, the shares of EOG
Common Stock issued and outstanding on such date, together with the shares of
EOG Common Stock issuable by EOG upon the exercise, conversion or exchange of
any outstanding stock options, warrants, agreements, securities, rights or other
instruments, but only to the extent that any of the foregoing are exercisable or
will be exercisable on or prior to December 31, 1999, and only to the extent
that any of the foregoing have an exercise price, conversion price or exchange
ratio of less than $22.00 per share.
"Governmental Authority" or "Governmental Authorities" shall mean the
United States and any foreign, state, county, city or other political
subdivision, agency, court or instrumentality.
"Income Tax" means any Tax based on or measured by net income.
"knowledge" means, with respect to any Party, the actual knowledge of
any executive officer of such Person.
"Laws" shall mean any constitution, statute, code, regulation, rule,
injunction, judgment, order, decree or ruling of any applicable Governmental
Authority.
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<PAGE> 4
"Lock-up Expiration Date" shall mean the date that is six months after
the Closing Date.
"Loss" or "Losses" shall mean all debts, liabilities, losses,
penalties, fines, assessments, settlements, judgments, costs (including, but not
limited to, remediation costs) and expenses (including, without limitation,
involving theories of negligence or strict liability and including court costs
and attorneys' fees), other than Taxes.
"Material Adverse Effect" shall mean, with respect to any given Person,
any event, circumstance, condition, development or occurrence causing, resulting
in or having an adverse effect on the financial condition, business, assets or
properties that is material to such Person and its Subsidiaries, taken as a
whole; provided, that such term shall not include effects that result from
market conditions generally in the oil and gas industry.
"Oil and Gas Interests" shall mean (a) direct and indirect interests in
and rights with respect to oil, gas, mineral, and related properties and assets
of any kind and nature, direct or indirect, including working, leasehold and
mineral interests and operating rights and royalties, overriding royalties,
production payments, net profit interests and other nonworking interests and
nonoperating interests; (b) all interests in rights with respect to hydrocarbons
and other minerals or revenues therefrom, all contracts in connection therewith
and claims and rights thereto (including all oil and gas leases, operating
agreements, unitization and pooling agreements and orders, division orders,
transfer orders, mineral deeds, royalty deeds, oil and gas sales, exchange and
processing contracts and agreements, and in each case, interests thereunder);
(c) surface interests, fee interests, reversionary interests, reservations, and
concessions related to the foregoing; (d) all easements, rights of way,
licenses, permits, leases, and other interests associated with, appurtenant to,
or necessary for the operation of any of the foregoing; and (e) all interests in
equipment and machinery (including wells, well equipment and machinery), oil and
gas production, gathering, transmission, treating, processing, and storage
facilities (including tanks, tank batteries, pipelines, and gathering systems),
pumps, water plants, electric plants, gasoline and gas processing plants,
refineries, and other tangible personal property and fixtures associated with,
appurtenant to, or necessary for the operation of any of the foregoing.
"Pension Plan" shall mean any "employee pension benefit plan" as such
term is defined in Section 3(2) of ERISA that is maintained or sponsored by
Enron.
"Plan" shall mean any "employee benefit plan" as such term is defined
in Section 3(3) of ERISA, including without limitation any Pension Plan.
"Person" shall mean any natural person, firm, partnership, association,
corporation, limited liability company, trust, entity, public body or
government.
"Pre-Closing Period" means any taxable period ending on or before the
Closing Date.
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<PAGE> 5
"Reasonable Efforts" shall mean a party's efforts in accordance with
reasonable commercial practices and without the payment of any money to any
third party except the incurrence of reasonable expenses that are insignificant
in amount.
"Registration Rights Agreement" means the Stock Restriction and
Registration Rights Agreement dated as of August 23, 1989 between Enron and EOG,
as amended.
"Retained Shares" shall mean any of the shares of EOG Common Stock
beneficially owned (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934, as amended) by Enron other than the Exchanged Shares (or shares that
will become the Exchanged Shares).
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Standstill Expiration Date" shall mean the later of (a) the second
anniversary of the Closing Date and (b) the earliest date that Enron ceases to
beneficially own more than 5% of the issued and outstanding shares of EOG Common
Stock.
"Straddle Period" means any taxable period beginning on or before and
ending after the Closing Date.
"Subsidiary" or "Subsidiaries" of a specified Person shall mean any
corporation, partnership, limited liability company, joint venture or other
legal entity of which the specified Person (either alone and/or through and/or
together with any other Subsidiary) owns, directly or indirectly, 50% or more of
the stock or other equity or partnership interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity or of which the
specified Person controls the management. Notwithstanding the foregoing, unless
otherwise expressly stated for purposes of this Agreement, EOG and its
Subsidiaries shall not be deemed to be Subsidiaries of Enron.
"Tax" or "Taxes" means any and all federal, state, local, foreign or
(American) Indian nation taxes, duties, levies, imposts, or withholdings of any
nature whatsoever (including, without limitation, income, franchise, gross
receipts, sales, rental, use, turnover, value added, property (tangible and
intangible), windfall profit, goods and services, excise and stamp taxes),
together with any and all assessments, penalties, fines, additions and interest
relating thereto.
"Termination Date" shall mean November 1, 1999.
"Third Party Claim" shall mean a Claim asserted against an Indemnified
Party by a Person other than a party to this Agreement or any Affiliate thereof
that could give rise to a right of indemnification under this Agreement, other
than a Claim for or related to Taxes.
"Unitary Tax" means a state Income Tax that reflects the combined
and/or consolidated tax reporting (either on a domestic or worldwide basis) of a
corporation and its Affiliates and that is
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<PAGE> 6
imposed by that state either (i) on its apportioned and/or allocable share of
the net income of a taxpayer and its United States Affiliates that are engaged
in a unitary business, part of which is conducted in the state or (ii) on its
apportioned and/or allocable share of the net income of a taxpayer and its
Affiliates, both domestic and foreign, that are engaged in a unitary business. A
"unitary business" is a group of affiliated corporations that (i) exhibits
common ownership, centralized management, functional integration, and/or
economies of scale, or (ii) is doing business in the state and included in a
consolidated federal Income Tax return.
"Unitary Tax Return" shall have the meaning given such term in Article
10.
ARTICLE 2.
THE TRANSACTIONS
2.1 Contributions. Subject to the terms and conditions set forth in
this Agreement, prior to the consummation of the Share Exchange the following
transactions shall be consummated:
(a) EOG shall cause EOG China Sichuan to be merged into EOG
International;
(b) EOG may, in its discretion, cause EOG International to be
merged into EOG (any such merger into EOG, the "EOG International
Merger") or into a limited liability company (provided that such
limited liability company is disregarded as an entity separate from EOG
for Income Tax purposes) wholly owned by EOG, provided that if EOG
International is merged into such a limited liability company, then
references in this Agreement to EOG International shall refer to such
limited liability company after such merger occurs and to EOG
International prior to such merger;
(c) EOG shall cause EOG International to contribute (or, if
the EOG International Merger occurs pursuant to Section 2.1(b), EOG
shall contribute) the shares of EOG China Cayco to EOG India HoldCo;
(d) EOG shall cause EOG India HoldCo to contribute the shares
of EOG China Cayco to EOG India Cayco. Effective the day after such
contribution (but prior to the day of the Share Exchange) EOG shall
cause EOG China Cayco to elect to be disregarded as an entity separate
from its owner pursuant to Treas. Reg. Section 301.7701-3;
(e) EOG shall contribute to EOG International, shall cause EOG
International to contribute to EOG India HoldCo simultaneously with the
receipt of such amount from EOG, and shall cause EOG India HoldCo to
contribute to EOG India Cayco simultaneously with the receipt of such
amount from EOG International, $600 million in cash (the "Contributed
Amount"); provided, however, that if the EOG International Merger
occurs pursuant to Section 2.1(b), EOG shall contribute the Contributed
Amount directly to EOG India HoldCo;
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(f) EOG shall cause EOG International to contribute (or, if
the EOG International Merger occurs pursuant to Section 2.1(b), EOG
shall contribute) to EOG India HoldCo the EOG China Delaware Shares;
(g) EOG shall cause EOG International to contribute (or, if
the EOG International Merger occurs pursuant to Section 2.1(b), EOG
shall contribute) to EOG India HoldCo, and shall cause EOG India HoldCo
to contribute to EOG India Cayco simultaneously with the receipt of
same from EOG International (or EOG), the balance as of the Closing
Date of all receivables from EOG India Cayco;
(h) EOG shall cause EOG International to contribute (or, if
the EOG International Merger occurs pursuant to Section 2.1(b), EOG
shall contribute) to EOG India HoldCo, and shall cause EOG India HoldCo
to contribute to EOG India Cayco simultaneously with the receipt of
such amount from EOG International (or EOG), an amount of cash
sufficient to allow EOG India Cayco to discharge all of its payables
(including accrued interest) to Wilsyx International Finance B.V. as of
the Closing Date, which payables shall be so discharged prior to the
consummation of the Share Exchange;
(i) EOG shall cause EOG International to contribute (or, if
the EOG International Merger occurs pursuant to Section 2.1(b), EOG
shall contribute) to EOG India HoldCo, shall cause EOG India HoldCo to
contribute to EOG India Cayco simultaneously with the receipt of same
from EOG International (or EOG), and shall cause EOG India Cayco to
contribute to EOG China Cayco simultaneously with the receipt of same
from EOG India HoldCo, the balance as of the Closing Date of all
receivables from EOG China Cayco; and
(j) EOG shall cause EOG International to contribute (or, if
the EOG International Merger occurs pursuant to Section 2.1(b), EOG
shall contribute) to EOG India HoldCo, shall cause EOG India HoldCo to
contribute to EOG China Delaware simultaneously with the receipt of
same from EOG International (or EOG), and shall cause EOG China
Delaware to contribute to EOG China International simultaneously with
the receipt of same from EOG India HoldCo, the balance as of the
Closing Date of all receivables from EOG China International.
The transactions contemplated by this Section 2.1 of this Agreement (except for
the EOG International Merger pursuant to Section 2.1(b)) shall be collectively
referred to herein as the "Contributions."
2.2 Share Exchange. Subject to the terms and conditions set forth in
this Agreement, (a) prior to the transactions referred to in clauses (b) and (c)
of this Section 2.2, EOG International shall distribute to EOG all of the EOG
India Shares (unless EOG International is merged into EOG pursuant to Section
2.1(b)); (b) Enron shall transfer and assign to EOG an aggregate of 62,270,000
shares of EOG Common Stock owned by Enron (the "Exchanged Shares") and (c) in
exchange therefor EOG shall transfer and assign to Enron all of the EOG India
Shares. The transactions
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contemplated by this Section 2.2 of this Agreement shall be collectively
referred to herein as the "Share Exchange."
2.3 Closing. The closing of the transactions contemplated by Section
2.2 of this Agreement (the "Closing") shall take place at the offices of Vinson
& Elkins L.L.P., 2300 First City Tower, 1001 Fannin, Houston, Texas 77002 at
9:30 a.m., Houston time, on the later of August 31, 1999 and the third Business
Day following the satisfaction or waiver of the conditions set forth in Article
8 (other than the deliveries contemplated to occur at Closing), or at such other
time as Enron and EOG shall agree in writing; provided, however, that if all of
the conditions set forth in Article 8 (other than the deliveries contemplated to
occur at Closing) have been satisfied or waived prior to August 31, 1999, EOG
shall have the right, but not the obligation, to cause the Closing to occur on a
Business Day after such waiver or satisfaction and prior to August 31, 1999 by
giving at least three Business Days notice to Enron of the rescheduled date of
Closing. The date upon which the Closing occurs shall be referred to herein as
the "Closing Date."
