<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): May 29, 1997
TRANSTEXAS GAS CORPORATION
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE
----------------------------------------------
(State or other jurisdiction of incorporation)
1-12204 76-0401023
- ------------------------ --------------------
(Commission File Number) (I.R.S. Employer
Identification No.)
1300 North Sam Houston Parkway East, Suite 310
Houston, Texas 77032
------------------------------------------------------------
(Address of principal executive offices, including zip code)
(281) 987-860O
-----------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Not applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 29, 1997, the Company entered into a Stock Purchase Agreement
with First Union Bank of Connecticut, as trustee under that certain
trust agreement dated February 28, 1997 by and between First
Intercontinental Leasing, L.P. and First Union Bank of Connecticut,
pursuant to which the Company sold all of the issued and outstanding
stock of its wholly owned subsidiary, TransTexas Transmission
Corporation, a Delaware corporation ("TTC"). The negotiated purchase
price of approximately $1.1 billion was paid in cash at closing.
TTC's assets consisted primarily of certain oil and gas producing
properties in Webb and Zapata Counties, Texas and pipeline gathering
and transmission assets located in Duval, Jim Hogg, Jim Wells,
Nueces, Webb and Zapata Counties, Texas. The purchase price is
subject to adjustment for, among other things, the value of certain
NGLs and stored hydrocarbons, the value of gas in TTC's pipeline,
prepaid expenses relating to post-effective date operations,
post-closing expenses relating to pre-closing operations, the value
of oil and gas produced and sold between the effective date of the
Stock Purchase Agreement and the closing date, property defects, and
estimated costs associated with liabilities incurred before closing.
Purchase price adjustments made at closing of the Lobo Sale are
expected to be subject to a review, reconciliation and resolution
process, which is expected to be completed within 105 days following
the closing and which could increase the total consideration received
by the Company.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not applicable.
ITEM 5. OTHER EVENTS.
In connection with the sale of TTC described in Item 2. above, the
Company solicited and obtained from the holders of its outstanding
11 1/2% Senior Secured Notes consents to certain waivers under and
amendments to the Indenture governing such notes. The Company also
solicited and obtained from the holders of its outstanding 13 1/4%
Senior Subordinated Notes consents to certain waivers under the
Indenture governing such notes.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
Not applicable.
-2-
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following financial statements, pro forma financial information
and exhibits are filed as a part of this report:
(a) Financial Statements of Businesses Acquired:
Not applicable.
(b) Pro forma financial information:
(1) Pro Forma Condensed Consolidated Balance Sheet dated January
31, 1997 (unaudited).
(2) Pro Forma Condensed Consolidated Statement of Operations for
the Year Ended January 31, 1997 (unaudited).
(c) Exhibits:
4.1 - First Supplemental Indenture dated May 29, 1997 by and
among the Company, TransTexas Transmission Corporation
and Firstar Bank of Minnesota, N.A.
10.1 - Stock Purchase Agreement dated as of May 29, 1997 by and
between the Company and First Union Bank of Connecticut,
as trustee.
-3-
<PAGE> 4
ITEM 8. CHANGE IN FISCAL YEAR.
Not applicable.
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.
Not applicable.
-4-
<PAGE> 5
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
information of TransTexas Gas Corporation (the "Company") as of and for the
year ended January 31, 1997, illustrates the effect, as described in Item 2 of
this Report on Form 8-K, of the sale of the Company's wholly owned subsidiary,
TransTexas Transmission Corporation ("Lobo Sale"). The unaudited pro forma
condensed consolidated balance sheet has been prepared assuming that the Lobo
Sale was consummated on January 31, 1997. The unaudited pro forma condensed
consolidated statement of operations has been prepared assuming that the Lobo
Sale was consummated on February 1, 1996.
The unaudited pro forma adjustments and the resulting unaudited pro
forma condensed consolidated financial information are based on the assumptions
noted in the footnotes thereto. Accordingly, the unaudited pro forma
adjustments and resulting unaudited pro forma condensed consolidated financial
information may change. The unaudited pro forma condensed consolidated
financial information does not purport to represent what the Company's
financial position or results of operations would have been had the Lobo Sale
actually occurred on the dates indicated or the financial position or results
of operations for any future date or period.
The unaudited pro forma condensed consolidated financial information
and notes thereto should be read in conjunction with the Company's historical
consolidated financial statements and the notes thereto as filed on Form 10-K.
-5-
<PAGE> 6
TRANSTEXAS GAS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JANUARY 31,1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Historical Adjustments Pro Forma
----------- ----------- -----------
ASSETS
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents ....................... $ 23,561 $ 1,073,420 (a) $ 980,586
(116,395)(b)
Cash restricted for interest .................... 46,000 46,000
Receivable from affiliates ...................... 3,248 3,248
Accounts receivable ............................. 78,660 -- 78,660
Inventories ..................................... 12,481 -- 12,481
Other current assets ............................ 24,984 -- 24,984
----------- ----------- -----------
Total current assets ................... 188,934 957,025 1,145,959
Net property and equipment ............................ 846,393 (446,810)(a) 399,583
Other assets .......................................... 17,825 -- 17,825
Deferred tax asset .................................... -- 14,380 (c) 14,380
----------- ----------- -----------
$ 1,053,152 $ 524,595 $ 1,577,747
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt ............ $ 5,787 $ -- $ 5,787
Accounts payable ................................ 28,150 -- 28,150
Accrued liabilities ............................. 83,411 (4,100)(b) 79,311
----------- ----------- -----------
Total current liabilities .............. 117,348 (4,100) 113,248
----------- ----------- -----------
Long-term debt, less current maturities ............... 8,775 (2,000)(b) 6,775
Production payments ................................... 11,931 (11,931)(b) --
Senior secured notes .................................. 800,000 -- 800,000
Subordinated notes .................................... 101,092 -- 101,092
Revolving credit agreement ............................ 26,268 -- 26,268
Deferred revenue ...................................... 54,554 (54,554)(b) --
Deferred income taxes ................................. 31,367 (45,747)(c) --
14,380 (c)
Payable to affiliates ................................. 19,621 262,200 (c) 126,821
(155,000)(d)
Other liabilities ..................................... 32,991 -- 32,991
Stockholders' equity (deficit):
Common stock .................................... 740 -- 740
Paid-in capital (deficit) ....................... (123,524) 155,000 (d) 31,476
Retained earnings ............................... 31,267 366,347 (e) 397,614
----------- ----------- -----------
(91,517) 521,347 429,830
Advances to affiliates .......................... (59,278) -- (59,278)
----------- ----------- -----------
Total stockholders' equity (deficit) ... (150,795) 521,347 370,552
----------- ----------- -----------
$ 1,053,152 $ 524,595 $ 1,577,747
=========== =========== ===========
</TABLE>
-6-
<PAGE> 7
TRANSTEXAS GAS CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(dollars in thousands)
(a) To record the Lobo Sale for a purchase price of $1,073.4 million:
<TABLE>
<S> <C>
Cash proceeds.......................... $ 1,073,420
Carrying value of stock sold........... (446,810)
-----------
Pretax gain on Lobo Sale.......... $ 626,610
===========
</TABLE>
In addition, purchase price adjustments were made for, among other
things, the value of certain NGLs and stored hydrocarbons, the value of
gas in TTC's pipeline, prepaid expenses relating to post-effective date
operations, post-closing expenses related to pre-closing operations, the
value of oil and gas produced and sold between the effective date of the
Stock Purchase Agreement and the closing date, property defects, and
estimated costs associated with liabilities incurred before closing.
Purchase price adjustments made at the closing of the Lobo Sale are
expected to be subject to a review, reconciliation and resolution process,
which is expected to be completed within 105 days following the closing
and which could increase the total consideration received by the Company.
(b) To record the application of a portion of the proceeds from (a) above:
<TABLE>
<S> <C>
Lobo Sale production payment......................... $ 43,810
Repayment of volumetric production payments
(deferred revenues), dollar-denominated
production payments and other debt
attributable to the Lobo Sale ..................... 72,585
--------
$116,395
</TABLE> ========
(c) To record the income tax effect of the Lobo Sale and to reclassify $14.4
million of deferred taxes to deferred tax assets.
<TABLE>
<S> <C>
Payable to TransAmerican pursuant to the Tax
Allocation Agreement................................. $ 262,200
Deferred income taxes.................................. (45,747)
----------
$ 216,453
==========
</TABLE>
(d) To record the assumption of $155 million of estimated net tax liability by
TransAmerican in accordance with the Tax Allocation Agreement.
(e) To record the effects on retained earnings as a result of (a) through (d).
<TABLE>
<S> <C>
Pretax gain on Lobo Sale................... $ 626,610
Lobo Sale production repayment............. (43,810)
Federal income taxes....................... (216,453)
---------
Total effect on retained earnings.... $ 366,347
=========
</TABLE>
-7-
<PAGE> 8
TRANSTEXAS GAS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JANUARY 31, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Revenues:
Gas, condensate and natural gas liquids ...... $ 363,459 $(223,077)(a) $ 140,382
Transportation ............................... 34,423 (34,423)(a) --
Gain on the sale of assets ................... 7,856 -- 7,856
Other ........................................ 609 -- 609
--------- --------- ---------
Total revenues ....................... 406,347 (257,500) 148,847
--------- --------- ---------
Costs and expenses:
Operating .................................... 114,453 (101,939)(a) 12,514
Depreciation, depletion and amortization ..... 132,453 (78,932)(a) 53,521
General and administrative ................... 45,596 -- 45,596
Taxes other than income taxes ................ 22,566 (12,818)(a) 9,748
Litigation settlement ........................ (96,000) -- (96,000)
--------- --------- ---------
Total costs and expenses ............. 219,068 (193,689) 25,379
--------- --------- ---------
Operating income ..................... 187,279 (63,811) 123,468
--------- --------- ---------
Other income (expenses):
Interest income .............................. 5,544 -- 5,544
Interest expense, net ........................ (97,007) (4,250)(b) (101,257)
--------- --------- ---------
Total other income (expense) ......... (91,463) (4,250) (95,713)
--------- --------- ---------
Income before income taxes ................... 95,816 (68,061) 27,755
Income taxes ....................................... 12,491 (2,777)(c) 9,714
--------- --------- ---------
Net income ........................... $ 83,325 $ (65,284) $ 18,041
========= ========= =========
</TABLE>
-8-
<PAGE> 9
TRANSTEXAS GAS CORPORATION
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(dollars in thousands)
(a) To adjust revenues, operating expenses, depreciation, depletion and
amortization and taxes other than income taxes as a result of the Lobo
Sale.
(b) To adjust interest expense as follows:
<TABLE>
<S> <C>
Interest on estimated federal income tax liability included
in payable to affiliate at an assumed rate of 9.0%........ $ 6,750
Historical interest expense on other debt................... (2,500)
--------
Total adjustment to interest expense.............. $ 4,250
========
</TABLE>
(c) To adjust income tax expense for the effects of adjustments (a) and (b)
above based on the federal statutory rate of 35%.
-9-
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
TRANSTEXAS GAS CORPORATION
By /s/ ED DONAHUE
--------------------------
Name: Ed Donahue
Title: Vice President
Dated: June 13, 1997
--------------
-10-
<PAGE> 11
EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description Page
- ---------------------------------------------------------------------------------------
<S> <C> <C>
4.1 First Supplemental Indenture dated May 29, 1997 by and among the
Company, TransTexas Transmission Corporation and Firstar Bank of
Minnesota, N.A.
10.1 Stock Purchase Agreement dated as of May 29, 1997 by and between
the Company and First Union Bank of Connecticut, as trustee.
</TABLE>
-11-
<PAGE> 1
EXHIBIT 4.1
TRANSTEXAS GAS CORPORATION,
Issuer
and
TRANSTEXAS TRANSMISSION CORPORATION,
Guarantor
and
FIRSTAR BANK OF MINNESOTA, NATIONAL ASSOCIATION,
successor by merger to
AMERICAN BANK NATIONAL ASSOCIATION,
Trustee
---------------------------------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of May 29, 1997
---------------------------------------------------
$800,000,000
11 1/2% Senior Secured Notes due 2002
<PAGE> 2
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of May 29, 1997 (the
"First Supplemental Indenture"), is made and entered into by and among
TRANSTEXAS GAS CORPORATION, a Delaware corporation (the "Company"), and
TRANSTEXAS TRANSMISSION CORPORATION, a Delaware corporation ("TTC"), and
FIRSTAR BANK OF MINNESOTA, NATIONAL ASSOCIATION, successor by merger to
AMERICAN BANK NATIONAL ASSOCIATION (the "Trustee"), under an Indenture dated as
of June 15, 1995, 1993, by and among the Company, TTC and the Trustee (the
"Original Indenture"). All capitalized terms used in this First Supplemental
Indenture that are defined in the Original Indenture, either directly or by
reference therein, have the meanings assigned to them therein, except to the
extent such terms are defined in this First Supplemental Indenture or the
context clearly requires otherwise.