2.4 Deliveries at or Prior to the Closing.
(a) At or prior to the Closing, EOG will, or will (if applicable) cause
EOG International to, deliver to Enron:
(i) written evidence reasonably satisfactory to Enron of the
consummation of the Contributions as contemplated by Section 2.1 of
this Agreement;
(ii) the certificate required to be delivered by EOG pursuant
to Section 8.2(d) of this Agreement; and
(iii) stock certificates representing all of the EOG India
Shares endorsed in blank or accompanied by duly executed assignment
documents.
(b) At or prior to the Closing, Enron will deliver to EOG:
(i) the certificate required to be delivered by Enron pursuant
to Section 8.3(c) of this Agreement;
(ii) stock certificates representing all of the Exchanged
Shares endorsed in blank or accompanied by duly executed assignment
documents; and
(iii) written evidence reasonably satisfactory to EOG of the
resignation, effective upon the Closing, as a director of EOG of each
of the following individuals: Kenneth L. Lay, Jeffrey K. Skilling;
James V. Derrick, Jr.; Ken L. Harrison; Richard A. Causey; and John H.
Duncan (or any successors thereto or additional directors appointed
without the concurrence of the Special Committee) (collectively, the
"Resigning Directors").
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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF ENRON
Enron hereby represents and warrants to EOG as follows, subject to the
matters set forth in the disclosure schedule delivered by Enron to EOG on the
date hereof (the "Enron Disclosure Schedule") and, provided that the disclosures
made on any section of the Enron Disclosure Schedule with respect to any
representation or warranty shall be deemed to be made with respect to any other
representation or warranty requiring the same or similar disclosure to the
extent that the relevance of such disclosure to other representations and
warranties is evident from the face of the applicable section of the Enron
Disclosure Schedule:
3.1 Organization. Enron is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Oregon, with full
corporate power, right and authority to own and lease the properties and assets
it currently owns and leases and to carry on its business as such business is
currently being conducted.
3.2 Qualification. Enron is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of
the business as now conducted or the character of the property owned or leased
by it makes such qualification necessary, except where the failure to be so
qualified or in good standing would not or would not reasonably be expected to,
have a Material Adverse Effect on Enron.
3.3 Authorization of this Agreement; No Violation. This Agreement has
been duly executed and delivered by Enron. Enron has the full corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Enron of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all requisite corporate action on the part of
Enron. Except as disclosed in Section 3.3 of the Enron Disclosure Schedule,
neither the execution and delivery by Enron of this Agreement nor the
consummation by Enron of the transactions contemplated hereby will conflict
with, result in a breach, default or violation of, or require the consent of any
third party under,
(a) the terms, provisions or conditions of the certificate of
incorporation or bylaws of Enron;
(b) any judgment, decree or order or any Law to which Enron is
a party or is subject that would, or would reasonably be expected to,
have a Material Adverse Effect on Enron; or
(c) any material contract, agreement, lease, license or other
arrangement to which Enron or one of its Subsidiaries is a party or by
which it or one of its Subsidiaries, or any of
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their respective properties, is bound that would, or would reasonably
be expected to, have a Material Adverse Effect on Enron.
3.4 Governmental Consents. Except as disclosed in Section 3.4 of the
Enron Disclosure Schedule, no consent, action, approval or authorization of, or
registration, declaration or filing with, any Governmental Authority is required
to authorize, or is otherwise required in connection with, the execution and
delivery by Enron of this Agreement or Enron's performance of the terms of this
Agreement or the validity or enforceability hereof against Enron.
3.5 Enforceability. This Agreement constitutes the legal, valid and
binding obligation of Enron enforceable against Enron in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and other Laws affecting creditors' rights generally and general principles of
equity.
3.6 Ownership of Exchanged Shares. Enron is the record and beneficial
owner of all of the Exchanged Shares, free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act and state
securities Laws), claims, liens for taxes, security interests, options,
warrants, rights, contracts, calls, commitments, equities and demands. Enron has
the sole right to vote the Exchanged Shares. None of the Exchanged Shares is
subject to any voting trust or other agreement, arrangement or restriction with
respect to the voting of the Exchanged Shares, and no proxy, power of attorney
or other authorization has been granted with respect to any of the Exchanged
Shares. Other than as set forth in this Agreement, neither Enron nor any of its
Subsidiaries is a party to any contracts, agreements, commitments or other
arrangements, including any options, warrants or other rights, obligating Enron
or any of its Subsidiaries to sell, dispose of or encumber any of the Exchanged
Shares.
3.7 Brokers' Fees. Except for Credit Suisse First Boston Corporation,
Enron has no liability or obligation to pay any fees or commissions to any
broker or finder with respect to the transactions contemplated by this
Agreement. Enron shall be solely responsible for all fees payable to any broker
or finder engaged on behalf of Enron with respect to the transactions
contemplated by this Agreement.
3.8 Investment. Enron is not acquiring the EOG India Shares with a view
to or for sale in connection with any distribution thereof within the meaning of
the Securities Act. Enron, together with its directors and executive officers
and advisors, is familiar with investments of the nature of the EOG India
Shares, understands that this investment involves substantial risks, has
adequately investigated the Acquired Companies and has substantial knowledge and
experience in financial and business matters such that it is capable of
evaluating, and has evaluated, the merits and risks inherent in acquiring the
EOG India Shares, and is able to bear the economic risks of such investment.
3.9 Litigation. Except as disclosed in Enron's Annual Report on Form
10-K for the year ended December 31, 1998 or Enron's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999, as of the date hereof, there are no
actions, suits, proceedings or governmental
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investigations or inquiries pending, or to the knowledge of Enron, threatened,
against Enron, its Subsidiaries or any of their respective properties, assets,
operations or businesses that would, or would reasonably be expected to, have a
Material Adverse Effect on Enron.
3.10 Tax Representations and Warranties.
(a) Immediately after the Share Exchange, EOG India HoldCo
will be engaged in the active conduct of a trade or business within the
meaning of section 355(b)(1)(A) (without regard to section
355(b)(2)(B)) of the Code.
(b) Following the Share Exchange, EOG India Cayco will
continue, independently of EOG and EOG International and with its
separate employees, the active conduct of the business conducted by EOG
India Cayco prior to the Share Exchange.
(c) Enron has no plan or intention to sell, exchange, transfer
by gift, or otherwise dispose of any stock in, or securities of, any of
the Acquired Companies following the Share Exchange.
(d) There is no plan or intention by any of the Acquired
Companies to redeem or otherwise acquire any of its outstanding stock
following the Share Exchange.
(e) There is no plan or intention to sell or otherwise dispose
of the assets of any of the Acquired Companies following the Share
Exchange, except in the ordinary course of business.
(f) Following the Share Exchange, EOG India Cayco will use the
Contributed Amount for expansion of its existing business and to make
debt and equity investments in related and unrelated parties for use in
operations outside the United States.
(g) It is Enron's intention to sell the Retained Shares in the
manner permitted by Section 6.2(c) as soon as is reasonably practical
and consistent with market conditions.
(h) Enron has no plan or intention to violate, or take any
action inconsistent with, any of its covenants in Section 6.1 or 6.3 of
this Agreement.
(i) Enron has owned, either directly or through a wholly owned
subsidiary of Enron, the Exchanged Shares and the Retained Shares
during the entire period beginning on October 9, 1990 and ending on the
Closing Date. During such period, Enron has not acquired any of the
Exchanged Shares or the Retained Shares by purchase (within the meaning
of section 355(d) of the Code).
(j) To the knowledge of Enron, no disposition by Enron or any
Affiliate of Enron of EOG Common Stock during the five-year period
preceding the Closing Date was made
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to one or more Persons acting pursuant to a plan or arrangement of such
Person or Persons to acquire at least 50% of the outstanding shares of
EOG Common Stock.
(k) The dispositions by Enron of EOG Common Stock in March
1996, May 1996, June 1996, August 1996, September 1996 and November
1996 were made on the open market in broker transactions. The
dispositions by Enron of EOG Common Stock in December 1995 were made in
a public offering through underwriters.
(l) Enron has no knowledge of any plan or intention of any
Person (or Persons acting in concert) to acquire at least 5% of the
outstanding shares of EOG Common Stock after the date hereof; provided,
however, that the Parties acknowledge and agree that any proposals or
indications of interest received by or on behalf of, or discussions or
negotiations with, Enron or EOG prior to the date hereof shall not be
deemed to constitute any such plan or intention if such proposals,
indications of interest, discussions or negotiations would violate the
provisions of, or be inconsistent with the transactions contemplated
by, this Agreement.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF EOG
EOG hereby represents and warrants to Enron as follows, subject to the
matters set forth in the disclosure schedule delivered by EOG to Enron on the
date hereof (the "EOG Disclosure Schedule"), and, provided that the disclosures
made on any section of the EOG Disclosure Schedule with respect to any
representation or warranty shall be deemed to be made with respect to any other
representation or warranty requiring the same or similar disclosure to the
extent that the relevance of such disclosure to other representations and
warranties is evident from the face of the applicable section of the EOG
Disclosure Schedule:
4.1 Organization. Each of EOG and (until the EOG International Merger
occurs, if it occurs) EOG International is a corporation (or, in the case of EOG
International, if it is merged into a limited liability company pursuant to
Section 2.1(b), a limited liability company) duly organized, validly existing
and in good standing under the Laws of the State of Delaware, with full
corporate power, right and authority to own and lease the properties and assets
it currently owns and leases and to carry on its business as such business is
currently being conducted. Each of the Acquired Companies is duly organized,
validly existing and (to the extent the concept is recognized in the applicable
jurisdiction) in good standing under the Laws of its respective jurisdiction of
incorporation, with full company power, right and authority to own and lease the
properties and assets it currently owns and leases and to carry on its business
as such business is currently being conducted.
4.2 Qualification. Each of EOG, (until the EOG International Merger
occurs, if it occurs) EOG International, and each of the Acquired Companies is
duly qualified to do business as a foreign
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corporation and is in good standing in each jurisdiction in which the nature of
the business as now conducted or the character of the property owned or leased
by it makes such qualification necessary (in each case to the extent such
concept is recognized in the applicable jurisdiction), except where the failure
to be so qualified or in good standing would not, or would not reasonably be
expected to, have a Material Adverse Effect on the Acquired Companies, taken as
a whole, or EOG.
4.3 Authorization of Agreement; No Violation. This Agreement has been
duly executed and delivered by EOG. EOG has the full corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by EOG of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all requisite corporate action on the part of
EOG. Without limiting the generality of the foregoing, this Agreement and the
transactions contemplated hereby have been unanimously approved by the Board of
Directors of EOG and have been unanimously recommended to the Board of Directors
by the Special Committee. Except as disclosed in Section 4.3 of the EOG
Disclosure Schedule, neither the execution and delivery by EOG of this Agreement
nor the consummation by EOG of the transactions contemplated hereby will
conflict with, result in a breach, default or violation of, or require the
consent of any third party under,
(a) the terms, provisions or conditions of the certificate of
incorporation or bylaws or other organizational documents of EOG or any
of its Subsidiaries;
(b) any judgment, decree or order or any Law to which EOG or
any of its Subsidiaries is a party or is subject that would, or would
reasonably be expected to, have a Material Adverse Effect on the
Acquired Companies, taken as a whole, or EOG; or
(c) any material contract, agreement, lease, license or other
arrangement to which EOG or one of its Subsidiaries is a party or by
which it or one of its Subsidiaries, or any of their respective
properties, is bound that would, or would reasonably be expected to,
have a Material Adverse Effect on EOG or the Acquired Companies, taken
as a whole.