WHEREAS, Section 9.02 of the Original Indenture provides, among other
things, that, subject to Section 6.8 of the Original Indenture, the Obligors,
when authorized by Board Resolutions, and the Trustee may, with the written
consent of the Holders of requisite percentage in aggregate principal amount of
the outstanding securities first having been obtained and delivered to the
Company and the Trustee, may amend or supplement the Original Indenture or the
Securities or enter into an indenture or indentures supplemental to the
Original Indenture for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of the Original Indenture or
the Securities or of modifying in any manner the rights of the Holders under
Original Indenture or the Securities; and
WHEREAS, in response to the Company's Consent Solicitation Statement
dated May 14, 1997 (the "Solicitation"), Holders of at least 66-2/3% of the
aggregate principal amount of the outstanding Notes consented in writing to the
adoption of the amendments to the Original Indenture that are set forth in
Article I of this First Supplemental Indenture (the "Proposed Amendments")
without, as of May 28, 1997, the date on which the Company certified the
receipt of such written consents to the Trustee, subsequent revocation; and
WHEREAS, the Boards of Directors of the Obligors have adopted
resolutions authorizing and approving the Proposed Amendments, and such
resolutions are in full force and effect on the date hereof; and
WHEREAS, the Company, TTC and the Trustee are executing and delivering
this First Supplemental Indenture in order to effect and evidence the adoption
of the Proposed Amendments;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this First
Supplemental Indenture hereby agree as follows:
ARTICLE I
AMENDMENTS TO ORIGINAL INDENTURE
Section 1.01. Amendment to Section 4.14. The first sentence of
Section 4.14 of the Original Indenture is hereby amended and restated in its
entirety to read as follows:
(a) The Company shall not, and shall not permit any
of its Subsidiaries to, consummate an Asset Sale, unless (A)
an amount equal to the Net Cash Proceeds therefrom is (i)
applied to the repurchase of Notes pursuant to an Offer to
Purchase and/or pursuant to a tender offer as described in
clause (y) of the fifth sentence of Section 12.15(a), (ii)
used to make cash payments in the ordinary course of business
and consistent with past practices that are not otherwise
prohibited by this Indenture, provided that the aggregate
amount so used pursuant to this clause (ii) from and after the
Issue Date does not exceed $50,000,000 (excluding amounts used
to acquire any Capital Assets in accordance with clause (iii)
below) or (iii) used to acquire Capital Assets for use in a
Related Business within 180 days after the date of such Asset
Sale, provided that the Company's most recent Reserve Report
indicates that
<PAGE> 3
the Company, after giving effect to the Asset Sale and to the
addition of proved reserves associated with any Exchange
Assets acquired in connection with such Asset Sale, has proved
reserves at least equal to 1 Tcfe of natural gas or with an
SEC PV10 of at least $900,000,000; and (B) in the case of any
Asset Sale or series of related Asset Sales for total proceeds
in excess of $5,000,000, at least 85% of the value of the
consideration for such Asset Sale consists of cash, Exchange
Assets or Permitted Capital Stock or any combination thereof.
Section 1.02. Amendment to Section 4.16. The second sentence of
Section 4.16 of the Original Indenture is hereby amended and restated in its
entirety to read as follows:
If the Company shall subsequently sell or otherwise transfer
all of the Capital Stock of any Guarantor (including but not
limited to TTC) held by the Company or shall subsequently sell
or transfer or cause to be sold or transferred all or
substantially all of the assets of such Guarantor (including
but not limited to TTC), the Guarantee required hereby shall
be discharged and terminated, and any such Guarantor
(including but not limited to TTC) shall be released from any
Security Documents to which it is a party, provided that the
capital stock or assets, as the case may be, of such Guarantor
sold or transferred are released from the Liens of the
Security Documents.
Section 1.03. Amendment to Section 4.17. Section 4.17 of the Original
Indenture is hereby amended and restated in its entirety to read as follows:
Section 4.17 Restriction on Sale and Issuance of
Subsidiary Stock. The Company shall not sell, and shall not
permit any of its Subsidiaries to, issue or sell, any shares
of Capital Stock of any Subsidiary of the Company to any
Person other than the Company or a Wholly Owned Subsidiary of
the Company, except that either the Company or TTC may sell
Qualified Capital Stock of TTC, provided (i) TTC is not
engaged in any business or activity other than that of TTC as
of the date hereof, (ii) the Company continues to own Capital
Stock of TTC representing (x) at least a majority of the
equity interest in TTC and (y) the voting power, under
ordinary circumstances, to elect the directors of TTC, and
(iii) the Company uses the net proceeds of such sale for one
of the purposes specified in the first sentence of Section
4.14, and (B) the Company may sell Qualified Capital Stock of
TTC, provided the Company shall be required to comply with the
requirements of Section 4.14 in connection with such sale and
provided further that the Company concurrently with such sale
deposits in the Collateral Account an amount equal to the
greater of (x) $846,000,000 and (y) the Release Amount
therefor.
Section 1.04. Amendment to Section 12.15. The first paragraph of
Section 12.15(a) of the Original Indenture is hereby amended by adding a new
sentence immediately following the fourth sentence of such first paragraph, to
read as follows:
Notwithstanding anything herein to the contrary, if any funds
are deposited into the Collateral Account pursuant to Section
4.17 (a "Section 4.17 Deposit"), the amount so deposited shall
be retained in the Collateral Account until the earlier of (x)
consummation of an Offer to Purchase made in accordance with
the terms of Section 4.14 following such Section 4.17 Deposit
or (y) consummation of a tender offer made by the Company
following such Section 4.17 Deposit to purchase all of the
outstanding Securities at a price at least equal to the
Purchase Price that would be payable therefor if such
Securities were then being purchased
<PAGE> 4
pursuant to an Offer to Purchase made in accordance with the
terms of Section 4.14. Concurrently with the consummation of
such Offer to Purchase or such tender offer, as the case may
be, the Company may withdraw such amount of the Section 4.17
Deposit, up to the full amount thereof, and utilize the amount
so withdrawn for the purpose of paying the Offer Price related
to such Offer to Purchase, or the purchase price related to
such tender offer, as the case may be, and any amount not used
to consummate such Offer to Purchase or such tender offer, as
the case may be, may be withdrawn by the Company and used for
general corporate purposes without restriction.
Section 1.05. Amendment to Section Article XIV. Article XIV of the
Original Indenture is hereby amended by adding a new Section immediately
following Section 14.14 of the Original Indenture, to read as follows:
Section 14.15 TTC No Longer Party Upon Certain
Events. Notwithstanding anything herein to the contrary, from
and after any sale or transfer of all of the Capital Stock of
TTC held by the Company or any sale or transfer of all or
substantially all of the assets of TTC, as permitted herein,
TTC shall cease to be a party hereto, and no obligations or
liabilities shall accrue to TTC hereunder or under any of the
Security Documents after TTC so ceases to be a party hereto;
provided that the capital stock or assets, as the case may be,
of TTC sold or transferred are released from the Liens of the
Security Documents.
ARTICLE II
GENERAL PROVISIONS
Section 2.01. Ratification of Indenture. The Original Indenture is in
all respects acknowledged, ratified and confirmed, and shall continue in full
force and effect in accordance with the terms thereof and as supplemented by
this First Supplemental Indenture. The Original Indenture and this First
Supplemental Indenture shall be read, taken and construed as one and the same
instrument.
Section 2.02. Effect of Headings. The Article and Section headings in
this First Supplemental Indenture are for convenience only and shall not affect
the construction of this First Supplemental Indenture.
Section 2.03. Severability. In case any one or more of the provisions
in this First Supplemental Indenture shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions shall not in any way be affected or impaired thereby, it
being intended that all of the provisions hereof shall be enforceable to the
full extent permitted by law.
Section 2.04. Governing Law. THIS FIRST SUPPLEMENTAL INDENTURE SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK.
Section 2.05. Counterparts. This First Supplemental Indenture may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
the same instrument.
[THE NEXT-FOLLOWING PAGE IS THE SIGNATURE PAGE]
<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this First Supplemental
Indenture to be duly executed as of day and year first above written.
TRANSTEXAS GAS CORPORATION
Attest: /s/ TIM MOORE By: /s/ ARNOLD H. BRACKENRIDGE
-------------------------------- ----------------------------
Tim Moore, Assistant Secretary Name: Arnold H. Brackenridge
Title: President
TRANSTEXAS TRANSMISSION
CORPORATION
Attest: /s/ TIM MOORE By: /s/ ARNOLD H. BRACKENRIDGE
-------------------------------- ----------------------------
Tim Moore, Assistant Secretary Name: Arnold H. Brackenridge
Title: President
FIRSTAR BANK OF MINNESOTA,
NATIONAL ASSOCIATION, Trustee
By: /s/ FRANK P. LESLIE, III
----------------------------
Name: Frank P. Leslie, III
Title: Vice President
<PAGE> 1
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
TRANSTEXAS GAS CORPORATION
("SELLER")
AND
FIRST UNION BANK OF CONNECTICUT, AS TRUSTEE
("BUYER")
DATED MAY 29, 1997
<PAGE> 2
TABLE OF CONTENTS
PAGE
<TABLE>
<S> <C>
ARTICLE I SALE AND PURCHASE OF COMMON STOCK
1.01. Agreement to Sell; Purchase Price . . . . . . . . . . . . -1-
1.02. Adjustments to Purchase Price . . . . . . . . . . . . . . -2-
(a) Preliminary Settlement Statement
(b) Upward Adjustments
(c) Downward Adjustments
1.03. Post-Closing Reconciliation of the Purchase Price . . . . -4-
(a) Final Settlement Statement
(b) Payment of Post-Closing Adjustments
(c) Resolution of Disputed Items
1.04. Revenues, Expenses, and Taxes . . . . . . . . . . . . . . -5-
(a) Revenues
(b) Division of Expenses; Payment
(c) Tax Prorations
1.05. Payment Method . . . . . . . . . . . . . . . . . . . . . . -5-
1.06. Principles of Accounting . . . . . . . . . . . . . . . . . -5-
1.07. Excluded Assets . . . . . . . . . . . . . . . . . . . . . -6-
1.08. Suspense Accounts . . . . . . . . . . . . . . . . . . . . -7-
1.09. Pre-Closing Company Hydrocarbons . . . . . . . . . . . . . -7-
1.10. Allocations . . . . . . . . . . . . . . . . . . . . . . . -7-
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER
2.01. Organization and Good Standing . . . . . . . . . . . . . . -8-
2.02. Authority and Authorization of Agreement . . . . . . . . . -8-
2.03. Due Execution and Binding Obligation . . . . . . . . . . . -8-
2.04. Company Shares; Shares . . . . . . . . . . . . . . . . . . -8-
2.05. Company Capitalization . . . . . . . . . . . . . . . . . . -9-
2.06. Company Financial Statements . . . . . . . . . . . . . . . -9-
2.07. No Violations . . . . . . . . . . . . . . . . . . . . . .-10-
2.08. Account Information . . . . . . . . . . . . . . . . . . .-10-
2.09. Powers of Attorney . . . . . . . . . . . . . . . . . . . .-10-
2.10. Labor Matters . . . . . . . . . . . . . . . . . . . . . .-10-
2.11. Tax Matters . . . . . . . . . . . . . . . . . . . . . . .-10-
2.12. Employee Benefit Plans . . . . . . . . . . . . . . . . . .-11-
(a) List of Plans
(b) Types of Plans
(c) Compliance
(d) Penalties
2.13. Contracts . . . . . . . . . . . . . . . . . . . . . . . .-12-
2.14. Litigation and Claims . . . . . . . . . . . . . . . . . .-13-
2.15. Transfer Requirements and Preference Rights . . . . . . .-13-
2.16. Compliance with Laws and Permits . . . . . . . . . . . . .-13-
2.17. Environmental Compliance . . . . . . . . . . . . . . . . .-14-
2.18. Status of Contracts . . . . . . . . . . . . . . . . . . .-15-
2.19. Burdens, Taxes, Expenses, and Revenues . . . . . . . . . .-15-
2.20. Production and Pipeline Balances and Penalties . . . . . .-16-
</TABLE>
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2.21. Plugging Status . . . . . . . . . . . . . . . . . . . . .-16-
2.22. Equipment . . . . . . . . . . . . . . . . . . . . . . . .-16-
2.23. Current Commitments . . . . . . . . . . . . . . . . . . .-16-
2.24. Payout Balances . . . . . . . . . . . . . . . . . . . . .-16-
2.25. Title . . . . . . . . . . . . . . . . . . . . . . . . . .-17-
2.26. Insurance . . . . . . . . . . . . . . . . . . . . . . . .-17-
2.27. Condemnation . . . . . . . . . . . . . . . . . . . . . . .-18-
2.28. Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . .-18-
2.29. No Fees . . . . . . . . . . . . . . . . . . . . . . . . .-19-
2.30. PUHCA/NGA . . . . . . . . . . . . . . . . . . . . . . . .-19-
2.31. Investment Company . . . . . . . . . . . . . . . . . . . .-19-
2.32. Section 29 Credit Wells . . . . . . . . . . . . . . . . .-19-
2.33. Texas Utility Status . . . . . . . . . . . . . . . . . . .-19-
2.34. Actions . . . . . . . . . . . . . . . . . . . . . . . . .-19-
2.35. Severance Tax Exemption . . . . . . . . . . . . . . . . .-19-
2.36. Operations . . . . . . . . . . . . . . . . . . . . . . . .-20-
(a) Operation of the Properties
(b) Operation of the Company
2.37. Copies of Seismic Data . . . . . . . . . . . . . . . . . .-22-
2.38. Casualty Loss and Government Takings . . . . . . . . . . .-22-
2.39. Accuracy of Representations . . . . . . . . . . . . . . .-22-
2.40. Property Ownership . . . . . . . . . . . . . . . . . . . .-22-
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER
3.01. Organization and Good Standing . . . . . . . . . . . . . .-23-
3.02. Authority and Authorization of Agreement . . . . . . . . .-23-
3.03. Due Execution and Binding Obligation . . . . . . . . . . .-23-
3.04. No Violations . . . . . . . . . . . . . . . . . . . . . .-23-
3.05. Actions . . . . . . . . . . . . . . . . . . . . . . . . .-24-
3.06. Knowledgeable Investor . . . . . . . . . . . . . . . . . .-24-
3.07. Accuracy of Representations . . . . . . . . . . . . . . .-24-
3.08. HSR Act . . . . . . . . . . . . . . . . . . . . . . . . .-24-
3.09. Location . . . . . . . . . . . . . . . . . . . . . . . . .-24-
ARTICLE IV ACCEPTED ENVIRONMENTAL DEFECTS; HOLD BACK FOR PROPERTY DEFECTS
4.01. Accepted Environmental Defects . . . . . . . . . . . . . .-24-
4.02. Holdback for Property Defects and Outstanding Interests .-25-
ARTICLE V JUDGMENT LIENS
5.01. Judgment Liens . . . . . . . . . . . . . . . . . . . . . .-29-
5.02. Security . . . . . . . . . . . . . . . . . . . . . . . . .-30-
5.03. Foreclosure of the Judgment Lien. . . . . . . . . . . . .-30-
ARTICLE VI ADDITIONAL AGREEMENTS AND COVENANTS
6.01. Public Announcements . . . . . . . . . . . . . . . . . . .-30-
6.02. Tax Agreements . . . . . . . . . . . . . . . . . . . . . .-31-
6.03. Buyer Transactions . . . . . . . . . . . . . . . . . . . .-32-
6.04. Company Records . . . . . . . . . . . . . . . . . . . . .-32-
6.05. Company Obligations . . . . . . . . . . . . . . . . . . .-33-
6.06. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .-33-
</TABLE>
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6.07. Name Change; Use of TransTexas Name, Etc. . . . . . . . .-35-
ARTICLE VII CLOSING
7.01. Closing . . . . . . . . . . . . . . . . . . . . . . . . .-36-
7.02. Seller's Closing Obligations . . . . . . . . . . . . . . .-36-
7.03. Buyer's Closing Obligations . . . . . . . . . . . . . . .-38-
7.04. Payment of Purchase Price . . . . . . . . . . . . . . . .-39-
7.05. Recording of Documents . . . . . . . . . . . . . . . . . .-40-
ARTICLE VIII SURVIVAL
8.01. Survival . . . . . . . . . . . . . . . . . . . . . . . . .-40-
ARTICLE IX LIMITATIONS
9.01. Disclaimer of Warranties . . . . . . . . . . . . . . . . .-40-
9.02. Texas Deceptive Trade Practices Act Waiver . . . . . . . .-41-
9.03. Damages . . . . . . . . . . . . . . . . . . . . . . . . .-42-
9.04. Shares . . . . . . . . . . . . . . . . . . . . . . . . . .-42-
ARTICLE X ALLOCATION OF LIABILITIES; INDEMNIFICATION
10.01. Assumption of Costs and Liabilities . . . . . . . . . . .-43-
10.02. Assignment of Excluded Assets . . . . . . . . . . . . . .-43-
10.03. Buyer's Indemnification . . . . . . . . . . . . . . . . .-43-
10.04. Seller's Indemnification . . . . . . . . . . . . . . . . .-43-
10.05. Express Negligence Rule . . . . . . . . . . . . . . . . .-44-
10.06. Limits on Seller's Indemnity . . . . . . . . . . . . . . .-44-
10.07. Third Party Claims and Obligations . . . . . . . . . . . .-44-
10.08. Exclusive Remedy . . . . . . . . . . . . . . . . . . . . .-45-
10.09. Seller's Title Warranty in Prior Conveyances . . . . . . .-45-
ARTICLE XI MISCELLANEOUS
11.01. Counterparts . . . . . . . . . . . . . . . . . . . . . . .-46-
11.02. Governing Law . . . . . . . . . . . . . . . . . . . . . .-46-
11.03. Entire Agreement . . . . . . . . . . . . . . . . . . . . .-46-
11.04. Expenses . . . . . . . . . . . . . . . . . . . . . . . . .-46-
11.05. Notices . . . . . . . . . . . . . . . . . . . . . . . . .-47-
11.06. Successors and Assigns . . . . . . . . . . . . . . . . . .-48-
11.07. Amendments and Waivers . . . . . . . . . . . . . . . . . .-48-
11.08. Appendices, Schedules and Exhibits . . . . . . . . . . . .-48-
11.09. Interpretation . . . . . . . . . . . . . . . . . . . . . .-48-
11.10. Arbitration . . . . . . . . . . . . . . . . . . . . . . .-49-
11.11. Agreement for the Parties' Benefit Only . . . . . . . . .-49-
11.12. Severability . . . . . . . . . . . . . . . . . . . . . . .-49-
11.13. No Recordation . . . . . . . . . . . . . . . . . . . . . .-49-
11.14. Time . . . . . . . . . . . . . . . . . . . . . . . . . . .-50-
11.15. Further Assurances . . . . . . . . . . . . . . . . . . . .-50-
11.16. No Recourse . . . . . . . . . . . . . . . . . . . . . . .-50-
11.17. Contribution Agreement . . . . . . . . . . . . . . . . . .-50-
</TABLE>
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SCHEDULES, EXHIBITS AND APPENDICES
SCHEDULES
Schedule 1.02 Preliminary Settlement Statement
Schedule 1.07 Excluded Assets
Schedule 1.08 Suspense Accounts
Schedule 2.04 Other Owners of Interests in Company Shares
Schedule 2.06 Financial Statements
Schedule 2.07(c) Violations and Defaults Under Obligations
Schedule 2.08 Account Information
Schedule 2.10 Employee Information and Claims
Schedule 2.11 Tax Matters
Schedule 2.12 Employee Benefit Plans
Schedule 2.13 Contracts, Agreements and Commitments
Schedule 2.14 Litigation and Claims
Schedule 2.15 Transfer Requirements and Preference Rights
Schedule 2.16 Compliance with Laws and Permits
Schedule 2.17 Environmental Compliance
Schedule 2.19 Burdens, Taxes, Expenses and Revenues
Schedule 2.20 Production and Pipeline Balances and Penalties
Schedule 2.23 Current Commitments
Schedule 2.24 Payout Balances
Schedule 2.28(b) Affiliates of TransAmerican
Schedule 2.28(c) List of and Affiliates involved in Reorganization Proceedings
Schedule 2.28(g) M&M Liens
Schedule 2.32 Section 29 Credit Wells
Schedule 2.33 Texas Utility Tariffs and Proceedings
Schedule 2.35 Severance Tax Exemption
Schedule 2.36(b)(i) Operation of the Company
Schedule 2.36(b)(vi) Settlements
Schedule 7.03(ix) Parties to be paid by Buyer at Closing
Schedule 2.40 Property Ownership
Schedule 4.02 Property Defects and Outstanding Interests
Schedule I Buyer Assumed Contracts
Schedule II Seismic Data
Schedule III Equipment
Schedule IV Permits
Schedule V Pipeline Equipment
Schedule VI Retained Contracts
EXHIBITS
Exhibit "A" Allocated Values
Exhibit "A-Part I" Leases
Exhibit "A-Part II" Wells
Exhibit "A-Part III" Fee Mineral and Royalty Interests
Exhibit "A-Part IV" Surface Contracts
Exhibit "A-Part V" Lease WI, NRI, and Allocated Values
Exhibit "B-Part I" Pipeline Description
</TABLE>
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Exhibit "B-Part II" Pipeline Rights-of-Way
Exhibit "B-Part III" Excluded Systems and Equipment
Exhibit C Form of Special Warranty Conveyance
Exhibit D Form of Memorandum of Option
APPENDICES
Appendix 1 Defined Terms
Appendix 2 Hydrocarbon Valuation
</TABLE>
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and
entered into on this the 29th day of May, 1997 ("Closing Date"), by and between
TransTexas Gas Corporation, a Delaware corporation ("Seller"), whose address is
1300 East North Belt, Suite 310, Houston, Texas 77032-2949, and First Union
Bank of Connecticut, a Connecticut banking corporation, solely, subject to
Section 11.16, in its capacity as trustee ("Buyer") under the Trust Agreement
("Trust Agreement"), dated as of February 28, 1997, by and between First
Intercontinental Leasing, L.P. and First Union Bank of Connecticut, whose
address is 10 State House Square, Hartford, Connecticut 06103.
PREAMBLE
A. Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, all of the issued and outstanding capital stock of TransTexas
Transmission Corporation, a Delaware corporation ("Company"), a wholly-owned
subsidiary of Seller, upon the terms and subject to the conditions set forth in
this Agreement.
B. All capitalized terms shall have the meanings set forth in the
body of this instrument or set forth on Appendix 1 attached hereto.
IN CONSIDERATION OF the covenants, obligations and agreements
of the parties set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, for
themselves and their respective successors and assigns, covenant and agree as
follows:
ARTICLE I
SALE AND PURCHASE OF COMMON STOCK
1.01. Agreement to Sell; Purchase Price. Contemporaneously
with the execution and delivery hereof and subject to the terms and conditions
of this Agreement, Seller is selling and conveying, and Buyer is purchasing and
accepting, all issued and outstanding common stock of the Company (the "Company
Shares") for a total consideration of one billion, ninety-five million, six
hundred twenty-six thousand dollars ($1,095,626,000), subject to adjustment as
herein provided (the "Purchase Price"), payable at Closing as herein provided.
1.02. Adjustments to Purchase Price.
(a) Preliminary Settlement Statement. The Purchase Price
paid at Closing has been determined as shown in the preliminary settlement
statement attached hereto as Schedule 1.02 (the "Preliminary Settlement
Statement") to reflect the adjustments set forth in this Section 1.02 and
elsewhere in this Agreement. Seller and Buyer acknowledge that some items in
the Preliminary Settlement Statement are estimates or otherwise subject to
change in the Final Settlement Statement to be prepared pursuant to Section
1.03.
(b) Upward Adjustments. The Purchase Price will be
increased (without
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duplication) by the following costs, expenses, and revenues:
(i) the value of all Stored Hydrocarbons and Line Pack
(as set forth in and determined pursuant to Appendix 2);
(ii) the amount of $0, which value represents the agreed
value of all expenses paid by Seller or the Company prior to the
Effective Date and attributable under GAAP to the ownership or
operation of the Properties, or any of them, from and after the
Effective Date;
(iii) an amount equivalent to interest on the Purchase
Price, after all upward and downward adjustments thereto as provided
in this Agreement, at the Agreed Rate for the month of March, 1997;
(iv) an amount equal to the value (as determined pursuant
to Appendix 2) of the underproduction of Hydrocarbons from the Leases,
Lands, and Wells that was attributable to Company's Working Interest
(and the Seller's Working Interest, if any) as of the Effective Date;
(v) an amount equal to the value (as determined pursuant
to Appendix 2) of the Positive Pipeline Imbalances; and
(vi) any other increases in the Purchase Price specified
in this Agreement or agreed to by the parties in writing at or prior
to Closing.
(c) Downward Adjustments. The Purchase Price will be
decreased (without duplication) by the following:
(i) all actual and reasonable costs and expenses,
including capital expenditures, if any, paid or incurred by Buyer or
its successors and assigns prior to Closing, and approved in writing
by Seller, in connection with the Properties, to the extent they are
attributable under GAAP to the ownership or operation of the
Properties prior to 11:59 p.m., Central Daylight Savings Time, on the
Closing Date (the "Closing Time"), other than those costs and expenses
paid or payable pursuant to the Interim Operating Agreement;
(ii) the value of all Hydrocarbons produced and saved from
or attributable to the Company's Net Revenue Interest (and the
Seller's Working Interest, if any) from the Effective Date to 7:00
a.m., Central Daylight Savings Time, on the first day of the month
following the month in which Closing occurs (the "Closing Month
Accounting Time"), including all such Hydrocarbons extracted or
recovered at the Exxon King Ranch Facility and the McKendrick
saltwater disposal facility and, further, including in such value (and
the Company's Net Revenue Interest (and the Seller's Working Interest,
if any) shall not be reduced by) any Hydrocarbons sold, disposed of,
or taken, or to be taken, by or on behalf of any holder of a
production payment, royalty interest, or other interest or burden on
the Properties under a Retained Contract, or under any other
instrument the effect of which, either alone or in combination, is to
cause Company's and Seller's Net Revenue Interests in any Property, in
the aggregate, to be less than that set forth in Exhibits "A-Part II"
and "A-Part V" (net of all production and severance taxes payable with
respect thereto, and all as determined pursuant to Appendix 2);
(iii) the value (as determined pursuant to Appendix 2) of
all liquid Hydrocarbons recovered from gas after being delivered to
the Pipeline Systems and prior to redelivery to the shipper, during
the period from the Effective Date to the Closing Month Accounting
Stock Purchase Agreement
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Time, and including all liquid Hydrocarbons extracted or recovered
therefrom at the Exxon King Ranch Facility;
(iv) the value (as determined pursuant to Appendix 2) of
all Stored Hydrocarbons and Line Pack sold or otherwise disposed of
prior to the Closing Month Accounting Time;
(v) any income, revenues, proceeds, and other benefits
derived from the ownership, operation, or use of the Properties
(including the Pipeline Systems) attributable under GAAP to the period
from the Effective Date to the Closing Month Accounting Time, except
income, revenues, proceeds, and other benefits derived from
Pre-Closing Company Hydrocarbons;
(vi) an amount equal to the value (as determined pursuant
to Appendix 2) of the overproduction of Hydrocarbons from the Lands,
Leases, and Wells that was attributable to the Company's Working
Interest (and the Seller's Working Interest, if any) as of the
Effective Date;
(vii) an amount equal to the value (as determined pursuant
to Appendix 2) of the Negative Pipeline Imbalances; and
(viii) any other decreases in the Purchase Price specified
in this Agreement or agreed to by the parties in writing at or prior
to Closing.
1.03. Post-Closing Reconciliation of the Purchase Price.
(a) Final Settlement Statement. As soon as reasonably
practicable, and in any event within 90 days after Closing, Seller will prepare
and deliver to Buyer a final settlement statement for the Company containing
its proposed statement of final reconciliation of the adjustments to the
Purchase Price specified in Section 1.02 and elsewhere herein (including any
adjustment to the amount specified in Section 1.02(b)(iii)), together with such
supporting information (the "Supporting Information"), including data,
calculations, and documents, as are required to verify such reconciliation (the
"Final Settlement Statement"). Buyer will have ten (10) Business Days after
receipt of the Final Settlement Statement in which to request any other
Supporting Information reasonably necessary to evaluate the Final Settlement
Statement. Seller will within ten (10) Business Days after receiving Buyer's
request provide such additional Supporting Information to Buyer. Buyer will
have 45 days after receiving Seller's Final Settlement Statement in which to
provide Seller with its written exceptions to any items in the Final Settlement
Statement that Buyer disputes in good faith, including any items Buyer disputes
due to insufficient Supporting Information (whether or not Buyer had previously
requested such Supporting Information); provided that items set forth in the
Preliminary Settlement Statement that were disputed by Buyer and not resolved
by written agreement of the parties prior to Closing shall continue to be in
dispute and deemed to be included in Buyer's written exceptions. All items in
the Final Settlement Statement to which Buyer does not make an exception within
the 45-day review period will be deemed correct.