4.4 Governmental Consents. Except as disclosed in Section 4.4 of the
EOG Disclosure Schedule, no consent, action, approval or authorization of, or
registration, declaration or filing with, any Governmental Authority is required
to authorize, or is otherwise required in connection with, the execution and
delivery by EOG of this Agreement or EOG's performance of the terms of this
Agreement or the validity or enforceability hereof against EOG.
4.5 Enforceability. This Agreement constitutes the legal, valid and
binding obligation of EOG enforceable against EOG in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other Laws affecting creditors' rights generally and general principles of
equity.
4.6 Ownership of EOG India Shares. EOG International (or, if the EOG
International Merger occurs, then EOG) is the record and beneficial owner of all
of the EOG India Shares free and
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clear of any restrictions on transfer (other than any restrictions under the
Securities Act and state securities Laws), claims, liens for taxes, security
interests, options, warrants, rights, contracts, calls, commitments, equities
and demands. There are no outstanding shares of any class of capital stock of
EOG India HoldCo (other than the EOG India Shares) or any securities convertible
into or exercisable or exchangeable for any class of capital stock of EOG India
HoldCo. EOG International (or, if the EOG International Merger occurs, then EOG)
has the sole right to vote all of the EOG India Shares. None of the EOG India
Shares is subject to any voting trust or other agreement, arrangement or
restriction with respect to the voting of such shares, and no proxy, power of
attorney or other authorization has been granted with respect to any of such
shares. Other than as set forth in this Agreement, there are no contracts,
agreements, commitments or other arrangements, including any options, warrants
or other rights, obligating EOG, EOG India HoldCo or any other Person to issue,
sell, dispose of or encumber any shares of any class of EOG India HoldCo capital
stock.
4.7 Brokers' Fees. Except for Goldman, Sachs & Co., Banc of America
Securities LLC, and J. P. Morgan Securities Inc., neither EOG nor any of its
Subsidiaries has any liability or obligation to pay any fees or commissions to
any broker or finder with respect to the transactions contemplated by this
Agreement. EOG shall be solely responsible for all fees payable to any broker or
finder engaged on behalf of EOG or any board committee thereof with respect to
the transactions contemplated by this Agreement.
4.8 Litigation. Except as set forth in Section 4.8 of the EOG
Disclosure Schedule or in EOG's Annual Report on Form 10-K for the year ended
December 31, 1998 or EOG's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999, as of the date hereof, there are no actions, suits, proceedings
or governmental investigations or inquiries pending, or to the knowledge of EOG,
threatened, against EOG, its Subsidiaries or any of their respective properties,
assets, operations or businesses that would, or would reasonably be expected to,
have a Material Adverse Effect on the Acquired Companies, taken as a whole, or
EOG.
4.9 Tax Representations and Warranties.
(a) EOG has owned all of the outstanding stock of EOG
International, and EOG International has (or, if the EOG International
Merger occurs, then EOG International and EOG, collectively, have)
owned all of the EOG India Shares, during the entire five-year period
ending on the date of the Share Exchange.
(b) Immediately after the Share Exchange, EOG will be engaged
in the active conduct of a trade or business within the meaning of
section 355(b)(2) of the Code, and such trade or business has been
actively conducted throughout the five-year period ending on the date
of the Share Exchange.
(c) Following the Share Exchange, EOG will continue,
independently of the Acquired Companies and with its separate
employees, the active conduct of the business conducted by EOG prior to
the Share Exchange.
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(d) EOG intends to complete on the Closing Date or within one
year after the Closing Date a stock offering of at least 10,000,000
shares of EOG Common Stock the proceeds of which will be used to fund
operations, capital expenditures, acquisitions, the retirement of
indebtedness, or other business needs, unless market conditions change
materially and adversely with respect to completion of such stock
offering on or after the Closing Date.
(e) To their knowledge, the management of EOG is not aware of
any plan or intention on the part of any particular shareholder or
security holder of EOG (other than Enron) to sell, exchange, transfer
by gift, or otherwise dispose of any stock in, or securities of, EOG
following the Share Exchange, other than through public market trading.
(f) There is no plan or intention by EOG, directly or through
any Subsidiary, to purchase any of its outstanding stock following the
Share Exchange.
(g) EOG has no plan or intention to sell or otherwise dispose
of the assets of EOG after the Share Exchange, except in the ordinary
course of business and except for sales or dispositions of assets that
EOG believes do not have significant value.
(h) None of EOG, EOG International and EOG India HoldCo is an
investment company as defined in section 368(a)(2)(F)(iii) and (iv) of
the Code.
(i) Neither EOG nor EOG International will own any equity
interest in EOG India HoldCo following the Share Exchange.
(j) As of the time immediately prior to the Share Exchange,
EOG India HoldCo has never had any Texas gross receipts for Texas
franchise tax purposes.
4.10. Financing Commitment. EOG has obtained a commitment (the
"Financing Commitment") from Bank of America, N.A. to finance the Contributed
Amount as well as any fees or expenses required to be paid by EOG in connection
with the transactions contemplated by this Agreement. A true and correct copy of
the Financing Commitment has been provided to Enron.
ARTICLE 5.
COVENANTS OF ENRON AND EOG
5.1 Reasonable Efforts; Consents. Each of the Parties shall use its
Reasonable Efforts to obtain the satisfaction of all conditions to the Closing
attributable to such Party in an expeditious manner. Each of the Parties will
use its Reasonable Efforts to obtain the authorizations, consents, orders and
approvals of Governmental Authorities and any other third parties that may be or
become necessary or advisable for the performance of its obligations pursuant to
this Agreement and the consummation of the transactions contemplated hereby and
will cooperate in all reasonable respects
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with each other in promptly seeking to obtain such authorizations, consents,
orders and approvals as may be necessary or advisable for the performance of
their respective obligations pursuant to this Agreement. In addition, each Party
shall make all filings required to be made by such party in connection with this
Agreement or necessary or desirable to achieve the purposes contemplated hereby,
and shall cooperate as needed with respect to any such filing by the other
Party. Except as required by Law, none of the Parties will take any action that
is reasonably likely to have the effect of delaying, impairing or impeding in
any material respect the receipt of any required approvals and each of the
Parties will use its Reasonable Efforts to secure such approvals as promptly as
possible.
5.2 Delivery and Retention of Records.
(a) On the Closing Date, EOG shall deliver or cause to be
delivered to Enron all material agreements, documents, books, records
and files (collectively, "Acquired Companies Records"), if any, in the
possession of EOG or any of its Subsidiaries relating to the business
and operations of the Acquired Companies to the extent not then in the
possession of the Acquired Companies, subject to the following
exceptions: (i) Enron recognizes that certain Acquired Companies
Records may contain incidental information relating to the Acquired
Companies or may relate primarily to Subsidiaries or divisions of EOG
other than the Acquired Companies, and that EOG may retain such
Acquired Companies Records and shall provide copies of the relevant
portions thereof to Enron at EOG's cost and (ii) EOG may retain any tax
returns and reports, forms or workpapers relating thereto, and Enron
shall be provided with copies of such returns, reports, forms or
workpapers, only to the extent that they relate to the Acquired
Companies' separate returns or separate tax liability.
(b) Enron agrees (i) to hold the Acquired Companies Records
and not to destroy or dispose of any thereof for a period of six years
from the Closing Date or such longer time as may be required by Law,
provided that, if it desires to destroy or dispose of such Acquired
Companies Records during such period, it will first offer in writing at
least 90 days prior to such destruction or disposition to surrender
them to EOG and if EOG does not accept such offer within 60 days after
receipt of such offer, Enron may take such action and (ii) following
the Closing Date to afford EOG and its accountants and counsel, during
normal business hours, upon reasonable request, at any time, full
access to the Acquired Companies Records and to Enron's and the
Acquired Companies' employees to the extent that such access may be
requested for any legitimate purpose at no cost to EOG (other than for
reasonable out-of-pocket expenses), provided, however, that such access
will not operate to cause the waiver of any attorney-client, work
product or like privilege; provided further, that in the event of any
litigation nothing herein shall limit either party's rights of
discovery under applicable Law. Notwithstanding the foregoing, Enron
shall be entitled to convey all or any portion of the Acquired
Companies Records in connection with the sale, if any, of all or any
portion of the capital stock, business or assets of the Acquired
Companies to the purchaser of such capital stock, business or assets of
any of the Acquired Companies; provided, that the purchaser of such
capital stock, business or assets agrees to be bound by the terms of
this
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Section 5.2(b). Enron shall have the same rights, and EOG the same
obligations, as are set forth above in this Section 5.2(b) with respect
to any copies of Acquired Companies Records pertaining to any of the
Acquired Companies that are retained by EOG, with the exception of tax
returns retained by EOG, provided that such access will not operate to
cause the waiver of any attorney-client, work product, or like
privilege.
5.3 Notice of Certain Events. Each Party will notify the other Party
of:
(a) any notice from any Person alleging that the consent of
such Person is or may be required in connection with the transactions
contemplated by this Agreement;
(b) any notice from any Governmental Authority in connection
with the transactions contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or threatened, which, if pending on the date of this
Agreement, would have been required to have been disclosed by it
pursuant to Sections 3.9 or 4.8.
5.4 Corporate Name, Trademarks, Etc. Pursuant to Section 5 of the
Non-Exclusive License Agreement between Enron and EOG dated as of December 9,
1997 (the "License Agreement"), the License Agreement and the non-exclusive
license granted thereunder shall be terminated six months after the Closing Date
in accordance with the terms of the License Agreement. The Parties hereby amend
Section 7 of the License Agreement such that the references therein to "eighteen
months" shall be "twelve (12) months."
5.5 EOG International Guarantee. Enron will use its Reasonable Efforts
to replace as soon as practicable the current guarantees (the "India
Guarantees") by EOG International to the Indian government of EOG India Cayco's
obligations under any applicable production sharing contracts, it being
acknowledged that such replacement will not be a condition to Closing. During
any period that such replacement does not occur, or if such replacement never
occurs, then Enron will indemnify, defend and hold harmless EOG, its Affiliates
and their respective directors, officers, shareholders and employees (each a
"EOG Party" and collectively, the "EOG Parties"), from and against all Claims
(including, without limitation, any Claims for Taxes) and Losses asserted
against, imposed upon, or incurred by any EOG Party, directly or indirectly, by
reason of, arising out of, or resulting from any requirement (or any assertion,
Claim or allegation by or on behalf of any beneficiary of the India Guarantee as
to any requirement) for EOG International (or, if the EOG International Merger
occurs pursuant to Section 2.1(b), EOG) to honor the India Guarantees. EOG
agrees to use its Reasonable Efforts to assist Enron in implementing the
replacement of the guarantee contemplated by this Section. EOG further agrees
not to modify the terms of any India Guarantee, or to consent to any
modification, without the prior written consent of Enron, which consent shall
not be unreasonably withheld or delayed.