(b) Payment of Post-Closing Adjustments. Upon the
resolution of or agreement to all adjustments to the Purchase Price paid at
Closing, all adjustments will be offset against each other so that only one
reconciliation payment is required. The party owing payment will pay the other
party the net post-Closing adjustment to the Purchase Price within ten (10)
days after the later of (i) expiration of Buyer's 45-day review period for the
Final Settlement Statement or (ii) resolution of all disputes pursuant to
Section 1.03(c). Such payment shall include interest at the Agreed Rate from
the Closing Date until paid.
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(c) Resolution of Disputed Items. After the completion
and delivery of Seller's proposed Final Settlement Statement, the parties agree
to negotiate in good faith to attempt to reach agreement on the amount due with
respect to all disputed Purchase Price adjustments. If the parties are unable
to agree on the amount due with respect to all disputed items within 60 days
after Seller receives Buyer's written exceptions to the Final Settlement
Statement, then either Buyer or Seller may submit the issue to Arthur Andersen
L.L.P., or such other Person as the parties may agree, who shall have the power
and authority to resolve all such disputes. The decision of such third party
shall be final and binding upon Buyer and Seller, and is nonappealable.
1.04. Revenues, Expenses, and Taxes.
(a) Revenues. If either party receives any revenues that
belong to the other party under this Agreement, the party receiving such
revenues shall promptly remit those revenues to the other party. If any such
revenues are received prior to completion of the post-Closing reconciliation
provided in Section 1.03 then, notwithstanding the foregoing, the payment of
such amounts shall be included in such reconciliation. The party receiving
revenues of the other shall promptly notify the other of such receipt but, in
any event, prior to the completion of the final reconciliation if received
prior to that date.
(b) Division of Expenses; Payment. From and after the
Closing Time, the Company and Buyer shall bear and promptly pay all Assumed
Obligations. From and after the Closing Time, Seller shall bear and promptly
pay all Retained Liabilities. Subject to Section 10.07, either party may pay
any obligation that is the responsibility of the other party under this
Agreement and the party on whose behalf the obligations are paid shall promptly
reimburse the other party for all costs and expenses, of whatever kind or
nature, incurred in connection therewith upon receiving satisfactory evidence
of such payment.
(c) Tax Prorations. Real and personal property taxes for
the Properties shall be prorated between Buyer and Seller as of the Effective
Date; provided that Buyer shall pay all such taxes attributable to the calendar
year 1997 to the extent due and payable after Closing, and at Closing the
Purchase Price has been decreased by Seller's share of such taxes for the
period prior to the Effective Date. The actual real and personal property taxes
are not known on the Closing Date, and Seller's share of such taxes was
determined by using the rates and millages for the most recent year available
and the assessed values for the year 1996, with appropriate adjustments for any
known or anticipated changes thereto. When Buyer receives the actual tax
statements for the Properties from the appropriate taxing authorities, Buyer
shall deliver to Seller a copy of such statements. If the proration for Seller
that would have been made using actual tax statements is different than the
Purchase Price adjustment made at Closing, the party owing payment shall pay
the other such difference within five (5) Business Days after receipt of such
statement, unless such determination is made prior to the completion and
payment of the post-Closing reconciliation under Section 1.03, in which case
such payment shall be made in conjunction with such reconciliation. In no event
shall the post-Closing reconciliation under Section 1.03 be delayed pending
determination of the proration of taxes pursuant to this Section 1.04(c).
1.05. Payment Method. Unless the parties otherwise agree in
writing, all payments under this Agreement will be by wire transfer in
immediately available funds to an account designated by the party to receive
payment.
1.06. Principles of Accounting. Except as otherwise provided
in this Article I, the Preliminary Settlement Statement was prepared, and the
Final Settlement Statement will be prepared,
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in accordance with GAAP.
1.07. Excluded Assets.
The following assets which might otherwise be considered as
attaching to the Properties or owned by the Company shall be excluded from the
provisions of this Agreement and shall be deemed to be (without duplication)
Excluded Assets: (i) the properties described in Schedule 1.07; (ii) all
accounts receivable, notes receivable, cash, cash equivalents, trade credits,
and general intangibles (as defined in the Texas Uniform Commercial Code) of
the Company attributable under GAAP with respect to any period of time prior to
the Closing Month Accounting Time, other than funds held in suspense accounts,
or other similar accounts containing funds of others, and pipeline and
production imbalances relating to the Properties; (iii) all claims or causes of
action of the Company (A) arising from acts, omissions or events, or damage to
or destruction of property, occurring prior to the Closing Time, (B) arising
under or with respect to any contract affecting the Properties that would
result in any Retained Liabilities (including claims for adjustments or
refunds), or (C) with respect to any of the Excluded Assets; (iv) all rights
and interests of the Company (A) under any policy of insurance or indemnity,
(B) under any bond, including the Finklestein Supersedeas Bond, or (C) to any
insurance or condemnation proceeds or awards, to the extent arising in each
case from acts, omissions, or events, or damage to or destruction of property
occurring prior to the Closing Time; (v) all claims of the Company for refunds
of or loss carry forwards with respect to (A) production taxes or any other
taxes (other than taxes described in clauses (B) and (C) below) attributable to
any period or portion thereof prior to the Closing Month Accounting Time (other
than real or personal property taxes attributable to the period after the
Effective Date), (B) income or franchise taxes for any period or portion
thereof ending on or prior to the Closing Time, or (C) any taxes attributable
to the Excluded Assets, to the extent that Seller has retained liability for
such taxes pursuant to this Agreement; (vi) all amounts due and payable to
Company as adjustments to insurance premiums related to the Properties; (vii)
all proceeds, income and revenues attributable under GAAP to (A) the Properties
for any period prior to the Closing Month Accounting Time or (B) the Excluded
Assets; (viii) all documents and instruments of the Company that are protected
by the attorney-client privilege; (ix) all Data that cannot continue to be
owned by the Company following consummation of the transactions contemplated
hereby and identified in Schedule 1.07; (x) all audit rights arising under any
agreement or contract or otherwise with respect to any time period prior to the
Closing Time or to any of the Excluded Assets; provided, however, that Tax
audits shall be governed exclusively by Section 6.02 hereof; (xi) all notes,
memorandums, agreements or reports of any consultant or other professional
employed by the Company in connection with the sale of the Company; (xii) all
agreements, communications and correspondence between the Seller or the Company
and either Jefferies & Co., Inc. or First Union Company of North Carolina, Inc.
(collectively, the "Advisor") and their respective employees, representatives
or agents relating to the transactions contemplated by this Agreement; (xiii)
all lists of prospective purchasers for such transactions compiled by either
the Seller or the Advisor; (xiv) all bids submitted by any prospective
purchasers of the Company; (xv) all analyses by Company or the Advisor of any
bids submitted by any prospective purchaser; (xvi) all correspondence or
communications between the Company or the Advisor and their respective
employees, representatives or agents, and any prospective purchaser of the
Company other than the Buyer; (xvii) all correspondence or communication
between the Company and the Advisor, their respective employees,
representatives or agents, regarding any or all of the bids, the prospective
purchasers, the engagement of or the activities of the Advisor or any of the
transactions contemplated in this Agreement; (xviii) all internal
correspondence and communications of the Company with respect to the sale of
the Company or any transaction contemplated in this Agreement; (xix) the
Excluded Systems and Equipment and all other personal property and real
property of the Company, other than the Properties and the Shares, including
all office furniture, fixtures and equipment and all vehicles; (xx)
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all contracts and agreements not constituting part of the Properties; (xxi) all
security deposits and other deposits; (xxii) all Pre-Closing Company
Hydrocarbons and all liquid Hydrocarbons stored at the Exxon King Ranch
Facility on the Effective Date; and (xxiii) the Finklestein Supersedeas Bond,
except to the extent any such items identified in clauses (i) through (xxi) are
specifically identified in Exhibits "A-Part I" through "A-Part IV," "B-Part I,"
"B-Part II," and Schedules I through V.
1.08. Suspense Accounts. Buyer shall be responsible for the
payment of the amount paid to Buyer, or its designee, at Closing pursuant to
Section 7.02(xvi) to the parties and in the amounts specified in Schedule 1.08,
which amount represents the total amount of all funds held in suspense accounts
of Seller and Company with respect to the Properties. Such payment obligation
shall be an Assumed Obligation; provided, that, Buyer's assumption of such
payment obligation shall be limited to and shall not exceed the amount paid to
Buyer, or its designee, at Closing. Any Liabilities arising with respect to
the withholding of such funds prior to the Closing Time, and the payment of
amounts in excess of the amount paid to Buyer, or its designee, at Closing,
shall constitute Retained Liabilities.
1.09. Pre-Closing Company Hydrocarbons. Buyer and Company
have sold to Seller the Hydrocarbons attributable to the Properties for the
period from the Closing Time to the end of the Closing Month Accounting Time.
Notwithstanding anything herein to the contrary, Seller agrees to assume, pay
and discharge, when due, all production and severance taxes and royalties
payable with respect to Pre-Closing Company Hydrocarbons, and the payment of
such obligations shall constitute Retained Liabilities.
1.10. Allocations. The value assigned to each portion of the
Properties in Exhibits "A," "A-Part II," and "A-Part V" is hereafter referred
to as the "Allocated Value" for that portion of the Properties.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer (and its successors
and assigns) at and as of Closing and the Closing Time the following:
2.01. Organization and Good Standing.
(a) Seller and Company are corporations duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and have all requisite corporate power and authority to own and lease the
properties and assets they currently own and lease and to carry on their
businesses as such businesses are currently conducted. Seller and Company are
duly licensed or qualified to do business as foreign corporations in the State
of Texas and are in good standing in the State of Texas.
(b) Seller is not a "foreign person" for the purposes of
Section 1445 or Section 7701 of the Code.
(c) Seller has heretofore delivered or made available to
Buyer true and complete copies of the Certificates of Incorporation and Bylaws
of the Company and Seller, as amended and in effect as of the Closing Date, and
true and complete copies of the minute books and stock transfer books of
Company and, except as previously disclosed in writing to the Buyer, the
Seller.
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2.02. Authority and Authorization of Agreement. Seller has
all requisite corporate power and authority to execute and deliver this
Agreement, to consummate the transactions contemplated by this Agreement, and
to perform all the terms and conditions of this Agreement to be performed by
it. The execution and delivery of this Agreement by Seller, the performance by
it of all the terms and conditions to be performed by it, and the consummation
of the transactions contemplated by this Agreement have been duly and validly
authorized and approved by all necessary corporate action on the part of
Seller.
2.03. Due Execution and Binding Obligation. This
Agreement, and all other documents and instruments executed and delivered by
Seller hereunder, have been duly executed and delivered on behalf of Seller and
constitute the legal, valid, and binding obligations of Seller, enforceable
against it in accordance with their terms, except as such enforceability may be
limited by bankruptcy, insolvency, or other laws relating to or affecting the
enforcement of creditors' rights generally and general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) ("Equitable Principles").
2.04. Company Shares; Shares. (a) Except as disclosed on
Schedule 2.04, the Seller holds of record and owns beneficially all of the
outstanding Company Shares free and clear of any security interest, lien,
option, warrant, purchase right, or other encumbrance (except as created by
this Agreement and restrictions on sales of stock under applicable securities
laws). By the purchase of the Company Shares pursuant to this Agreement, the
Buyer has obtained good and valid title to all of the outstanding Company
Shares free and clear of all security interests, liens, options, warrants,
purchase rights, or other encumbrances (other than those created by, through or
under Buyer and restrictions on sales of stock under applicable securities
laws). The Seller is not a party to any option, warrant, purchase right, or
other contract or commitment (other than this Agreement) that could require the
Seller to sell, transfer, or otherwise dispose of any Company Shares. The
Seller is not a party to any voting trust, proxy, or other agreement or
understanding with respect to the voting of any Company Shares.
(b) Assuming the representations and warranties contained
in Section 4.6 of the Exchange and Contribution Agreement, dated as of January
28, 1997, among Southeast Marine, Inc., Frederick A. Forster, and TransAmerican
Natural Gas Corporation, were true and correct when made, as of Closing (i) the
Company holds of record and owns beneficially the Shares free and clear of any
security interest, lien, option, warrant, purchase right or other encumbrance,
other than liens pursuant to the Pledge Agreements (as such term is defined in
the Exchange and Contribution Agreement), and (ii) the Shares constitute all of
the issued and outstanding shares of capital stock of Signal Capital Holdings
Corporation.
2.05. Company Capitalization. The entire authorized
capital stock of the Company consists of 100,000 Company Shares, of which 1,000
Company Shares are issued and outstanding and held beneficially and of record
by the Seller. All of the issued and outstanding Company Shares have been duly
authorized and are validly issued, fully paid and nonassessable and were not
issued in violation of the preemptive rights of any Person. The Company does
not have outstanding, and is not a party to, any convertible security, call,
preemptive right, option, warrant, purchase right, or other contract or
commitment that could, directly or indirectly, require the Company to sell,
issue, or otherwise dispose of any Company Shares.
2.06. Company Financial Statements. Attached hereto as
Schedule 2.06 is the audited balance sheet for the Company as of January 31,
1997 (the "Balance Sheet") and unaudited proforma statements of income and cash
flows for the fiscal year ended January 31, 1997 and the
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three months ending April 30, 1997, including the effect of the Initial
Contribution Conveyances (the "Statements of Operations," and together with the
Balance Sheet, the "Financial Statements"). The Financial Statements present
fairly, in accordance with GAAP applied on a basis consistent with the past
practices of the Seller and the Company, the financial position of the Company
subject, in the case of the Statements of Operations, to normal year-end
adjustments that are not in the aggregate expected to be material. Other than
that the line items on the Financial Statements (and in the case of the Balance
Sheet the accompanying notes) related to such matters have been prepared in
accordance with GAAP, no representation or warranty is made under this Section
2.06 with respect to the title of the Company to any Property or the Shares,
any pending or threatened Actions, any Plugging and Abandonment Obligations, or
the existence, non-existence or effect, of any Environmental Condition,
Environmental Claims, Offsite Environmental Matters, or Environmental
Liabilities. Except as set forth in the schedules attached pursuant to this
Article II and the notes in the Financial Statements, there are no material
contingencies or commitments of the Company that would be required to be
disclosed in any note in the Financial Statements under GAAP.
2.07. No Violations. The execution and delivery of this
Agreement by Seller does not, and the fulfillment and compliance with the terms
and conditions of this Agreement and the consummation of the transactions
contemplated herein do not:
(a) violate, conflict with, or require the consent of any
Person under the articles of incorporation or bylaws of Seller;
(b) to Seller's knowledge, violate any provision of, or
require any filing, consent, authorization, notice or approval ("Consent")
under, any Law applicable to or binding upon Seller, Company, or the Properties
(assuming receipt of all routine governmental consents typically received after
consummation of transactions of the nature contemplated by this Agreement);
(c) except as disclosed on Schedule 2.07(c), violate,
conflict with, result in a breach of, constitute a default under (without
regard to requirements of notice or the lapse of time or both), accelerate or
permit the acceleration of the performance required by, or require any Consent
under (i) any mortgage, indenture, loan, credit agreement or other agreement or
instrument evidencing indebtedness for borrowed money to which Seller or the
Company is a party, or by which either is bound, or to which any of the
Properties are subject or (ii) any lease, license, contract or other agreement
or instrument to which either Seller or the Company is a party, or by which
either is bound, or to which any of the Properties is subject; or
(d) result in the creation or imposition of any Lien upon
the Company or any of the Properties.
2.08. Account Information. Schedule 2.08 contains an
accurate list of the names and addresses of every bank and other financial
institution in which Company maintains an account (whether checking, savings or
otherwise), lock box or safe deposit box, and the account numbers and persons
having signature authority or legal access thereto.
2.09. Powers of Attorney. There are no outstanding powers
of attorney relating to or affecting Company.
2.10. Labor Matters. The Company has and has had no
employees. Except as disclosed on Schedule 2.10, there are no controversies
pending or, to the knowledge of the Seller or the Company, threatened, between
the Seller or the Company and any of the current or former employees of the
Seller performing services for the Company. Neither Seller nor the Company is
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a party to any collective bargaining agreement or other labor union contract
applicable to employees of the Seller.
2.11. Tax Matters. With respect to the Company and any
subsidiary of the Company, except as set forth in Schedule 2.11, (a) all
reports, returns, statements (including estimated reports, returns, or
statements), and other similar filings required to be filed on or before the
Closing Date by the Company and any subsidiary of the Company (or the common
parent of the affiliated group of which the Company is a member) with respect
to any Taxes (the "Tax Returns") have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such Tax Returns are
required to be filed; (b) the Tax Returns are true and correct in all material
respects, and all Taxes reported on such returns have been paid; (c) neither
the Company (or the common parent of the affiliated group of which the Company
is a member) nor any subsidiary thereof has extended or waived the application
of any statute of limitations of any jurisdiction regarding the assessment or
collection of any Tax; (d) there are no administrative proceedings or lawsuits
pending or, to the knowledge of Seller, there are no claims, assessments,
levies, administrative proceedings, or lawsuits threatened against the Company
or any subsidiary of the Company or Seller by any taxing authority; (e) there
are no Tax liens on any of the assets of the Company or any subsidiary of the
Company; and (f) no election under Section 341(f) of the Code has been made
with respect to the Stock of the Company or any subsidiary of the Company.
Notwithstanding anything in this Section 2.11 to the contrary, no
representation or warranty is made with respect to the amount, availability,
expiration, limitation or reduction of any net operating losses of the Company.
Notwithstanding anything herein to the contrary, no representation or warranty
is made pursuant to this Section 2.11 with respect to Signal Capital Holdings
Corporation for (i) any Tax Return or Taxes for any period ending on or prior
to January 28, 1997 or for any portion of a taxable period beginning before
January 28, 1997 and ending after January 28, 1997 that is allocable to the
portion of such period ending on January 28, 1997 in a manner consistent with
Section 6.06(c) hereof by substituting therein January 28, 1997 for the Closing
Date, and (ii) any extension, waiver or election made, or any administrative
proceeding or lawsuit or Tax lien arising, on or before January 28, 1997.
2.12. Employee Benefit Plans.
(a) List of Plans. Schedule 2.12 sets forth all employee
benefit plans (within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option,
stock purchase, restricted stock, incentive, deferred compensation, retiree
medical or life insurance, supplemental retirement, severance, vacation or
other benefit plans, programs or arrangements, with respect to which the Seller
or any member of the Seller's controlled group (within the meaning of Section
414(b), (c) or (m) of the Internal Revenue Code of 1986, as amended (the
"Code")) ("ERISA Affiliates") has any obligation or which are maintained,
contributed to or sponsored by the Seller or any ERISA Affiliates for the
benefit or any current employee, officer or director of the Seller or any
former employee of the Seller, regardless of whether such plans, programs or
arrangements are being assumed by the Buyer (the plans, programs, arrangements,
contracts and agreements described above being the "Employee Plans"). Except as
disclosed in Schedule 2.12, each Employee Plan is in writing and the Seller has
previously made available to the Buyer a true and complete copy of each
Employee Plan.
(b) Types of Plans. None of the Employee Plans is (i)
subject to Title IV of ERISA, (ii) a multi- employer plan (within the meaning
of Section 3(37) or 4001(a)(3) of ERISA), or (iii) a voluntary employees
beneficiary association ("VEBA") (within the meaning of Section 501(c)(9) of
the Code). Except as disclosed on Schedule 2.12, no Employee Plan will cause
the Company to incur liability for severance pay as a result of the
consummation of the transactions described in this Agreement. Except as
disclosed on Schedule 2.12, no Employee Plan provides for
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post-retirement medical coverage, or medical coverage after termination of
employment except as provided under Section 4980(B) of the Code, and no
representations, agreements, covenants or commitments to provide such coverage
have been made by the Seller.
(c) Compliance. Each Employee Plan which is intended to
be qualified under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service ("IRS") that it is so
qualified, and each related trust which is intended to be exempt from federal
income tax pursuant to Section 501(a) of the Code has received a determination
letter from the IRS that it is so exempt, and no fact or event has occurred
since the date of such determination letter that could reasonably be expected
to adversely affect such qualification or exemption, as the case may be. Each
Employee Plan is now and had been operated in all material respects in
accordance with the requirements of all applicable laws, including, without
limitation, ERISA and the Code.
(d) Penalties. With respect to each Employee Plan,
neither the Seller nor any ERISA Affiliate is currently liable for any material
tax arising under Section 4971, 4972, 4975, 4979, 4980, or 4980B of the Code,
and no fact or event exist which could reasonably give rise to any such
liability.
2.13. Contracts. Schedule I sets forth all of the contracts
and agreements (excluding Leases, Surface Contracts, and Pipeline
Rights-of-Way) material to the ownership, operation, development, maintenance
or use of any of the Properties as currently owned and operated by the Company.
Schedule 2.13 sets forth all of the following contracts, agreements, and
commitments (excluding Leases, Surface Contracts, and Pipeline Rights-of-Way)
to which any of the Properties are bound: (i) any agreement with any TransTexas
Entity or any Affiliate thereof that has not been released; (ii) any agreement
or contract for the sale, exchange, or other disposition of Hydrocarbons
produced from or attributable to Company's or any TransTexas Entity's interest
in the Leases that is not cancelable without penalty or other material payment
on not more than 60 days prior written notice; (iii) any agreement of or
binding upon Company or any TransTexas Entity to sell, lease, farmout, or
otherwise dispose of any interest in any of the Properties, other than
conventional rights of reassignment arising in connection with the Company's
surrender or release of any of the Properties; (iv) any tax partnership
agreement of or binding upon Company or any TransTexas Entity affecting any of
the Properties; (v) any operating agreement to which any of the Properties are
subject; (vi) any contract that will require the Company to expend after
Closing more than $10,000 in any year in connection with any of the Properties;
(vii) any contract that relates to the Properties that contains an indemnity
with respect to environmental and health and safety matters; (viii) any hedge,
exchange, swap, option to purchase, or call on the Hydrocarbons produced from
or attributable to Company's or any TransTexas Entity's interest in the Lands,
Leases, and Wells; (ix) any contract relating to the Properties that is not
assignable by its terms; (x) all materials identified in clauses (ii), (iii),
or (iv) of the definition of Data that are subject to confidentiality or other
agreements limiting the disclosure or transferability of such Data; (xi) any
lease, title retention agreement, or security interest affecting any of the
Equipment or Pipeline Equipment; and (xii) any deed of trust, mortgage,
security agreement, financing statement, security instrument, production
payment, net profits interest, or other similar interests or burdens
encumbering the Properties or any of them. Seller has furnished or made
available to Buyer true and correct copies of all such contracts and
agreements, as amended and in effect as of the Closing Date.
2.14. Litigation and Claims. Except as set forth on
Schedule 2.14, (a) no claim, demand, filing (including lis pendens filings and
abstracts of judgment), investigation, proceeding, action, suit, or other legal
proceeding of any kind or nature (including any take-or-pay claims) is pending
or, to Seller's or any TransTexas Entity's knowledge, is or has been threatened
with respect
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to the Properties, the Company, or the Seller (with respect to any of the
Properties or the Company), or any of them, or the ownership, operation,
development, maintenance, or use of any thereof, (b) neither Seller nor any
TransTexas Entity is aware of any facts, conditions or circumstances in
connection with, related to, or associated with the Properties (or the
ownership, operation, development, maintenance, or use of any thereof), the
Company, or the Seller (with respect to any of the Properties or the Company),
that could reasonably be expected to give rise to any such claim, demand,
filing, investigation, proceeding, action, suit, or other legal proceeding, and
(c) no notice from any Governmental Authority or any other Person has been
received by Company or any TransTexas Entity (i) claiming any violation,
repudiation, or termination, in whole or in part, of any of the Properties or
any violation of any Law with respect to the Properties (including any such Law
concerning the conservation of natural resources) or (ii) requiring, or calling
attention to the need for, any work, repairs, construction, alterations,
installations, remediation, response, removal or abatement actions,
restoration, investigation or monitoring of, on, in, under, in connection with,
or related to the Properties or the ownership, operation, development,
maintenance, or use of any thereof, which matters, all or in part, remain
outstanding and unresolved to the satisfaction of the sender of such notice.
Notwithstanding anything in this Section to the contrary, no warranty or
representation is given in this Section as to any Environmental Claim,
Environmental Liability, or Environmental Law.
2.15. Transfer Requirements and Preference Rights.
Schedule 2.15 contains a complete and accurate list of all Preference Rights
and Transfer Requirements. With respect to (i) all conveyances, assignments,
and transfers of all or any of the Properties to, between, or among any of the
TransTexas Entities, (ii) the transactions contemplated hereby, and (iii) the
transactions contemplated by the Asset Purchase and Sale Agreement, all
Transfer Requirements have been made, obtained, waived, or otherwise satisfied,
and all Preference Rights have been waived by the lawful holder thereof, or
expired after due notice to the holder without exercise during the time period
in which such rights were required to be exercised.
2.16. Compliance with Laws and Permits. Except as
disclosed on Schedule 2.16, (a) the Properties have been and currently are
operated, and the Company, the TransTexas Entities (to the extent they relate
to the Properties), and the Properties are, in substantial compliance with the
provisions and requirements of all Laws of all Governmental Authorities having
jurisdiction with respect to such parties, the Properties, or the ownership,
operation, development, maintenance, or use of any thereof, (b) all necessary
franchises, permits, licenses, approvals, consents, certificates (including
certificates of public convenience and necessity), and other rights and
authorizations of any kind or nature with regard to the ownership, operation,
development, maintenance, or use of the Properties, or any of them, have been
obtained and maintained in effect, and no violations exist in respect of any
thereof, and (c) to Seller's knowledge, there are no facts, conditions or
circumstances in connection with, related to or associated with the Properties
or the ownership, operation, or use of any thereof that could reasonably be
expected to give rise to any claim or assertion that the TransTexas Entities
(with respect to the Properties) or the Properties, or the ownership,
operation, development, maintenance, or use of any thereof, is not in
substantial compliance with any applicable Law or with any term or conditions
of any applicable franchise, servitude, permit, license, approval, consent,
certificate or other authorization. Notwithstanding anything in this Section
to the contrary, no warranty or representation is given in this Section as to
any Environmental Claim, Environmental Permit, Environmental Liability, or
Environmental Law.