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5.6 North Milton Field. The Parties acknowledge that under the terms of
that certain letter agreement by and between Enron Natural Gas Marketing &
Storage Company, a wholly owned subsidiary of Enron ("NGMS"), and EOG dated as
of January 9, 1989 (the "Bammel Agreement"), NGMS has the right to acquire, on
the terms and conditions set forth therein, EOG's interests (the "North Milton
Interests") in the North Milton Field located in Harris County, Texas if EOG
desires to sell the North Milton Interests or any part thereof or if EOG should
cease to be a majority owned subsidiary of Enron (a "Change of Control"). Enron
agrees that even if the execution of this Agreement or the consummation of the
transactions contemplated hereby constitute a Change of Control, Enron shall not
have the right to exercise its right to acquire the North Milton Interests;
provided, however, if EOG or any of its Subsidiaries directly or indirectly
transfers or otherwise disposes of any interest in the North Milton Interests to
any third party not affiliated with EOG, or if following the Closing any Person
acquires more than 50% of the voting stock of EOG, then Enron shall have the
right to exercise its right to acquire the North Milton Interests (or in the
case EOG or any of its Subsidiaries directly or indirectly transfers or
otherwise disposes only a portion of their interest in the North Milton
Interests, such portion of the North Milton Interests so transferred or
otherwise disposed of) in accordance with the provisions of the Bammel
Agreement. Furthermore, neither EOG nor any of its Subsidiaries may directly or
indirectly transfer or otherwise dispose of all or a portion of the North Milton
Interests unless the transferee thereof agrees to be bound by the provisions of
this Section and the Bammel Agreement; provided that no such transfer shall
relieve EOG of its obligations hereunder or under the Bammel Agreement.
5.7 Employee Benefit and Compensation Matters.
(a) As of the Closing Date, EOG and its Subsidiaries shall cease to be
participating employers in Enron Benefit Plans and employees of EOG and its
Subsidiaries shall cease to be participants in all Enron Benefit Plans, and all
liability associated with such Enron Benefit Plans, including but not limited to
funding, claims for events which occur prior to the Closing, earned or accrued
benefits, fines, penalties and Taxes, shall remain the sole liability of Enron.
Notwithstanding the foregoing, employees of EOG and its Subsidiaries who are
participants in or who have accrued benefits under the Enron Executive
Supplemental Survivor Benefits Plan, the Enron Performance Unit Plan and the
Enron 1988 Deferral Plan shall remain entitled to benefits provided thereunder
according to the terms and provisions of such plans, which if necessary shall be
amended by Enron to recognize continuing service with EOG (or service with a
member of a controlled group of corporations that includes EOG, within the
meaning of Code Section 414(b)) as continued employment under such plans.
(b) EOG shall promptly establish employee benefit plans for its employees
for the period subsequent to the Closing. EOG shall promptly seek a favorable
determination letter from the Internal Revenue Service for each such Plan that
is intended to be tax qualified. Each EOG employee shall be given credit for all
purposes under EOG's employee benefit plans, programs, practices and policies
(in each case other than tax-qualified Pension Plans) for all service prior to
the Closing Date with EOG and its Affiliates, or any predecessor employer, to
the extent such credit was given under the Enron Benefit Plans ("Past Service").
With respect to any of the EOG employee benefit plans that is a tax qualified
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Pension Plan, each EOG employee shall be given credit, to the extent he or she
participates in any such Pension Plan, for all Past Service for purposes of
eligibility to participate and vesting, but not for purposes of benefit accrual,
except that EOG shall give credit for Past Service for purposes of benefit
accrual for those employees of EOG who were not vested in Enron's Cash Balance
Plan. Upon the Closing Date, Enron shall pay EOG an amount in cash equal to
$1,850,000 which is attributable to the unvested accrued benefits of EOG's
employees upon the cessation of EOG's participation in Enron's Cash Balance
Plan. Upon establishment by EOG of a tax qualified defined contribution Pension
Plan meeting the requirements of section 401(k) of the Code, and the issuance of
a favorable determination letter by the Internal Revenue Service for such plan,
Enron and EOG will cooperate for a trust-to-trust transfer of assets and
assumption of liabilities (cash and Enron common stock) from the 401(k) Pension
Plan sponsored by Enron to such 401(k) Pension Plan established by EOG.
Subsequent to the Closing and until such transfer shall occur, Enron will accept
non-payroll deducted loan payments from employees of EOG who have loans from
their accounts in the Enron 401(k) Pension Plan.
(c) As of the Closing, Enron shall cause the Enron Flexible
Compensation Plan to be split into two identical plans, with one such plan
designated the EOG Flexible Compensation Plan which shall cover EOG's employees
and include their flexible spending account balances. As of the Closing, EOG
shall assume and become financially responsible for the EOG Flexible
Compensation Plan.
(d) Prior to the Closing Date, representatives of Enron and EOG shall
negotiate in good faith to develop a list (the "Enron Employee Offer List") of
the names of employees of EOG and its Subsidiaries to whom Enron may make offers
of employment effective as of the Closing Date on such terms and conditions as
Enron in its sole discretion may determine, provided, however, it shall be a
condition of employment of any such employee by Enron that such employee agree
to execute an election in a form satisfactory to Enron and EOG to exchange all
stock-based awards made to such employee under any stock plan maintained by EOG
at an equal conversion value determined by Enron for equivalent stock awards
made under a stock plan maintained by Enron. Subject thereto, neither Enron nor
EOG (nor their respective Subsidiaries) may, prior to the Closing and for a one
year period thereafter, without the prior written consent of the other Party,
solicit to hire any employee of the other Party. Each employee of EOG listed on
the Enron Employee Offer List who (i) accepts an offer of employment from Enron,
(ii) commences employment with Enron as of the Closing and (iii) is a
participant in the EOG 1996 Deferral Plan shall cease deferrals to such Plan but
remain entitled to benefits provided thereunder according to the terms and
provisions of such Plan, which if necessary shall be amended by EOG to recognize
continuing service with Enron (or service with a member of a controlled group of
corporations that includes Enron, within the meaning of Code Section 414(b)) as
continued employment under such Plan.
(e) Enron shall assume EOG's liability for payment of awards becoming
due after the Closing to employees of EOG who accept offers of employment from
Enron made pursuant to preceding paragraph (d), pertaining to payments under
EOG's 20 Bcfe Award Program attributable to Panna/Mukta, Tapti and China
discoveries. A true and correct copy of the current form of such
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program has been furnished to Enron, and such program will not be amended
without the prior written consent of Enron.
5.8 Aircraft Leases. At the Closing, all of EOG's rights and
obligations under each of the Aircraft Agreements shall be terminated.
5.9 Office Space. Enron shall use its Reasonable Efforts to make
available to EOG office space in Three Allen Center, Houston, Texas to which
Enron currently has access that reasonably accommodates EOG. In the event that
Enron makes available to EOG office space in Three Allen Center that reasonably
accommodates EOG, (i) EOG shall promptly move its office to such location and
vacate its current office space at 1400 Smith Street, Houston, Texas and (ii)
Enron shall subsidize the rent that is payable by EOG for the offices located at
Three Allen Center from the date that EOG vacates its offices at 1400 Smith
Street through the date that is one year following the Closing Date by an amount
equal to the aggregate rent subsidy that EOG would have otherwise been entitled
to receive for its offices at 1400 Smith Street under the Services Agreement
dated as of January 1, 1997 between Enron and EOG for the same period ("Services
Agreement"). The obligations in this Section shall be in addition to Enron's
obligations to pay for EOG's relocation expenses on the terms, and subject to
the conditions, set forth in Section 11(d) of the Business Opportunity
Agreement.
5.10 Intercompany Agreements. In the event that there shall be any
agreement between EOG or its Subsidiaries, on the one hand, and Enron or its
Subsidiaries, on the other hand, in existence and effect as of the Closing Date
that is not set forth on Appendix I (which has been mutually prepared and does
not constitute a representation of either Party), then the Parties agree that,
within 30 days after the date that one Party identifies any such agreement to
the other Party, the Parties will negotiate in good faith whether to modify or
terminate such agreement (or whether to take no action with respect thereto), it
being understood that in the absence of any agreement to the contrary, such
agreement will not be affected by the transactions contemplated by this
Agreement, unless otherwise expressly provided for herein or in such agreement.
5.11 Business Opportunity Agreement.
(a) The Parties hereby agree that Section 12 of the Business
Opportunity Agreement is hereby amended, effective as of the date
hereof, to the effect that Enron shall no longer have the rights set
forth in such Section 12 to participate in any subsequent offerings of
capital stock by EOG that are consummated simultaneously with, or
after, the Closing; provided, however, that Enron shall continue to
have the rights set forth in Section 6.2 hereof. If this Agreement is
terminated without the occurrence of a Closing, then the amendment
effected pursuant to this Section 5.11 shall be null and void ab
initio.
(b) The Parties hereby agree that, notwithstanding anything to
the contrary contained in the Business Opportunity Agreement, in the
event that Enron is required pursuant to Section 4 of the Business
Opportunity Agreement to offer to EOG a business
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opportunity that involves E& P Business Assets (as defined in the
Business Opportunity Agreement) located in India or China, (i) if Enron
so elects, EOG shall offer such business opportunity, at Enron's cost,
to one of the Acquired Companies selected by Enron to pursue such
opportunity and (ii) following the Closing, Enron shall be entitled,
directly or indirectly to pursue such opportunity. In addition, the
Parties hereby agree that Section 4 of the Business Opportunity
Agreement is hereby amended, effective as of the Closing Date, by
adding a sentence to the end of such Section that reads as follows:
"Notwithstanding the foregoing, for purposes of this Section
4, a business opportunity involving E&P Business Assets
located in India or China that was first presented after July
19, 1999 shall be deemed not to have been first presented
until after Enron no longer controls EOG and no longer owns
directly or indirectly at least 40% of the capital stock of
EOG having ordinary voting power for the election of
directors."
5.12 Payroll Services. Subsequent to the Closing and through December
31, 1999, Enron shall continue to provide to EOG the payroll services being
provided under the Services Agreement. EOG shall compensate Enron for
performance of such services using the methodology described in the Services
Agreement. After December 31, 1999, EOG shall no longer have any rights to such
services, except that Enron will provide to EOG under the terms of the Services
Agreement year-end payroll and payroll tax reporting with respect to the year
ended December 31, 1999.
5.13 Certain Board Matters. If, prior to the Closing, the Board of
Directors of EOG votes upon any matter that specifically relates to EOG's
operations or proposed operations in India or China, then the parties agree
that, in addition to the vote of the Board of Directors required under the
Delaware General Corporation Law and EOG's Certificate of Incorporation or
Bylaws, such matter will also require the concurrence of the Special Committee.
ARTICLE 6.
ADDITIONAL COVENANTS OF ENRON
6.1 Ownership of Exchanged Shares. Except as otherwise contemplated by
Section 2.2 of this Agreement, Enron will not, directly or indirectly, sell,
transfer, pledge or otherwise dispose any of the Exchanged Shares (or shares
that will become Exchanged Shares) to any Person or grant an option with respect
to any of the Exchanged Shares (or shares that will become Exchanged Shares), or
enter into any other agreement or arrangement with respect to any of the
Exchanged Shares (or shares that will become Exchanged Shares).
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6.2 Post-Closing Transfers of Retained Shares of EOG Common Stock.
(a) Except as provided in Section 6.2(b) below, from and after
the date hereof and prior to the Lock-up Expiration Date, Enron will
not, directly or indirectly, sell, transfer, pledge or otherwise
dispose of (including without limitation by issuing any debt or equity
securities exercisable or exchangeable for, or convertible into) any
Retained Shares to any Person other than a wholly owned Subsidiary of
Enron.
(b) Notwithstanding the provisions of Section 6.2(a), in the
event that EOG engages in a public offering of its equity securities
("Public Offering") prior to the Lock-Up Expiration Date, Enron shall
be entitled, subject to the terms and conditions of the Registration
Rights Agreement (including those terms relating to underwriter
cutbacks), to sell in the Public Offering (i) one or more series of
debt or equity securities of Enron ("Convertible Securities") that are
mandatorily exchangeable for or mandatorily convertible into up to
10,000,000 Retained Shares less any shares sold pursuant to clause (ii)
below and (ii) with the prior written consent of EOG, up to 10,000,000
Retained Shares less the number of Retained Shares underlying
Convertible Securities sold pursuant to clause (i) above. In connection
with any such Public Offering, Enron and EOG shall use their Reasonable
Efforts to cause the underwriters in such Public Offering to distribute
any such securities in a widely dispersed manner.