2.17. Environmental Compliance. Except as set forth on
Schedule 2.17, (a) all environmental and health and safety permits, licenses,
approvals, consents, certificates and other authorizations of any kind or
nature ("Environmental Permits") necessary for the ownership, operation,
development, maintenance, or use of any of the Properties have been obtained
and
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maintained in effect, (b) the Seller, Company, and the Properties, and the
ownership, operation, development, maintenance, and use thereof, are in
compliance with all Environmental Laws and with all terms and conditions of all
Environmental Permits, and all prior instances of non-compliance have been
fully and finally resolved to the satisfaction of all Governmental Authorities
with jurisdiction over such matters, (c) neither the Company, Seller, nor the
Properties, or the ownership, operation, development, maintenance, or use
thereof, is subject to any Environmental Claim or Environmental Liabilities
arising from, based upon, associated with or related in any way to the
Properties or the ownership, operation, or use of any thereof, (d) neither
Company nor any TransTexas Entity has received any notice of any Environmental
Claim, Environmental Liabilities or any violation or noncompliance with any
Environmental Law or the terms or conditions of any Environmental Permit,
arising from, based upon, associated with or related in any way to the
Properties or the ownership, operation, development, maintenance, or use of any
thereof, (e) no Hazardous Materials are present, or have been disposed of
(onsite or offsite), released, migrated or transported to or from, or have
escaped on, in, from, under or in connection with the Properties, or the
ownership, operation, development, maintenance, or use of any thereof, such as
to cause a condition or circumstance that could reasonably be expected to
result in a violation of or liability pursuant to any Environmental Law, and
(f) neither Seller nor any TransTexas Entity is aware of any facts, conditions,
or circumstances in connection with, related to, or associated with the
Properties, or any of them, or the ownership, operation, development,
maintenance, or use of any thereof, that could reasonably be expected to give
rise to an assertion that Seller, Company, or the Properties, or the ownership,
operation, or use thereof, are not in substantial compliance with Environmental
Laws or the terms or conditions of any Environmental Permit, or have any
liability pursuant to any Environmental Law. Notwithstanding anything herein
to the contrary, Seller makes no representation or warranty relating to any
Environmental Liability, Environmental Claim, Environmental Permits, or
Environmental Conditions arising out of or related to any Future Laws.
2.18. Status of Contracts. Neither Company, nor any
TransTexas Entity, nor, to the knowledge of Seller or any TransTexas Entity,
any other party to or bound by any Lease, Surface Contract, Contract, Pipeline
Right- of-Way, or other agreement to which any of the Properties or the Company
are bound (a) is in breach of or default, or with the lapse of time or the
giving of notice, or both, would be in breach or default, with respect to any
of its obligations thereunder, to the extent that such breaches or defaults
have an adverse impact on any of the Properties or (b) has given or, to the
knowledge of Seller or any TransTexas Entity, has threatened to give notice of
any default under, or made inquiry into any possible default under, or action
to alter, terminate, rescind or procure a judicial reformation of any Lease,
Surface Contract, Contract, Pipeline Right-of-Way, or other agreement.
2.19. Burdens, Taxes, Expenses, and Revenues. Except as
set forth on Schedule 2.19, (a) all rentals, royalties, excess royalty,
overriding royalty interests, production payments, and other payments due
and/or payable on or prior to the Closing Time under or with respect to the
Wells and Leases, and the Hydrocarbons produced therefrom or attributable
thereto, have been properly and timely paid, (b) all rentals, payments, and
obligations due and payable or performable on or prior to the Closing Time
under or on account of any of the Properties have been duly paid, performed, or
provided for prior to the Closing Time, (c) all ad valorem, property,
production, transportation, sales, gross receipts, excise, use, severance,
employee, income, franchise and other taxes, including taxes based on or
measured by the ownership or operation of the Properties or the production of
Hydrocarbons from the Wells and Leases, as well as all assessments and other
governmental charges, penalties, interest and fines, which have become due and
payable on or prior to the Closing Time with respect to the Properties, or the
Company's or any TransTexas Entity's ownership or operation thereof, or which
have been collected by Company or any TransTexas Entity in connection with the
Properties on behalf of some governmental entity, have been properly paid prior
to becoming
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delinquent, and all returns and reports with respect to such matters have been
duly and timely filed, (d) all costs, expenses, and liabilities payable on or
prior to the Closing Time under the terms of the Contracts and any other
agreement to which any of the Properties or the Company are bound have been
properly and timely paid, except for such expenses as are being currently paid
prior to delinquency in the ordinary course of business, and (e) neither
Seller, Company, nor any other TransTexas Entity is obligated under any
contract or agreement for the sale of gas containing a take-or-pay, advance
payment, prepayment, or similar provision, or under any gathering,
transmission, or any other contract or agreement with respect to any of the
Properties (i) to pay for and take any gas if the purchase of such gas becomes
unprofitable, (ii) to gather, deliver, process, or transport any gas without
then receiving full payment therefor, or (iii) to transport gas at rates less
than seventeen cents ($0.17) per thousand cubic feet.
2.20. Production and Pipeline Balances and Penalties.
Schedule 2.20 accurately sets forth all pipeline and production imbalances and
penalties as of the Effective Date arising with respect to the Properties.
Except as disclosed in Schedule 2.20, (a) no purchaser is entitled to "make-up"
or otherwise take or receive deliveries of Hydrocarbons attributable to
Company's interest in the Wells and Leases without paying at the time of such
deliveries the full contract price therefor, (b) no Person is entitled to
receive any portion of the Company Hydrocarbons or to receive cash or other
payments to "balance" any disproportionate allocation of Hydrocarbons produced
from the Lands, Wells and Leases under any operating agreement, gas balancing
or storage agreement, gas processing or dehydration agreement, gas
transportation agreement, gas purchase agreement, or other agreements, whether
similar or dissimilar, (c) Company is not obligated to deliver any quantities
of gas, or to pay any penalties or other amounts, in connection with the
violation of any of the terms of any gas transportation contract or other
agreement with shippers, (d) no claim, notice, or order from any Governmental
Authority has been received by Seller or by any other TransTexas Entity due to
Hydrocarbon production from the Properties being in excess of allowables or
similar violations which could result in curtailment of Hydrocarbon production
from the Properties after Closing; and (e) neither Company nor any TransTexas
Entity is obligated to pay any penalties or other payments under any gas
transportation or other agreement as a result of the delivery of quantities of
gas from the Wells in excess of the contract requirements.
2.21. Plugging Status. There are no wells on the Lands
that have been permanently plugged and abandoned, but have not been plugged in
accordance in all material respects with all applicable requirements of each
regulatory authority having jurisdiction over the Properties.
2.22. Equipment. The Equipment, Pipeline Systems, and
Pipeline Equipment have been maintained in a state of repair so as to be
adequate for normal operations by Company. Except as set forth above, Seller
makes no warranty, either, express, implied or statutory, with respect to the
condition of the Equipment, Pipeline Systems, and Pipeline Equipment, and same
are being conveyed "AS IS," "WHERE IS," and "WITH ALL FAULTS." Buyer has made
such inspections of the Equipment, Pipeline Systems, and Pipeline Equipment as
it deems appropriate and is satisfied as to such equipment's condition.
2.23. Current Commitments. Schedule 2.23 contains a true
and complete list as of the Closing Date of all oral or written commitments for
capital expenditures of more than $50,000 with respect to any of the Properties
for which all of the activities anticipated in such commitments have not been
completed by the Closing Date, other than those commitments approved under the
Interim Operating Agreement. Except for those set forth in Schedule 2.23, or
authorized under the Interim Operating Agreement and to which Seller has
provided written notice to Buyer, as of Closing there are no oral or written
commitments for capital expenditures with respect to the Properties.
2.24. Payout Balances. Schedule 2.24 contains a complete
and accurate list of the
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status of any "payout" balance, as of the Effective Date, for each Well and
Lease that is subject to a reversion or other adjustment at some level of cost
recovery or payout (or passage of time or other event, other than cessation of
production).
2.25. Title.
(a) Except as set forth on Schedule 4.02, all of the
Leases, Surface Contracts, Contracts, and Pipeline Rights-of-Way are valid,
subsisting and in full force and effect, and, with respect to the Leases, such
Leases burden and apply to all the Lands, and the Company's undivided interest
in each Lease (or tract within such Lease) is not less than that necessary to
aggregate the figure set forth under the column "Company Net Acres" in Exhibit
"A-Part V" with respect to such Lease or tract.
(b) Company has good and indefeasible title to, and is
possessed in, all of the Leases and Wells, free of all Liens, other than
Permitted Encumbrances, necessary for Company to receive from the Wells and all
other wells to be located on the Lands, no less than the Net Revenue Interests
attributable thereto in Exhibits "A-Part II" and "A-Part V," without reduction,
suspension, or termination throughout the productive life of each such Lease,
Well, and well. The Company's Working Interest in any Lands, Lease or Well does
not exceed that attributable thereto in Exhibits "A-Part II" and "A-Part V,"
without a corresponding and proportional increase in the Company's Net Revenue
Interests applicable thereto.
(c) Company has good and indefeasible title to, and is
possessed in, the Properties (other than the Lands, Leases and Wells) free of
all Liens, other than Permitted Encumbrances; provided, that Seller's warranty
of title with respect to (i) the Data, Equipment, Permits, Pipeline Equipment,
Surface Contracts, and Pipeline Rights-of-Way shall only apply to the
Properties identified in Schedules II, III, IV, V, Exhibit "A-Part IV," and
Exhibit "B-Part II," respectively, and (ii) the Pipeline Systems shall only
apply to the pipelines and gathering systems described in clause (a) of the
definition of Pipeline Systems. Where so indicated in the applicable Schedule
or Exhibit, the Company's title shall be limited to a leasehold estate.
(d) The Pipeline Rights-of-Way and Leases purport to be
from the owners of the land covered thereby and purport to grant to Company,
and its successors and assigns, (or to Company's predecessor(s)-in-interest,
and its and their successors and assigns) the right to own, construct, operate
and maintain the Pipeline Systems in, over, under and across such land in its
current manner.
2.26. Insurance. No notice has been received from any
insurance company that has issued a policy insuring Company or any TransTexas
Entity with respect to any portion of the Properties (or Company's or any
TransTexas Entities' business relating thereto), or any board of fire
underwriters (or other body exercising similar functions) claiming any defects
or deficiencies, requiring the performance of any material repairs,
replacements, alterations or other work, or requiring any changes in Company's
or any TransTexas Entity's operations with respect to the Properties. Seller
shall be entitled to the refund of any premiums resulting from the termination
of Company's insurance as of Closing, except to the extent of the refund of any
premium paid by Buyer or Conoco under the Interim Operating Agreement.
2.27. Condemnation. Neither Seller nor any TransTexas
Entity has any knowledge or notice of any actual or threatened taking (whether
permanent, temporary, whole or partial) of any part of the Properties by reason
of condemnation or the threat of condemnation.
Stock Purchase Agreement
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2.28. Bankruptcy. (a) There are no bankruptcy,
reorganization, or arrangement proceedings pending, being contemplated by or,
to Seller's knowledge, threatened against Company, Seller, or any other
TransTexas Entity.
(b) Attached as Schedule 2.28(b) is a list of each
current and former (whether by dissolution, merger, sale, or
otherwise) Affiliate of TransAmerican, and the current Affiliates
listed on Schedule 2.28(b) are all of the current Affiliates of
TransAmerican.
(c) Attached as Schedule 2.28(c) is a list of every
current or former (whether by dissolution, merger or sale) Affiliate
of TransAmerican as to which a voluntary or involuntary petition for
bankruptcy protection under the Bankruptcy Act or Bankruptcy Code has
been filed subsequent to 1980, together with the court in which such
petition was filed, the date on which it was filed and if a plan of
arrangement or reorganization (each, a "Plan," and, collectively, the
"Plans") was approved, the date of confirmation, and consummation of
such Plan.
(d) The Seller has provided the Buyer with a copy of each
Plan referenced in the immediately preceding paragraph.
(e) Each claim asserted against the debtors in the
proceedings listed on Schedule 2.28(c) has been resolved by (i)
payment in full pursuant to the terms of the Plan, (ii) a final
nonappealable order disallowing such claim, or (iii) a settlement of
such claim approved by the bankruptcy court having jurisdiction over
such claim in a final, nonappealable order, or is otherwise
unenforceable.
(f) Except to the extent set forth on Schedule 2.14, no
Action has been filed, alleged, or asserted under the Texas Uniform
Fraudulent Transfer Act or under any other similar statute of Texas or
any other state in connection with any transfer of any interest in the
Properties, or any of them, from any TransTexas Entity to another
TransTexas Entity.
(g) Except as set forth in Schedule 2.28(g), all
mechanics and materialmen's liens asserted against the debtors in the
proceedings listed on Schedule 2.28(c) or arising prior to the
consummation of the Plans have been paid in full and satisfied or are
otherwise unenforceable.
2.29. No Fees. No broker, finder, or other party is
entitled to any fee, or to any commission, based in any way on agreements,
arrangements, or understandings made by or on behalf of Seller or any
TransTexas Entity for which Buyer shall be directly or indirectly liable.
2.30. PUHCA/NGA. Neither Seller nor any TransTexas Entity
(a) is a "holding company," or a "subsidiary company" of a "holding company,"
or an "affiliate" of a "holding company," or an "affiliate" of a "subsidiary"
of a "holding company," or a "public-utility company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended, and (b) is subject in
any respect to the provisions of said act. No Consent is required in connection
with the transactions contemplated hereby under the Natural Gas Policy Act of
1978, as amended. Neither Seller nor any TransTexas Entity is an interstate
pipeline company within the meaning of the Natural Gas Act of 1938.
2.31. Investment Company. Neither Seller nor any
TransTexas Entity (a) is an investment company or a company controlled by an
investment company within the meaning of the Investment Company Act of 1940, as
amended and (b) is subject in any respect to the provisions of
Stock Purchase Agreement
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said act.
2.32. Section 29 Credit Wells. Schedule 2.32 accurately
sets forth with respect to each Well identified thereon, (a) the spud date, (b)
the date each Well was drilled to its total depth, (c) the zone in which each
Well was completed, and (d) the date and docket number for Railroad Commission
of Texas certification of the Well as a tight formation well under the Natural
Gas Policy Act of 1978.
2.33. Texas Utility Status. Certain of the Pipeline Assets
include transmission pipelines that are subject to regulation as a "gas
utility" by the Railroad Commission of Texas pursuant to the Cox Act, Texas
Revised Civil Statutes, Art. 6050, et seq., and the Gas Utility Regulatory Act,
Texas Revised Civil Statutes, Art. 1446e. Schedule 2.33 accurately sets forth
a list of all tariffs, rate schedules and other similar pending or approved
rate filings of the Company on file with the Railroad Commission of Texas. The
Company has complied in all material respects with all orders, rules and
regulations of the Railroad Commission of Texas, including all filing,
reporting and similar requirements.