(c) Enron shall not, without the prior written consent of EOG,
sell, transfer, pledge or otherwise dispose of, directly or indirectly,
any Retained Shares or Convertible Securities other than (to the extent
any transaction is permitted by Sections 6.2(a) and 6.2(b)) (i)
pursuant to a public offering registered under the Securities Act
(provided that Enron shall use its Reasonable Efforts to cause the
underwriters in such public offering to distribute such shares in a
widely dispersed manner), (ii) pursuant to Rule 144 promulgated under
the Securities Act, (iii) to a wholly owned subsidiary of Enron, which
shall thereafter become subject to the provisions of this Agreement to
the same extent as Enron, (iv) pursuant to any merger approved by the
Board of Directors of EOG with respect to which Enron did not violate
the provisions of Section 6.3 hereof or (v) any tender offer or
exchange offer recommended by the Board of Directors of EOG with
respect to which Enron did not violate the provisions of Section 6.3
hereof.
(d) Enron shall notify EOG in writing within five Business
Days after Enron consummates the sale of any Retained Shares.
6.3 Standstill. Enron agrees that, commencing on the date hereof and
ending on the Standstill Expiration Date, unless specifically requested in
advance by EOG's board of directors, neither Enron nor any of its Subsidiaries
will directly or indirectly (a) acquire, offer to acquire, or agree to acquire,
or cause or recommend that any other Person acquire, directly or indirectly, by
purchase, gift, through the acquisition or control of another Person or
otherwise, any voting securities of EOG (other than Retained Shares in
connection with dispositions of shares of EOG Common
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Stock permitted by Section 6.2 hereof), (b) make or in any way participate in,
directly or indirectly, any "solicitation" of "proxies" to vote or become a
"participant" in any "election contest" (as such terms are used in the proxy
rules of the Securities and Exchange Commission) or seek to advise or influence
any Person with respect to the voting of any voting securities of EOG, (c)
propose or nominate any nominee for director of EOG (other than to fill any
vacancy prior to the Closing Date caused by a Resigning Director ceasing to be a
director of EOG prior to the Closing Date), (d) submit any stockholder proposal
to be voted upon by the stockholders of EOG, (e) deposit any voting securities
in a voting trust or subject any such voting securities to any arrangement or
agreement with respect to the voting of such voting securities, (f) except as
expressly contemplated by this Agreement, propose any business combination
(including without limitation pursuant to any merger or share exchange)
involving EOG or make or propose a tender or exchange offer or any other offer
for any of EOG's voting securities, or arrange, or participate in the
arrangement of, financing thereof, (g) disclose an intent, purpose, plan or
proposal with respect to EOG or its voting securities inconsistent with the
provisions of this Agreement, (h) from and after the Closing Date, otherwise
act, alone or in concert with or on behalf of others, to seek directly or
indirectly to control the officers or board of directors of EOG (provided that
prior to the Closing Date Enron will not take any action with respect thereto
that is inconsistent with this Agreement, its implementation or the effectuation
of the purposes hereof), or (i) encourage or assist any other Person in
connection with any of the foregoing. In addition, during the period from the
Closing Date until the Standstill Expiration Date, at any meeting of EOG
stockholders with respect to which Enron owns Retained Shares entitled to vote,
Enron will attend such meeting in person or by proxy and will vote all of its
Retained Shares in the manner, if any, recommended by the board of directors of
EOG.
6.4 Cooperation in Litigation. Following the Closing Date, and to the
extent reasonably necessary to permit EOG or any of its Affiliates to defend
(including, without limitation, any related investigation, appeal or settlement)
any lawsuit, mediation, enforcement action, arbitration, administrative hearing
or other adjudicative proceeding which exists at the Closing Date or which is
brought thereafter, Enron agrees to afford EOG and its Affiliates and their
respective accountants and counsel, during normal business hours at no cost to
EOG other than reasonable out-of-pocket expenses, (i) reasonable access to all
employees of Enron or any of its Affiliates and all witnesses subject to the
control or direction of Enron or any of its Affiliates and (ii) reasonable
access to all documents and records within the custody or subject to the control
of Enron or any of its Affiliates; provided, however, that such access will not
operate to cause the waiver of any attorney-client, work product or like
privilege; provided further, that in the event of any litigation nothing herein
shall limit either party's rights of discovery under applicable Law. Following
the Closing Date, Enron also agrees to give EOG 15 days prior written notice of
the intention of Enron or any of its Affiliates to settle or otherwise
compromise any claims against Enron or any of its Affiliates arising from or
related to any Enron Producer/Affiliate Disputes, as that term is defined below,
whether or not those claims have been formally filed with any court or other
adjudicative body. As used in this paragraph, the term "Enron Producer/Affiliate
Disputes" means any claim, lawsuit, mediation, enforcement action, arbitration,
administrative hearing or other adjudicative proceeding where the allegations
include claims that EOG or any of its Affiliates have failed to pay or has
improperly paid any amount alleged to be due and owing and which further alleges
that such failure to pay or improper payment
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results in whole or in part from, or is in any way related to, the affiliate
relationship of EOG or any of its Affiliates with Enron or any of its
Affiliates. The foregoing definition is intended to include, but is not limited
to, claims asserting failure to pay or improper payment of royalties, overriding
royalties, production payments, severance taxes, and/or any other liability
arising from the production and/or sale of hydrocarbons.
6.5 Resignation of Directors. Enron shall cause each of the Resigning
Directors who is also an employee of Enron to resign as a director of EOG
effective upon the Closing. Enron shall use its Reasonable Efforts to cause any
other Resigning Directors to resign as a director of EOG effective upon the
Closing.
ARTICLE 7.
ADDITIONAL COVENANTS OF EOG
7.1 Ownership of the EOG India Shares. Except as otherwise contemplated
by this Agreement, EOG and EOG International will not, directly or indirectly,
sell, transfer, pledge or otherwise dispose of any of the EOG India Shares (or
the shares of capital stock of any of the Acquired Companies) to any Person or
grant an option with respect to any of the foregoing, or enter into any other
agreement or arrangement with respect to any of the foregoing.
7.2 Conduct of Business by the Acquired Companies Pending the Share
Exchange. From the date hereof until the Closing Date, unless Enron shall
otherwise agree in writing, EOG shall cause the Acquired Companies to conduct
their business in the ordinary course consistent with recent past practice and
shall use all Reasonable Efforts to preserve intact the Acquired Companies'
business organizations and relationships with third parties and to keep
available the services of the Acquired Companies' present officers and key
employees. Except as set forth in Section 7.2 of the EOG Disclosure Schedule or
as otherwise expressly contemplated by or expressly provided in this Agreement,
and without limiting the generality of the foregoing, from the date hereof until
the Closing Date, except with the prior written consent of Enron, which consent
shall not be unreasonably withheld, EOG will cause the following:
(a) None of the Acquired Companies will adopt or propose any
change to its certificate of incorporation or bylaws or other organizational
documents;
(b) None of the Acquired Companies will (i) declare, set aside
or pay any dividend or other distribution with respect to any of their shares of
capital stock or (ii) repurchase, redeem or otherwise acquire any outstanding
shares of capital stock or other securities of, or other ownership interests in
the Acquired Companies.
(c) Except for the pending Tata farmout and the pending Hardy
Oil & Gas acquisition, both of which have been described to Enron, and except as
set forth in the capital budget
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or work program furnished in writing to Enron, none of the Acquired Companies
will merge or consolidate with any other Person or acquire assets having an
individual purchase price of more than $1 million or an aggregate purchase price
of more than $5 million;
(d) Except as set forth in the capital budget or work program
furnished in writing to Enron, none of the Acquired Companies will sell, lease,
license or otherwise surrender, relinquish or dispose of any assets or
properties with an individual fair market value exceeding $1 million or an
aggregate fair market value exceeding $5 million;
(e) None of the Acquired Companies will settle any material
tax audit, make or change any material tax election or file any material amended
tax return, which audit, election or return relates solely to one or more
Acquired Companies;
(f) Except as described on Section 7.2(f) of the EOG
Disclosure Schedule, none of the Acquired Companies will issue any securities,
incur any indebtedness except trade debt in the ordinary course of business or
pursuant to existing credit facilities or arrangements, increase compensation,
bonus or other benefits payable to any executive officer or former employee
except in the ordinary course of business or enter into any settlement or
consent with respect to any pending material litigation;
(g) None of the Acquired Companies will change any method of
financial accounting or accounting practice, except for any such change required
by GAAP and except, to the extent relating to any reporting required by foreign
Law, for any such change required by foreign Law;
(h) Except as described on Section 7.2(h) of the EOG
Disclosure Schedule, neither EOG India HoldCo nor any of its Subsidiaries will
become bound or obligated to participate in any operation, or consent to
participate in any operation, with respect to any Oil and Gas Interests that
will individually cost in excess of $1 million unless the operation is a
currently existing obligation of EOG India HoldCo or any of its Subsidiaries or
necessary to extend, preserve or maintain an Oil and Gas Interest;
(i) None of the Acquired Companies will enter into any
futures, hedge, swap, collar, put, call, floor, cap, option or other contracts
that are intended to benefit from or reduce or eliminate the risk of
fluctuations in the price of commodities, other than in the ordinary course of
business in accordance with the Acquired Companies' recent past practice;
(j) Neither EOG nor any of the Acquired Companies will pledge
any of the shares or assets of EOG India Cayco, EOG China Cayco, EOG China
Limited, or EOG China International as security for any loan to any member of
the EOG Group; and
(k) None of the Acquired Companies will agree or commit to do
any of the foregoing.
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7.3 Cooperation in Litigation. Following the Closing Date, and to the
extent reasonably necessary to permit Enron or any of its Affiliates to defend
(including, without limitation, any related investigation, appeal or settlement)
any lawsuit, mediation, enforcement action, arbitration, administrative hearing
or other adjudicative proceeding which exists at the Closing Date or which is
brought thereafter, EOG agrees to afford Enron and its Affiliates and their
respective accountants and counsel, during normal business hours, at no cost to
Enron other than reasonable out-of-pocket expenses, (i) reasonable access to all
employees of EOG or any of its Affiliates and all witnesses subject to the
control or direction of EOG or any of its Affiliates and (ii) reasonable access
to all documents and records within the custody or subject to the control of EOG
or any of its Affiliates; provided, however, that such access will not operate
to cause the waiver of any attorney-client, work product or like privilege;
provided further, that in the event of any litigation nothing herein shall limit
either party's rights of discovery under applicable Law. Following the Closing
Date, EOG also agrees to give Enron 15 days prior written notice of the
intention of EOG or any of its Affiliates to settle or otherwise compromise any
claims against EOG or any of its Affiliates arising from or related to any EOG
Producer/Affiliate Disputes, as that term is defined below, whether or not those
claims have been formally filed with any court or other adjudicative body. As
used in this paragraph, the term "EOG Producer/Affiliate Disputes" means any
claim, lawsuit, mediation, enforcement action, arbitration, administrative
hearing or other adjudicative proceeding where the allegations include claims
that Enron or any of its Affiliates have failed to pay or has improperly paid
any amount alleged to be due and owing and which further alleges that such
failure to pay or improper payment results in whole or in part from, or is in
any way related to, the affiliate relationship of Enron or any of its Affiliates
with EOG or any of its Affiliates. The foregoing definition is intended to
include, but is not limited to, claims asserting failure to pay or improper
payment of royalties, overriding royalties, production payments, severance
taxes, and/or any other liability arising from the production and/or sale of
hydrocarbons.
7.4 Share Issuances. EOG will not issue or dispose of any shares of its
capital stock (other than pursuant to currently outstanding options under
employee or director stock option plans) prior to the Closing unless, after such
issuance or disposition, Enron continues to own at least a majority of the Fully
Diluted EOG Shares; provided, however, that the foregoing provision shall not
prohibit the issuance of shares of capital stock by EOG in connection with the
Public Offering, so long as such issuance is consummated no earlier than
simultaneously with the Closing.
ARTICLE 8.
CONDITIONS TO CLOSING
8.1 Conditions Precedent to Obligation of Each Party. The respective
obligations of each Party to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment at or prior to the Closing Date of
the following conditions:
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(a) no order shall have been entered and shall have remained
in effect in any action or proceeding before any Governmental Authority
that would prohibit or make illegal the consummation of the
transactions contemplated by this Agreement; and
(b) any and all material consents of Governmental Authorities,
if any, necessary to consummate the transactions contemplated by this
Agreement shall have been obtained.
8.2 Additional Conditions Precedent to Obligations of Enron. The
obligations of Enron to consummate the transactions contemplated by this
Agreement are also subject to the fulfillment (or waiver in writing by Enron) at
or prior to the Closing Date of the following conditions:
(a) each of the representations and warranties of EOG
contained in Article 4 of this Agreement (other than those
representations and warranties contained in Sections 4.2 and 4.7)
shall, to the extent qualified as to Material Adverse Effect, be true
and correct in all respects as of the Closing Date (except for such
representations and warranties as are made as of a specified date,
which shall be true and correct in all respects as of such specified
date), and to the extent not so qualified shall be true and correct
except for such failures which, individually or in the aggregate, have
not had and would not reasonably be expected to have a Material Adverse
Effect on the Acquired Companies, taken as a whole, or Enron;
(b) all the covenants in this Agreement to be complied with
and performed by EOG on or before the Closing Date (other than the
covenants set forth in paragraphs (b), (c), (d) or (h) of Section 7.2,
which are the subject of paragraph (c) below) shall have been duly
complied with and performed in all material respects;
(c) each of the covenants set forth in paragraphs (b), (c),
(d) or (h) of Section 7.2 of this Agreement to be complied with and
performed by EOG on or before the Closing Date shall have been duly
complied with and performed in all respects, except for such failures
which, individually or in the aggregate, have not had and would not
reasonably be expected to have, a Material Adverse Effect on the
Acquired Companies, taken as a whole, or Enron;
(d) a certificate to the foregoing effect dated the Closing
Date and signed by an authorized executive officer of EOG shall have
been delivered to Enron; and
(e) Vinson & Elkins L.L.P. shall have delivered to Enron its
written opinion (which may be based upon certain representations of EOG
and Enron) dated as of the Closing Date to the effect that no gain or
loss should be recognized to Enron upon the Share Exchange pursuant to
section 355(a) of the Code.
8.3 Additional Conditions Precedent to Obligations of EOG. The
obligations of EOG to consummate the transactions contemplated by this Agreement
are also subject to the fulfillment (or waiver in writing by EOG) at or prior to
the Closing Date of the following conditions:
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(a) each of the representations and warranties of Enron
contained in Article 3 of this Agreement (other than those
representations and warranties contained in Sections 3.2 and 3.7)
shall, to the extent qualified as to Material Adverse Effect, be true
and correct in all respects as of the Closing Date (except for such
representations and warranties as are made as of a specified date,
which shall be true and correct in all respects as of such specified
date), and to the extent not so qualified shall be true and correct
except for such failures which, individually or in the aggregate have
not had and would not reasonably be expected to have a Material Adverse
Effect on EOG;
(b) all the covenants in this Agreement to be complied with
and performed by Enron on or before the Closing Date shall have been
duly complied with and performed in all material respects;
(c) a certificate to the foregoing effect dated the Closing
Date and signed by an authorized executive officer of Enron shall have
been delivered to EOG;
(d) Steptoe & Johnson LLP shall have delivered to EOG its
written opinion (which may be based upon certain representations of EOG
and Enron) dated as of the Closing Date to the effect that the Share
Exchange should constitute a distribution of the stock of a controlled
corporation described in section 355 of the Code upon which no gain or
loss is recognized to EOG and, if the EOG International Merger does not
occur, no gain or loss is recognized to EOG International; and
(e) at or prior to the Closing, each Resigning Director shall
resign as a director of EOG, effective upon the Closing.
ARTICLE 9.
INDEMNIFICATION
9.1 By Enron. Subject to the terms and conditions of this Article 9,
Enron hereby agrees to indemnify, defend and hold harmless EOG, its Affiliates
and their respective directors, officers and employees (each a "EOG Party" and
collectively, the "EOG Parties"), from and against the following (collectively,
the "EOG Indemnified Liabilities"): all Claims and Losses asserted against,
imposed upon, or incurred by any EOG Party, directly or indirectly, by reason
of, arising out of, or resulting from (a) the inaccuracy or breach of any
representation or warranty of Enron contained in this Agreement or (b) the
breach of any covenant or agreement of Enron contained in this Agreement.
9.2 By EOG. Subject to the terms and conditions of this Article 9, EOG
hereby agrees to indemnify, defend and hold harmless Enron, its Affiliates and
their respective directors, officers and employees (each an "Enron Party" and
collectively, the "Enron Parties"), from and against the following
(collectively, the "Enron Indemnified Liabilities"): all Claims and Losses
asserted against,
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imposed upon or incurred by any Enron Party, directly or indirectly, by reason
of, arising out of, or resulting from (a) the inaccuracy or breach of any
representation or warranty of EOG contained in this Agreement, or (b) the breach
of any covenant or agreement of EOG contained in this Agreement.
9.3 Express Negligence Rule. WITHOUT LIMITING OR ENLARGING THE SCOPE OF
THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS ARTICLE 9, AN INDEMNIFIED
PARTY SHALL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN ACCORDANCE WITH THE
TERMS HEREOF, REGARDLESS OF WHETHER THE LOSS OR CLAIM GIVING RISE TO SUCH
INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT OR COMPARATIVE
NEGLIGENCE, STRICT LIABILITY OR VIOLATION OF ANY LAW OF OR BY SUCH INDEMNIFIED
PARTY. THE PARTIES AGREE THAT THIS PARAGRAPH CONSTITUTES A CONSPICUOUS LEGEND.
9.4 Exceptions to Indemnities. Notwithstanding anything to the contrary
set forth in Section 9.1, EOG Indemnified Liabilities shall not include any and
all Claims to the extent such Claims are attributable to a breach of any
representation, warranty, covenant or agreement of EOG under this Agreement.
Notwithstanding anything to the contrary set forth in Section 9.2, Enron
Indemnified Liabilities shall not include any and all Claims to the extent such
Claims are attributable to a breach of any representation, warranty, covenant or
agreement of Enron under this Agreement. Notwithstanding any other provision of
this Article 9, the provisions of this Article 9 (other than this sentence)
shall not apply to any matters relating to indemnification for Taxes (including
indemnification relating to Sections 3.10 and 4.9), which matters shall be
governed exclusively by Article 10 and this sentence; provided that this Section
9.4 shall not limit Enron's obligations pursuant to Section 5.5.
9.5 Notice of Claim.
(a) For purposes of this Article 9, the term "Indemnifying
Party" when used in connection with a particular Claim or Loss shall
mean the party having an obligation to indemnify another party with
respect to such Claim or Loss pursuant to this Article 9, and the term
"Indemnified Party" when used in connection with a particular Claim or
Loss shall mean the party having the right to be indemnified with
respect to such Claim or Loss by another party pursuant to this Article
9.
(b) Promptly after any Indemnified Party becomes aware of
facts giving rise to a Claim by it for indemnification pursuant to this
Article 9, such Indemnified Party will provide notice thereof in
writing to the Indemnifying Party (a "Claim Notice") specifying the
nature and specific basis for such Claim and a copy of all papers
served with respect to such Claim (if any). For purposes of this
Section 9.5(b), receipt by a party of written notice of any demand,
assertion, claim, action or proceeding (judicial, administrative or
otherwise) by or from any Person other than a party to this Agreement
which gives rise to a Claim on behalf of such party shall constitute
the discovery of facts giving rise to a Claim by it and shall
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require prompt notice of the receipt of such matter as provided in the
first sentence of this Section 9.5(b). The failure by an Indemnified
Party to notify an Indemnifying Party shall not be a defense to any
indemnification obligation unless the Indemnifying Party is able to
demonstrate that actual prejudice was suffered by the Indemnifying
Party as a result of such failure to notify. Each Claim Notice shall
set forth a reasonable description of the Claim as the Indemnified
Party shall then have and shall contain a statement to the effect that
the Indemnified Party giving the notice is making a claim pursuant to
and formal demand for indemnification under this Article 9. The Claim
Notice must set forth the particular provision in this Article 9 and
any related provision in this Agreement pursuant to which such
indemnification claim is made.
9.6 Third Party Claims.
(a) If an Indemnified Party shall have any Third Party Claim
asserted against such Indemnified Party, the Indemnified Party promptly
shall transmit to the Indemnifying Party a Claim Notice relating to
such Third Party Claim. Prior to the expiration of the 45-day period
following the Indemnifying Party's receipt of such notice (the
"Election Period"), the Indemnifying Party shall notify the Indemnified
Party whether the Indemnifying Party disputes its potential liability
to the Indemnified Party under this Article 9 with respect to such
Third Party Claim.
(b) If an Indemnifying Party notifies an Indemnified Party
within the Election Period that the Indemnifying Party does not dispute
its potential liability to the Indemnified Party under this Article 9,
the Indemnifying Party shall assume the defense of the Third Party
Claim, at its sole cost and expense, and shall prosecute such defense
diligently to a final conclusion or settle such Third Party Claim at
the discretion of the Indemnifying Party in accordance with this
Section 9.6(b). The Indemnifying Party shall have full control of such
defense and proceedings, including any compromise or settlement
thereof. If requested by the Indemnifying Party, the Indemnified Party
agrees to cooperate fully with the Indemnifying Party and its counsel
at the Indemnifying Party's expense in contesting any Third Party Claim
that the Indemnifying Party elects to contest, including, without
limitation, the making of any related counterclaim against the Person
asserting the Third Party Claim or any cross-complaint against any
Person. The Indemnified Party shall have the right to participate in,
but not control, any defense or settlement of any Third Party Claim
controlled by the Indemnifying Party pursuant to this Section 9.6(b)
and shall bear its own costs and expenses with respect to any such
participation.
9.7 Subrogation. In the event that any Indemnified Party has a right
against a Third Party with respect to any damages, losses, costs or expenses
paid to or on behalf of such Indemnified Party by an Indemnifying Party, then
such Indemnifying Party shall, to the extent of such payment, be subrogated to
the right of such Indemnified Party.
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9.8 Exclusive Remedies; Survival of Representations and Warranties. EOG
and Enron (a) agree that only actual damages shall be recoverable under this
Agreement and (b) hereby waive any right to recover special, punitive,
consequential, incidental or exemplary damages except to the extent any such
party suffers such damages to an unaffiliated Third Party in connection with a
Third Party Claim, in which event such damages shall be recoverable.
Notwithstanding anything to the contrary in this Agreement, the indemnification
provisions of this Article 9 shall be (x) the exclusive remedies for a Party for
any Claim based upon the breach of any representation or warranty of the other
Party contained in this Agreement following Closing and (y) the exclusive
monetary remedies for any Claim based upon the breach of any covenant of the
other Party contained in this Agreement; provided, however, that indemnification
related to Taxes, including indemnification relating to Sections 3.10 and 4.9,
shall be governed exclusively by Article 10. No Claim of any nature can be
brought by any EOG Party against Enron pursuant to Section 9.1(a) or any Enron
Party against EOG pursuant to Section 9.2(a) unless written notice of such Claim
has been given on or before the second anniversary of the Closing Date and
otherwise in accordance with this Article 9 with respect to any other Claim.