2.34. Actions. There is no Action pending, or to the
knowledge of Seller, threatened against Seller or its subsidiaries or
Affiliates, or any of their respective properties, that might delay, prevent,
or hinder the consummation of the transactions contemplated by this Agreement.
2.35. Severance Tax Exemption. Company has made all
filings, obtained all necessary certificates from Governmental Authorities, and
performed such other acts as necessary to obtain and qualify for, or to apply
for a refund of excess taxes paid under, the high-cost gas severance tax
exemption or tax reduction under Section 201.057 of the Texas Tax Code for all
Wells set forth on Schedule 2.35.
2.36. Operations. Since January 31, 1997 Seller has caused
the Company to operate the Properties in the ordinary course of business
consistent with past practice. Without limiting the generality of the
foregoing, since January 31, 1997 Seller has not caused or permitted the
Company to do any of the following:
(a) Operation of the Properties.
(i) waive any material right relating to any of the
Properties that would not be waived by a reasonably prudent operator;
(ii) release or abandon any of the Properties without
Buyer's prior written consent, except in the ordinary course of
business;
(iii) convey, farmout, or otherwise dispose of any interest
in the Properties or any part thereof except in the ordinary course of
business;
(iv) engage in any material operation, or series of
related operations, on any Properties that Seller or Company has not
previously committed to and that may be expected to cost Company in
the aggregate in excess of $50,000 (except for emergency operations,
in which case Seller will promptly notify Buyer of such operations),
except as provided in the Interim Operating Agreement;
(v) except in the ordinary course of business and
consistent with past practices, enter into, assign, terminate or
amend, in any material respect, any Contract or any other
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<PAGE> 23
contract or agreement by which the Properties are bound; or
(vi) commit itself to do any of the foregoing; provided
however, that nothing contained in this Section 2.36(a) or elsewhere
in this Agreement will limit the rights of Seller to produce, consume
and sell Hydrocarbons produced from or attributable to the Properties
or insignificant amounts of personal property in the ordinary course
of business and to comply with applicable Law.
(b) Operation of the Company.
(i) except as set forth on Schedule 2.36(b)(i), declare
or pay any dividends, or make any distributions, in respect of, or
issue any of, its equity securities or securities convertible into its
equity securities, or repurchase, redeem or otherwise acquire any such
securities or make or propose to make any other change in its
capitalization;
(ii) merge into or with or consolidate with any other
corporation or other business entity or acquire all or substantially
all of the business or assets of any corporation or other Person;
(iii) make any change in its articles of incorporation or
bylaws;
(iv) purchase any securities of any corporation or other
Person, except for investments made in the ordinary course of business
and consistent with prior practices;
(v) take any action or enter into any commitment with
respect to or in contemplation of any liquidation, dissolution,
recapitalization, reorganization or other winding up of its business
or operations;
(vi) except as set forth in Schedule 2.36(b)(vi), enter
into any settlement of any pending or threatened Action, unless the
settlement involves the payment of money damages by Company of not
more than $50,000 (other than on account of any insurance deductible
of $50,000 or less) and does not impose an injunction or similar
equitable relief upon the Company or materially impair the Company's
defense of any other Action then pending or threatened against the
Company of which the Company has knowledge;
(vii) change its accounting policies or practices
(including any change in depreciation or amortization policies),
except as required under GAAP;
(viii) enter into any employment agreement not terminable at
will;
(ix) create or change any employee benefit plans (within
the meaning of section 3(3) of ERISA) or any other employee benefit
plan or program not subject to ERISA, established, contributed to, or
maintained by the Seller in which employees who perform services for
the Company participate, except as required by Law;
(x) incur, guarantee or otherwise assume liability in
respect of any indebtedness for money borrowed in excess of $100,000,
in the aggregate;
(xi) disclose any secret or confidential intellectual
property (except by way of issuance of a patent) or permit to lapse or
go abandoned any intellectual property (or any registration or grant
thereof or any application relating thereto) to which, or under which,
the
Stock Purchase Agreement
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<PAGE> 24
Company has any right, title, interest, or license;
(xii) make any express or deemed election or settle or
compromise any liability, with respect to Taxes of the Seller or the
Company;
(xiii) agree, whether in writing or otherwise, to take any
of the actions specified in this Section 2.36(b)or grant any options
to purchase, rights of first refusal, rights of first offer or any
other similar rights or commitments with respect to any of the actions
specified in this Section 2.36(b), except as expressly contemplated by
this Agreement;
(xiv) operate the Pipeline Assets in any manner, or take
any action or fail to take any action with respect to such facilities,
which materially increases the scope or expense of federal or state
regulation; or
(xv) other than the payment of dividends set forth on
Schedule 2.36(b)(i), transferred, encumbered, or disposed of, or
entered into any contract affecting, any of the assets of Capital
Signal Holdings Corporation, and Capital Signal Holdings Corporation
has not entered into any contracts; provided, however, that this
clause (xv) shall apply to any action taken since January 28, 1997.
2.37. Copies of Seismic Data. The Seller has not made or
retained any copies of the Data identified in clause (iv) of the definition of
such term.
2.38. Casualty Loss and Government Takings. Since January
31, 1997, none of the Properties have been damaged or destroyed by fire, flood,
storm, or casualty, or taken under the right of eminent domain, and no
proceedings for such purposes are pending or, to Seller's, Company's, or any
TransTexas Entity's knowledge have been threatened.
2.39. Accuracy of Representations. No representation or
warranty by Seller in this Agreement, or in the documents delivered by Seller
at Closing pursuant to Sections 7.02(iv) and (ix), contains an untrue statement
of a material fact or omits to state a material fact necessary to make the
statements contained in any such representation or warranty, in light of the
circumstances under which it was made, not misleading. Seller has not
intentionally failed to disclose to Buyer or its representative, Conoco, any
fact known to Seller or to any other TransTexas Entity that materially and
adversely affects (or may materially and adversely affect) the ownership,
operation, development, or use of any portion of the Properties, except as to
facts and matters expressly disclaimed by Seller in this Agreement or other
facts and matters generally affecting the United States oil and gas and gas
transportation industries. Seller shall have the burden of proof to
demonstrate that Seller disclosed any allegedly undisclosed fact or, if such
fact was not disclosed, that such failure to disclose was not intentional.
2.40. Property Ownership. Except as disclosed on Schedule
2.40 or with respect to the Company's interest in the Properties and the
Excluded Assets, no TransTexas Entity or any family member, or any Affiliate of
any family member, of John R. Stanley owns any mineral, royalty, or leasehold
interest, or any right or option to acquire any such mineral, royalty, or
leasehold interest, in the Lands. Except as disclosed on Schedule 2.40 or with
respect to the Company's interest in the Pipeline Assets, no TransTexas Entity
or any family member, or any Affiliate of any family member, of John R. Stanley
owns any interest in any gathering systems and pipelines in Webb, Zapata, Jim
Hogg, Duval, Jim Wells, and Nueces Counties, Texas, other than the Excluded
Systems and Equipment.
Stock Purchase Agreement
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller at and as of Closing
and the Closing Time the following:
3.01. Organization and Good Standing. First Union Bank of
Connecticut is a banking corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of creation. Buyer has
heretofore delivered or made available to Seller true and correct copies of the
Trust Agreement.
3.02. Authority and Authorization of Agreement. First
Union Bank of Connecticut has all requisite corporate power and authority to
execute and deliver the Trust Agreement, and acting pursuant thereto, to
execute and deliver this Agreement, to consummate the transactions contemplated
by this Agreement and to perform all the terms and conditions of this Agreement
to be performed by it. The execution and delivery of this Agreement by Buyer,
the performance by Buyer of all the terms and conditions to be performed by it
and the consummation of the transactions contemplated by this Agreement have
been duly and validly authorized and approved by all necessary action on the
part of Buyer.
3.03. Due Execution and Binding Obligation. This
Agreement, and all other documents and instruments required to be executed and
delivered by Buyer hereunder, have been duly executed and delivered by Buyer
and constitute the legal, valid, and binding obligation of Buyer and the Trust,
enforceable against them in accordance with their terms, except as such
enforceability may be limited by Equitable Principles.
3.04. No Violations. This Agreement and its execution and
delivery by Buyer does not, and the fulfillment and compliance with the terms
and conditions of this Agreement and the consummation of the transactions
contemplated herein do not:
(a) conflict with, or require the consent of any Person
under the bylaws or certificate of incorporation of First Union Bank of
Connecticut, or the Trust Agreement;
(b) to Buyer's knowledge, violate any provision of, or
require any Consent under, any Law applicable to or binding upon Buyer or the
Trust (assuming receipt of all routine governmental consents typically received
after consummation of transactions of the nature contemplated by this
Agreement); or
(c) to Buyer's knowledge, violate, conflict with, result
in a breach of, constitute a default under (without regard to requirements of
notice or the lapse of time or both), accelerate or permit the acceleration of
the performance required by, or require any consent, authorization or approval
under, (i) any mortgage, indenture, loan, credit agreement or other agreement
or instrument evidencing indebtedness for borrowed money to which Buyer or the
Trust is a party or by which Buyer or the Trust is bound or to which any of
their properties is subject or (ii) any lease, license, contract or other
agreement or instrument to which Buyer or the Trust is a party or by which
either is bound or to which any of their properties are subject.
3.05. Actions. There is no Action pending, or to the
knowledge of Buyer, threatened against Buyer or its subsidiaries or any of
their respective properties that might delay, prevent or hinder the
consummation of the transactions contemplated by this Agreement.
Stock Purchase Agreement
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<PAGE> 26
3.06. Knowledgeable Investor. Buyer is not acquiring the
Company Shares with intent of participating in a distribution and will not
sell, transfer, lease or otherwise convey in any manner, in whole or in part,
the Company Shares without the necessary registration, or exemptions therefrom,
under applicable federal and state securities laws. The Buyer is sophisticated
in financial matters and is able to evaluate the risks inherent in purchasing
the Company Shares, and is capable of bearing the economic loss of its entire
investment.
3.07. Accuracy of Representations. No representation or
warranty by Buyer in this Agreement or in the officer's certificate delivered
pursuant to Section 7.03(a)(n), contains an untrue statement of a material fact
or omits to state a material fact necessary to make the statements contained in
any such representation or warranty, in light of the circumstances under which
it was made, not misleading.
3.08. HSR Act. For purposes of the HSR Act, (a) the Buyer
is a newly formed entity which is its own "ultimate parent entity" and (b) the
Buyer has less than $10,000,000 of assets, as calculated in accordance with
section 801.11(e)(i) of the HSR Rules and, as a result, the sale of the Company
Shares as contemplated by this Agreement does not require a filing under the
HSR Act because the "size of the person test" is not met.
3.09. Location. The location of the day to day operations
of Buyer, the Trust, and First Intercontinental Leasing, L.P., a Delaware
limited partnership, is and will be in the foreseeable future outside of the
State of Texas.
ARTICLE IV
ACCEPTED ENVIRONMENTAL DEFECTS;
HOLD BACK FOR PROPERTY DEFECTS
4.01. Accepted Environmental Defects. Notwithstanding
anything in this Agreement to the contrary, in no event shall Seller have any
liability hereunder to Remediate any Accepted Environmental Defect. After
Closing, Buyer shall Remediate all Accepted Environmental Defects, to the
extent not Remediated by Seller before Closing, and Buyer's Remediation
obligation under this Section 4.01, and all Environmental Liabilities
proximately caused by Buyer's Remediation of an Accepted Environmental Defect
or failure to so Remediate, shall be an Assumed Obligation. In no event shall
Buyer be deemed to have assumed any Liability with respect to an Accepted
Environmental Defect other than as set forth above.
4.02. Holdback for Property Defects and Outstanding
Interests. (a) At Closing certain Properties, or portions thereof (the
"Affected Properties"), were subject to certain uncured defects and
deficiencies (the "Property Defects") and, subject to the provisions of this
Section 4.02, such Affected Properties were retained by the Company and not
conveyed to Seller pursuant to the Excluded Asset Conveyance, and the portion
of the Purchase Price attributable to the Value of such Property Defects was
not paid at Closing. Further, at Closing Seller was engaged in acquiring
certain renewal leases, rights-of-way, and other interests in lands and leases
(the "Outstanding Interests") but was unable to complete such acquisitions
prior to Closing. In order to permit the parties to proceed to Closing, Buyer
and Seller have agreed to permit Seller a period of time following Closing in
which to remedy such Property Defects and to complete the acquisition of the
Outstanding Interests. The Affected Properties, the Property Defects, the
actions required, to the extent known by Buyer at Closing, to correct and
remedy such Property Defects (the "Curative Action"), the Outstanding
Interests, the material terms and provisions of the instruments and
Stock Purchase Agreement
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<PAGE> 27
agreements evidencing, constituting, or relating to the Outstanding Interests
(the "Outstanding Interest Terms"), and the agreed value of each Property
Defect and Outstanding Interest (the "Value") are described and identified in
Schedule 4.02 hereto.