Indemnity obligations of any Indemnifying Party shall be reduced by any
insurance proceeds realized by any Indemnified Party.
ARTICLE 10.
TAX MATTERS
10.1 Preparation and Filing of Tax Returns.
(a) Unitary Tax Returns Filed by Enron. Enron shall file
timely all returns and reports ("Tax Returns") with respect to a
Unitary Tax ("Unitary Tax Returns") covering a Pre-Closing Period or a
Straddle Period required to be filed by Enron and shall be responsible
for the timely payment of all Taxes due with respect to the period
covered by such Unitary Tax Returns. EOG shall provide to Enron all
information in its or its Subsidiaries' possession needed by Enron to
prepare and file such Unitary Tax Returns.
(b) Tax Returns of Acquired Companies (other than Consolidated
Income Tax Returns) for Pre-Closing Periods. With respect to each Tax
Return covering a Pre-Closing Period that is required to be filed after
the Closing Date (other than the Tax Returns described in Section
10.1(a) or 10.1(d)) for, by or with respect to any of the Acquired
Companies, Enron shall cause such Tax Return to be prepared, shall
cause to be included in such Tax Return all items of income, gain,
loss, deduction and credit and other tax items ("Tax Items") required
to be included therein, shall furnish a copy of such Tax Return to EOG
as soon as practicable, shall file timely such Tax Return with the
appropriate taxing authority, and shall be responsible for the timely
payment of all Taxes due with respect to the period covered by such Tax
Return.
(c) Tax Returns of Acquired Companies (other than Consolidated
Income Tax Returns) for Straddle Periods. With respect to any Tax
Return of an Acquired Company
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covering a taxable period beginning on or before the Closing Date and
ending after the Closing Date that is required to be filed after the
Closing Date, Enron shall cause such Tax Return to be prepared, shall
cause to be included in such Tax Return all Tax Items required to be
included therein, shall furnish a copy of such Tax Return to EOG as
soon as practicable, shall file timely such Tax Return with the
appropriate taxing authority, and shall be responsible for the timely
payment of all Taxes due with respect to the period covered by such Tax
Return.
(d) Consolidated Income Tax Returns. With respect to each U.S.
federal Income Tax Return, each Tax Return relating to consolidated or
combined state Income Taxes, and each Unitary Tax Return covering a
Pre-Closing Period or a Straddle Period that is required to be filed
after the Closing Date for, by or with respect to the EOG Group, EOG
shall cause such Tax Return to be prepared, shall cause to be included
in such Tax Return all Tax Items required to be included therein, shall
deliver a copy of such Tax Return to Enron as soon as practicable, and
shall pay timely all Taxes required to be paid by or with respect to
the EOG Group for the periods covered by such Tax Returns.
(e) Income Tax Return Preparation. Except as specifically set
forth in this Section 10.1, any Tax Return to be prepared pursuant to
the provisions of this Section 10.1 shall be prepared in a manner
consistent with practices followed in prior years with respect to
similar Tax Returns, except for changes required by changes in Law. To
the extent necessary, EOG shall grant to Enron or its designee and
Enron shall grant to EOG or its designee appropriate powers of attorney
to enable each to prepare and file Tax Returns as provided in this
Section 10.1.
(f) Treatment of Contributions and Share Exchange. Effective
the day after the contribution of the shares of EOG China Cayco to EOG
India Cayco pursuant to Section 2.1(d) hereof (but prior to the day of
the Share Exchange) EOG shall cause EOG China Cayco to elect to be
disregarded as an entity separate from its owner pursuant to Treas.
Reg. Section 301.7701-3. EOG and Enron shall treat the contribution
described in Section 2.1(d) hereof as a transfer of the assets of EOG
China Cayco to EOG India Cayco pursuant to a reorganization within the
meaning of section 368(a)(1)(D) of the Code, shall cooperate with each
other to preserve the tax-free nature of such transaction, and shall
take no action or position inconsistent with the nature of the
contribution described in Section 2.1(d) hereof as tax-free (taking
into account section 367 of the Code) without the need for filing a
gain recognition agreement. Enron and EOG shall treat, and shall take
no action or position inconsistent with the treatment of, the Share
Exchange as tax-free to Enron, EOG and (if the EOG International Merger
does not occur) EOG International under section 355 of the Code, unless
the Share Exchange is required to be treated differently pursuant to a
determination (within the meaning of section 1313(a) of the Code).
Enron and EOG shall treat, and shall take no position or action
inconsistent with the treatment of, the transactions described in
Section 2.1 of this Agreement as not creating Texas gross receipts for
Texas franchise Tax purposes, unless such transactions are required to
be treated differently pursuant to a
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determination (within the meaning of section 1313(a) of the Code or
comparable provision of Texas Tax Law).
(g) Subpart F Income. In the event that Enron intends to file
any Tax Return reflecting Taxes for which EOG would be responsible
pursuant to Section 10.3(b)(ii), Enron will present Enron's good faith
calculations of the relevant amount of Subpart F income and of the
amount of Tax, computed as provided in Section 10.4(e), for which Enron
believes EOG is responsible in connection with such Tax Return at least
45 days prior to the date such Tax Return is due, including extensions.
EOG will provide EOG's good faith comments on such calculations no
later than 15 days after receipt of such calculations from Enron. To
the extent that Enron agrees with EOG's good faith comments, Enron will
accept them and reflect them on such Tax Return as it is filed. To the
extent that Enron disagrees with EOG's good faith comments, the Parties
will attempt in good faith to resolve the dispute. In the event that
they do not resolve the dispute, a neutral accountant mutually selected
by Enron and EOG will resolve the dispute expeditiously prior to the
date the Tax Return is due, including extensions.
10.2 Liquidation of Tax Sharing Agreements.
(a) Except as provided in Section 10.2(b), all Tax sharing
agreements or similar agreements or arrangements between Enron, on the
one hand, and EOG or any members of the EOG Group on the other hand,
whether written or unwritten and including specifically (i) the Tax
Allocation Agreement, dated February 17, 1998, between Enron and EOG
and certain EOG Subsidiaries (the "1998 Tax Sharing Agreement") and
(ii) the First Amended and Restated Tax Allocation Agreement, dated
August 9, 1991, between Enron and EOG and certain EOG Subsidiaries,
shall be terminated as of the Closing Date upon payment by EOG to Enron
of $13,355,313 (appropriately adjusted if the Closing Date is other
than September 30, 1999), and thereafter no party to any such agreement
shall have any liability to make any payment under any such agreement.
(b) Notwithstanding Section 10.2(a), the provisions of Section
3.2 of the 1998 Tax Sharing Agreement, dealing with payments for
utilization of consolidated minimum tax credits, and the provisions of
Section 3.5 of the 1998 Tax Sharing Agreement, dealing with payments
with respect to capital loss carrybacks, and the related provisions of
the 1998 Tax Sharing Agreement to the extent necessary to implement
Sections 3.2 and 3.5 thereof, shall survive the Closing and continue in
force and effect.
10.3 Indemnification for Taxes.
(a) Subject to the terms and conditions of Section 10.4, from
and after the Closing Date Enron shall be liable for and shall
indemnify and hold harmless EOG and its Subsidiaries (collectively, the
"EOG Tax Indemnitees")from and against the following:
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(i) Any Taxes of an Acquired Company or of any member
of the Enron Group (other than EOG or any member of the EOG Group
(other than an Acquired Company) which was also a member of the Enron
Group) for any taxable period, except to the extent provided in Section
10.3(b);
(ii) Any Taxes imposed on EOG or EOG International
with respect to the Share Exchange to the extent resulting from a
breach by Enron of any representation or warranty made pursuant to
Section 3.10 of this Agreement or covenant made pursuant to Section 6.2
of this Agreement;
(iii) Any Taxes imposed on EOG or EOG International
with respect to the Share Exchange to the extent resulting from any of
the following events: (1) within two years following the Closing Date
the percentage ownership by Enron or any Acquired Company of the stock
of an Acquired Company is decreased to less than 80% of its ownership
percentage of such stock immediately after the Share Exchange, (2)
within two years following the Closing Date any Acquired Company
redeems or otherwise acquires more than 20 percent of its stock
outstanding immediately after the Share Exchange, (3) within two years
following the Closing Date any Acquired Company disposes of any of its
assets other than in the ordinary course of business, or (4) within two
years following the Closing Date Enron sells the Retained Shares to one
Person (or a group of Persons composed of one Person and other Persons
related to such Person within the meaning of section 267(b) or
707(b)(1) of the Code); and
(iv) Any withholding Tax imposed by India with
respect to interest paid or accrued by EOG India Cayco.
(b) Subject to the terms and conditions of Section 10.4, from
and after the Closing Date EOG shall be liable for and shall indemnify
and hold harmless Enron, EOG India HoldCo and their respective
Subsidiaries (collectively, the "Enron Tax Indemnitees") from and
against the following:
(i) Any Taxes of any member of the EOG Group (whether
pursuant to Treas. Reg. Section 1.1502-6 or otherwise) other than any
Acquired Company for any taxable period except to the extent provided
in Section 10.3(a);
(ii) Any Taxes imposed with respect to any Subpart F
income (within the meaning of section 952 of the Code) of any of the
Acquired Companies attributable (using an interim closing of the books
approach) to the period January 1, 1999 through the Closing Date;
(iii) Any Taxes imposed on Enron with respect to the
Share Exchange to the extent resulting from a breach by EOG of any
representation or warranty made pursuant to Section 4.9 of this
Agreement;
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(iv) Any Taxes imposed on Enron with respect to the
Share Exchange if continuity of interest in EOG within the meaning of
Treas. Reg. Section 1.355-2(c) is not maintained with respect to the
Share Exchange unless the absence of such continuity of interest was
not a contributing cause with respect to the imposition on Enron of any
such Taxes; provided, however, that if EOG asserts that continuity of
interest was maintained with respect to the Share Exchange and/or that
any absence of continuity of interest was not a contributing cause with
respect to the imposition of any such Taxes, EOG shall bear the burden
of proof and be required to prove such matters by clear and convincing
evidence; and
(v) Any Texas franchise Taxes (measured by any of the
contributions described in Section 2.1 of this Agreement) imposed on
EOG India HoldCo to the extent resulting from a breach of the
representation contained in Section 4.9(j) of this Agreement.
10.4 Indemnification Procedures.
(a) If a claim is made by any taxing authority that, if
successful, would result in the indemnification of a party (the "Tax
Indemnified Party") under Section 10.3, the Tax Indemnified Party shall
promptly give written notice of such fact to the party (the "Tax
Indemnifying Party") obligated under Section 10.3 to indemnify the Tax
Indemnified Party.
(b) The Tax Indemnified Party shall take such action in
connection with contesting such claim as the Tax Indemnifying Party
shall reasonably request in writing from time to time, including the
selection of counsel and experts and the execution of appropriate
powers of attorney; provided that (i) within 30 days after the notice
required by this section has been delivered (or such earlier date that
any payment of Taxes is due by the Tax Indemnified Party but in no
event sooner than 10 days after the Tax Indemnifying Party's receipt of
such notice), the Tax Indemnifying Party requests that such claim be
contested, (ii) the Tax Indemnifying Party shall have agreed to pay to
the Tax Indemnified Party on a monthly basis all costs and expenses
that the Tax Indemnified Party reasonably incurs in connection with
contesting such claim, including reasonable attorneys' and accountants'
fees and disbursements, and (iii) if the Tax Indemnified Party is
requested by the Tax Indemnifying Party to pay the Tax claimed and sue
for a refund, the Tax Indemnifying Party shall have advanced to the Tax
Indemnified Party, on an interest-free basis, the amount of such claim.
The Tax Indemnified Party shall not make any payment of any such claim
for at least 30 days (or such shorter period as may be required by
applicable Law) after the giving of the notice required by this
subsection, shall give to the Tax Indemnifying Party any information
reasonably requested relating to such claim, and otherwise shall
cooperate with the Tax Indemnifying Party in order to contest
effectively any such claim. The Tax Indemnifying Party shall determine
the method of any contest of such claim and shall control the conduct
thereof.
(c) Subject to the provisions of Section 10.4(b), the Tax
Indemnified Party shall enter into a settlement of such contest with
the applicable taxing authority or prosecute such
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contest to a determination in a court of initial or appellate
jurisdiction, all as the Tax Indemnifying Party may request.
(d) Promptly after the extent of the liability of the Tax
Indemnified Party with respect to a claim shall be established by the
final judgment or decree of a court or a final and binding settlement
with a governmental authority having jurisdiction thereof, the Tax
Indemnifying Party shall pay to the Tax Indemnified Party the amount of
any Taxes (computed as provided in Section 10.4(e) with respect to U.S.
state and federal Income Taxes) and costs and expenses to which the Tax
Indemnified Party may become entitled by reason of the provisions of
Section 10.3 and this Section 10.4, less any amount advanced to the Tax
Indemnified Party pursuant to Section 10.4(b). Any such payment shall
be treated as described in Section 10.5(c).
(e) The amount of U.S. state and federal income Taxes to which
the Tax Indemnified Party shall be entitled pursuant to Section 10.3
(other than Section 10.3(b)(v)) and this Section 10.4 shall be computed
as follows:
(i) Determine the amount of income or gain included
in the Tax Indemnified Party's gross income for U.S. federal income tax
purposes with respect to the Taxes for which the Tax Indemnified Party
is indemnified;
(ii) Multiply the amount determined in clause (i)
above by the percentage which is two percentage points higher than the
highest rate of tax applicable to corporations under section 11 of the
Code for the taxable year to which the indemnified Taxes relate;
(iii) If and to the extent that any amount of the
payment by the Tax Indemnifying Party to the Tax Indemnified Party of
indemnified Taxes is subject (without regard to the Tax Indemnified
Party's other Tax Items) to Income Tax in the hands of the Tax
Indemnified Party, multiply the amount determined in clause (ii) above
by a fraction, the numerator of which is one and the denominator of
which is one minus the percentage (expressed as a decimal) which is two
percentage points higher than the highest rate of tax applicable to
corporations under section 11 of the Code for the taxable year in which
such payment is made or otherwise required to be reported; and
(iv) Add to the amount determined in clause (iii)
above interest at the rate and in the manner specified in section
6621(a)(2) of the Code from the due date of the Tax Return for the
taxable year to which the indemnified Taxes relate to the date of
payment of the indemnified Taxes by the Tax Indemnifying Party to the
Tax Indemnified Party.
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10.5 Tax Refunds.
(a) Except as provided in Section 10.5(b), to the extent any
determination of Taxes, whether as the result of an audit or
examination, a claim for refund, the filing of an amended Tax Return,
or otherwise, results in a refund of Taxes paid (all referred to as a
"Refund"), EOG shall be entitled to any part of such Refund
attributable to a Tax for which EOG has indemnified the Enron Tax
Indemnitees pursuant to Section 10.3(b) of this Agreement, and Enron
shall be entitled to any part of such Refund attributable to a Tax for
which Enron has indemnified the EOG Tax Indemnitees pursuant to Section
10.3(a) of this Agreement. Whichever Party receives a Refund shall,
within 10 days after receipt thereof, pay such Refund, or any part
thereof, together with any interest received thereon, to the Party
entitled thereto under this Section 10.5(a).
(b) If, subsequent to any payment made between Parties
pursuant to Section 10.5(a), the amount of any Refund is adjusted, a
subsequent payment shall be made between the Parties to reflect the
amount of such adjustment.
(c) Any payment from Enron to EOG pursuant to this Agreement
shall be treated for Tax purposes as a decrease in the amount
contributed by EOG to EOG India HoldCo pursuant to Section 2.1 of this
Agreement, and any payment from EOG to Enron pursuant to this Agreement
shall be treated for Tax purposes as an increase in the amount
contributed by EOG to EOG India HoldCo pursuant to Section 2.1 of this
Agreement unless required to be treated differently pursuant to a
determination (within the meaning of section 1313(a) of the Code).
ARTICLE 11.
TERMINATION
11.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby abandoned as follows:
(a) by the mutual written consent of Enron and EOG at any time
prior to the Closing;
(b) by Enron or EOG if a final, non-appealable order to
restrain, enjoin or otherwise prevent the consummation of the
transactions contemplated hereby shall have been entered;
(c) by Enron or EOG if the Closing shall not have occurred on
or before the Termination Date; provided that, a Party shall not be
entitled to terminate this Agreement pursuant to this Section 11.1(c)
if the failure results primarily from the breach by such Party of any
of its representations, warranties or covenants contained in this
Agreement.
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11.2 Effect of Termination. In the event that Closing does not occur as
a result of any party exercising its right to terminate pursuant to Section
11.1, then this Agreement shall be null and void and no party shall have any
rights or obligations under this Agreement, except that nothing herein and no
termination pursuant hereto shall relieve any party from any liability for any
breach hereof prior to such termination, or, with respect to those provisions
that survive such termination, prior to or following such termination.
ARTICLE 12.
MISCELLANEOUS
12.1 Expenses. Except as otherwise expressly provided in the Business
Opportunity Agreement and in the Registration Rights Agreement, each Party shall
be solely responsible for all expenses, including due diligence expenses,
incurred by it or its Subsidiaries in connection with the transactions
contemplated by this Agreement, and no Party shall be entitled to any
reimbursement for such expenses from any other Party. Notwithstanding the
foregoing and in addition to any amounts that may be due under the preceding
sentence, Enron shall reimburse EOG for $1.25 million of its expenses incurred
in connection with the transactions contemplated by this Agreement, which
reimbursement shall be, and shall be effected through, an adjustment to the
Contributed Amount.
12.2 Waiver. Except as expressly provided in this Agreement, neither
the failure nor any delay on the part of any Party in exercising any right,
power or remedy hereunder shall operate as a waiver thereof, or of any other
right, power or remedy; nor shall any single or partial exercise of any right,
power or remedy preclude any further or other exercise thereof, or the exercise
of any other right, power or remedy. Except as expressly provided herein, no
waiver of any of the provisions of this Agreement shall be valid unless it is in
writing and signed by the Party against whom it is sought to be enforced and, in
the case of any waiver of EOG prior to the Closing, has been approved by the
Special Committee.
12.3 Publicity. The Parties shall consult with each other with regard
to all publicity and other releases concerning the transactions contemplated by
this Agreement and, except as required by applicable Law or the applicable rules
or regulations of any Governmental Authority or stock exchange, no Party
(including each Party's Subsidiaries) shall issue any such publicity or other
release without the prior written consent of the other Party.
12.4 Assignment. Neither this Agreement nor any rights or obligations
hereunder shall be assigned or transferred in any way whatsoever by the Parties
hereto except with the prior written consent of the other Party hereto, which
consent such other Party shall be under no obligation to grant, and any
assignment or attempted assignment without such consent shall have no force or
effect with respect to the non-assigning Party. Subject to the preceding
sentence, this Agreement shall be binding on and inure to the benefit of the
Parties hereto and their successors and permitted assigns.
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12.5 Notices. Any and all notices or other communications required or
permitted under this Agreement shall be given in writing and delivered in Person
or sent by United States certified or registered mail, postage prepaid, return
receipt requested, or by overnight express mail, or by telex, facsimile or
telecopy to the address of such party set forth below. Any such notice shall be
effective upon receipt or three days after placed in the mail, whichever is
earlier.
if to Enron: Enron Corp.
1400 Smith Street
Houston, Texas 77002
Attention: Kenneth L. Lay and James V. Derrick, Jr.
Facsimile No.: (713) 853-9479
with a copy to: Vinson & Elkins L.L.P.
2300 First City Tower
Houston, Texas 77002
Attention: J. Mark Metts
Facsimile No.: (713) 615-5605
if to EOG: Enron Oil & Gas Company
1400 Smith Street
Houston, Texas 77002
Attention: Mark G. Papa and Barry Hunsaker
Facsimile No.: (713) 646-2750
with copies to: Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010
Attention: Arthur H. Rogers
Facsimile No.: (713) 651-5246
and
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Daniel A. Neff and David A. Katz
Facsimile No.: (212) 403-2000
Any party may, by notice so delivered, change its address for notice purposes
hereunder.
12.6 Governing Law. This Agreement shall be governed by and construed
in accordance with the Laws of the State of Delaware, excluding any choice of
Law rules that may direct the application of the Laws of another jurisdiction.
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12.7 Further Assurances. After the Closing each Party hereto at the
reasonable request of the other Party hereto and without additional
consideration, shall execute and deliver, or shall cause to be executed and
delivered, from time to time, such further certificates, agreements or
instruments of conveyance and transfer, assumption, release and acquittance and
shall take such other action as the other Party hereto may reasonably request,
to consummate or implement the transactions contemplated by this Agreement.
12.8 Severability. If any provision of this Agreement is invalid,
illegal or unenforceable, the balance of this Agreement shall remain in full
force and effect and this Agreement shall be construed in all respects as if
such invalid, illegal or unenforceable provision were omitted. If any provision
is inapplicable to any Person or circumstance, it shall, nevertheless, remain
applicable to all other Persons and circumstances.
12.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and which together
shall constitute but one and the same instrument.
12.10 Construction. Any section headings in this Agreement are for
convenience of reference only, and shall be given no effect in the construction
or interpretation of this Agreement or any provisions thereof. No provision of
this Agreement will be interpreted in favor of, or against, any Party by reason
of the extent to which any such Party or its counsel participated in the
drafting thereof or by reason of the extent to which any such provision is
inconsistent with any prior draft hereof or thereof.
12.11 Entire Agreement; Amendment. This Agreement, the Schedules
hereto, each of which is deemed to be a part hereof, and any agreements,
instruments or documents executed and delivered by the Parties (or their
Subsidiaries) pursuant to this Agreement, constitute the entire agreement and
understanding between the Parties, and it is understood and agreed that all
previous undertakings, negotiations and agreements between the Parties regarding
the subject matter hereof are merged herein. This Agreement may not be modified
orally, but only by an agreement in writing signed by each of the Parties;
provided that any modification to this Agreement shall not be effective unless
recommended to the Board of Directors of EOG by the Special Committee.
12.12 No Third Party Beneficiaries. Nothing in this Agreement shall
provide any benefit to any third party or entitle any third party to any claim,
cause of action, remedy or right of any kind, it being the intent of the Parties
that this Agreement shall not be construed as a third party beneficiary
contract; provided, however, that the indemnification provisions in Article 9
shall inure to the benefit of the Enron Parties and the EOG Parties as provided
therein.
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<PAGE> 41
IN WITNESS WHEREOF, the Parties have duly executed and delivered this
Agreement on the date first written above.
ENRON CORP.
By /s/ JEFFREY K. SKILLING
--------------------------------------
Jeffrey K. Skilling
President and Chief Operating Officer
ENRON OIL & GAS COMPANY
By /s/ MARK G. PAPA
--------------------------------------
Mark G. Papa
President and Chief Executive Officer
41