(b) After Closing Seller shall promptly undertake and
pursue in good faith and with due diligence, and shall use its reasonable
efforts to complete as soon as practicable, but in any event within sixty (60)
days after the Closing Date or such longer period as shall be approved in
writing by Buyer in its sole discretion (the "Cure Period"), the Curative
Action necessary to remedy each Property Defect. All costs and expenses of any
kind and nature incurred in connection with remedying such Property Defects
shall be borne and paid by Seller. Buyer and Seller shall cooperate in good
faith in remedying each Property Defect and Seller shall obtain Buyer's prior
written approval of any and all documents, agreements, instruments and other
curative materials sought or to be offered or obtained in connection with
remedying each Property Defect. Upon completion of each Curative Action,
Seller shall submit to Buyer a written notice (a "Notice of Cure") identifying
the Property Defect Seller maintains has been remedied and including with such
Notice of Cure all documents, instruments, and other materials necessary to
demonstrate that such Curative Action has been completed and that the Property
Defect has been remedied and no longer burdens, encumbers, or affects the
applicable Affected Property. Within ten (10) Business Days after Buyer's
actual receipt of a Notice of Cure, Buyer shall notify Seller in writing of its
determination of whether such Property Defect has been remedied, or if Buyer
disputes that such Property Defect has been remedied, Buyer's basis for
rejecting such alleged cure and the actions necessary on Seller's part to
remedy such Property Defect, which actions may be in addition to the Curative
Action in order to accommodate changes in circumstances or additional
information unknown by Buyer at Closing with respect to remedying such Property
Defect. If Buyer shall fail to so respond to a Notice of Cure within such ten
(10) day period, such failure shall be deemed to constitute an acceptance by
Buyer of such cure and an election to retain the Affected Property. The
parties shall negotiate in good faith any dispute as to whether a Property
Defect has been remedied and no longer burdens, encumbers, or affects the
applicable Affected Property. If the parties are unable to agree, such dispute
shall be resolved pursuant to the Dispute Resolution Agreement; provided, that,
the only issues that may be submitted to arbitration are whether the Curative
Action has been completed and such Property Defect has been remedied and no
longer burdens, encumbers, or affects the applicable Affected Property, and
neither party may submit to arbitration any other issue, including any issue
relating to the Value or the validity of any Property Defect. If Buyer
disputes whether a Property Defect has been remedied, such Property Defect
shall be deemed remedied only upon written agreement of the parties or upon a
determination pursuant to the Dispute Resolution Agreement that such Property
Defect has been remedied.
(c) If Seller remedies any Property Defect within the
Cure Period as herein provided, Buyer shall, subject to Section 4.02(d) below,
deliver to Seller the Value applicable to such Property Defect, together with
accrued interest thereon at the Agreed Rate from Closing to the date of
payment. If Seller fails to remedy any Property Defect on or before the
expiration of the Cure Period, Buyer may, with respect to each Affected
Property, either (i) provide Seller written notice of its election to accept
and retain such Affected Property, in which case Buyer shall retain the Value
attributable thereto, or (ii) notify Seller that Buyer rejects the Affected
Property, in which case, subject to Section 4.02(d) below, (A) Seller shall pay
to Buyer that portion of the Allocated Value applicable to the rejected
Affected Property that was paid to Seller at Closing, if any, plus accrued
interest thereon at the Agreed Rate from Closing until the date of payment, and
(B) Buyer shall, contemporaneously with such payment, convey to Seller the
Affected Property upon a form of special warranty conveyance in substantially
the form of Exhibit C hereto (the "Special Warranty Conveyance"), and further
pay to Seller all revenues received after Closing by Buyer attributable to such
rejected Affected Property, less all costs, expenses, and liabilities incurred,
paid, payable, or
Stock Purchase Agreement
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<PAGE> 28
to be paid with respect thereto. Notwithstanding clause (i) above, if the
Value attributable to an Affected Property is the Allocated Value for such
Affected Property, and if Buyer shall elect to accept and retain such an
Affected Property that is subject to an uncured Property Defect, Buyer shall
tender to Seller such Allocated Value, or such lesser amount as the parties
shall agree, plus accrued interest thereon at the Agreed Rate from Closing
until the date of payment. In giving effect to the payment provisions of the
immediately preceding sentence, the Allocated Value to be paid shall be
adjusted to give effect to the provisions of Sections 1.02 and 1.04, and any
other provisions hereof pertaining to adjustments to the Purchase Price. In no
event will Buyer commence, without Seller's prior approval, the drilling or
reworking of any well on an Affected Property, other than a well required under
or necessary to perpetuate any Lease, until such time as the Property Defect(s)
applicable thereto are remedied as herein provided or, if not so remedied,
until Buyer has made an election to accept and retain the Affected Property
under clause (i) above.
(d) On the second Friday after the Closing Date, and
every two (2) weeks thereafter, Buyer and Seller shall meet to assess the
status of Seller's Curative Actions and the acquisition of any Outstanding
Interests. At such meeting the parties shall negotiate in good faith to
determine whether outstanding Properties Defects have been remedied pursuant to
pending Notices of Cure, and review pending Notices of Acquisition to review
compliance with the applicable Outstanding Interest Terms. If Buyer and Seller
agree that a Property Defect has been remedied, or that an Outstanding Interest
has been acquired within the applicable Outstanding Interest Terms (or if prior
to such meeting Buyer has not responded to an outstanding Notice of Cure or
Notice of Acquisition within ten (10) Business Days following receipt thereof),
then within three (3) Business Days following such meeting Buyer shall tender
to Seller a payment in the amount of the Value pertaining to any such remedied
Property Defect or acquired Outstanding Interest. If the parties do not agree
that any Curative Action is sufficient, or cannot agree upon an Outstanding
Interest Price with respect to any Outstanding Interest acquired on terms less
favorable than the Outstanding Interest Terms, such dispute may be held over
until the next meeting or may ultimately be determined pursuant to the Dispute
Resolution Agreement, to the extent herein provided. Notwithstanding anything
herein to the contrary, in no event shall Buyer, or its successors and assigns,
be required to tender to Seller any amounts under this Section 4.02 until such
time as Seller and the TransTexas Entities shall re-execute, validly
acknowledge (where appropriate), and deliver to Buyer, or its successors and
assigns, the Estoppel Certificates, Guarantee, and Ancillary Guarantee.
(e) After Closing Seller shall promptly undertake and
pursue in good faith and with due diligence, and shall use its reasonable
efforts to complete as soon as practicable, but in any event within sixty (60)
days after Closing, the acquisition of the Outstanding Interests upon terms no
less favorable than the Outstanding Interest Terms. All costs and expenses of
any kind and nature incurred in connection with acquiring the Outstanding
Interests shall be borne and paid by Seller. With respect to any Outstanding
Interest (including any Outstanding Interest pertaining to only a portion of
the lands described or referred to in Schedule 4.02, or in any instrument
identified in such schedule) acquired by Seller within such sixty (60) day
period and containing terms no less favorable than the Outstanding Interest
Terms, Buyer is hereby granted the exclusive right to purchase, and Buyer
hereby agrees to purchase in the manner herein provided, such Outstanding
Interest. With respect to any Outstanding Interest (including any Outstanding
Interest pertaining to only a portion of the lands described or referred to in
Schedule 4.02, or in any instrument identified in such schedule) acquired by
Seller within such sixty (60) day period and containing terms less favorable
than the Outstanding Interest Terms, Buyer is hereby granted the exclusive
right and option, but not the obligation, to purchase such Outstanding Interest
in the manner herein provided. The purchase price to be paid by Buyer to
Seller hereunder for any Outstanding Interest acquired by Seller within such
time period shall be the Value allocated thereto in Schedule 4.02, or such
lesser amount as the
Stock Purchase Agreement
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<PAGE> 29
parties shall agree in good faith, and with due regard for the economic
benefits of the Outstanding Interest, if the Outstanding Interest is upon terms
less favorable than the Outstanding Interest Terms (the "Outstanding Interest
Price"). If Buyer does not acquire an Outstanding Interest as herein provided,
Section 4.02 (g) shall have no applicability to such Outstanding Interest.
Buyer agrees not to acquire or seek to acquire any Outstanding Interest during
such sixty (60) day period. Notwithstanding anything herein or in any other
agreement between Seller and either Buyer or Conoco to the contrary, if Seller
fails to acquire any Outstanding Interest within such sixty (60) day period,
Buyer and its successors and assigns may acquire such Outstanding Interest and,
in such event, Seller hereby waives all right to receive, and shall not be
entitled to receive, the Outstanding Interest Price or any other compensation
of any kind or nature in connection therewith, including any reimbursement of
any costs and expenses incurred by Seller in attempting to acquire such
Outstanding Interest.
(f) Seller shall obtain Buyer's prior written approval of
any and all leases, rights-of-way, documents, agreements, and other instruments
relating to or evidencing any Outstanding Interest. Upon acquiring an
Outstanding Interest, Seller shall submit to Buyer a written notice (a "Notice
of Acquisition") identifying the Outstanding Interest acquired by Seller and
including all leases, rights-of-way, documents, agreements, instruments, and
other materials relating thereto. Within ten (10) Business Days after Buyer's
receipt of a Notice of Acquisition, Buyer shall notify Seller in writing of its
determination of whether such Outstanding Interest is upon terms no less
favorable than the Outstanding Interest Terms and, if Buyer maintains that such
terms are less favorable, Buyer's proposed Outstanding Interest Price for such
Outstanding Interest. If Buyer has approved a form of lease or right-of-way,
Buyer cannot claim such instrument is upon terms less favorable than the
applicable Outstanding Interest Terms. If Buyer fails to respond to a Notice of
Acquisition within such ten (10) day period, such failure shall be deemed an
agreement by Buyer that the applicable Outstanding Interest Terms are
satisfied. The parties shall negotiate in good faith any dispute as to whether
the Outstanding Interest Terms have been satisfied, and the amount of any
adjustment to the Outstanding Interest Price if the terms of the Outstanding
Interest are less favorable. If the parties are unable to agree, such dispute
shall be resolved pursuant to the Dispute Resolution Agreement. Within five
(5) Business Days after Buyer notifies Seller that the Outstanding Interest
satisfies the Outstanding Interest Terms, or within five (5) Business Days
following a determination, by agreement or otherwise, of the Outstanding
Interest Price, Seller shall deliver to Buyer a validly executed and
acknowledged Special Warranty Conveyance of the Outstanding Interest
(warranting title against all claims arising by, through, or under Seller and
all other TransTexas Entities) and, contemporaneously therewith, Buyer shall
tender to Seller the Outstanding Interest Price.
(g) Subject to Section 4.02(e) above, which shall control
with respect to the Outstanding Interests (whether on the same or different
terms than the Outstanding Interest Terms) acquired during the Cure Period,
Buyer is hereby granted the exclusive right and option, but not the obligation,
to purchase and acquire any right-of-way, surface, mineral, royalty, leasehold,
or other interest of any kind or character, and all rights under any contract,
option, or other agreement to acquire any such interest, in the lands described
or referred to in Schedule 4.02, or in any instrument identified in such
schedule, that is acquired by Seller or any other TransTexas Entity prior to
the third anniversary of the Closing Date by paying Seller or such TransTexas
Entity the actual out-of-pocket costs and expenses incurred by Seller or such
TransTexas Entity in connection with acquiring such interest. Within ten (10)
Business Days following any such acquisition, Seller shall provide Buyer, or
cause such TransTexas Entity to provide Buyer, a Notice of Acquisition which
shall include, in addition to the information specified in Section 4.02(f)
above, a detailed accounting of all actual out-of-pocket costs and expenses
incurred in connection with acquiring such interest, including all supporting
documentation reasonably necessary to confirm such costs and expenses. Buyer
shall notify Seller or such TransTexas Entity of its exercise of its option
hereunder within ten
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(10) Business Days after Buyer's receipt of such notice and all such supporting
documentation. Within five (5) Business Days thereafter, Seller shall deliver
to Buyer, or cause the appropriate TransTexas Entity to deliver to Buyer, a
validly executed and acknowledged Special Warranty Conveyance of the interest
(warranting title against all claims arising by, through, or under Seller and
all other TransTexas Entities, but not otherwise) and, contemporaneously
therewith, Buyer shall tender to Seller or such other TransTexas Entity an
amount equal to the actual out-of-pocket costs and expenses so incurred.
(h) In order to evidence of record Buyer's rights and
options hereunder, contemporaneously with Closing the parties are causing a
Memorandum of Rights and Options in substantially the form of Exhibit D hereto
(the "Memorandum of Option") to be filed of record in the appropriate real
property records of the counties in which the lands subject to such Outstanding
Interests are situated.
(i) Buyer may sell and convey the Affected Properties and
assign the rights and options granted pursuant hereto at any time; provided
that such assignee must expressly assume Buyer's obligations under this Section
4.02 with respect to the Affected Properties conveyed and rights and options so
assigned. If any assignee, or its successors and assigns, is required to convey
to Seller any Affected Property pursuant to Section 4.02(c) above, the warranty
of title in the Special Warranty Conveyance shall apply only to claims arising
by, through, and under such assignee, but not otherwise.
(j) If a Property Defect is the failure to obtain a
consent to assign a portion of the Properties, and such consent is not obtained
within such sixty (60) day period, but Seller has filed suit against the party
or parties from whom such consent is required to compel the granting of such
consent, as long as Seller diligently pursues such suit, the sixty (60) day
period as to such Property Defect shall be tolled until such suit is settled or
a final non-appealable judgment is entered.
ARTICLE V
JUDGMENT LIENS
5.01. Judgment Liens. The Properties are subject to that
certain Judgment Lien, dated January 13, 1995, securing the judgment against
TransAmerican Natural Gas Corporation and TransTexas Gas Corporation in the sum
of $17,957,156.00 awarded in H.S. Finklestein v. TransAmerican Natural Gas
Corporation and TransTexas Gas Corporation (Cause No. 2,677), Zapata County
District Court (49th Judicial District), recorded in Volume 281, Page 295 of
the Official Records of Webb County, Texas and Volume 511, Page 651 of the
Official Records of Zapata County, Texas (the "Judgment Lien"), which judgment
and Judgment Lien are Retained Liabilities and, subject to Seller fulfilling
each and every of its obligations under this Article V, shall constitute a
Permitted Encumbrance. The Judgment Lien is secured by a bond (the "Finklestein
Supersedeas Bond") by International Fidelity Insurance Company, which secures
payment of the judgment, including attorneys' fees, and all accrued
post-judgment interest in the event of a final nonappealable judgment adverse
to TransTexas, et al.
5.02. Security. Seller hereby agrees that the Finklestein
Supersedeas Bond will be maintained by Seller in amounts sufficient to satisfy
the judgment until such time as the judgment is made final or this matter is
otherwise settled or disposed of and is no longer a Lien on the Properties.
Seller hereby further agrees to provide prompt written notice to Buyer in the
event that the judgment described in Section 5.01 is: (a) made final; (b)
otherwise settled or disposed of and are no longer an encumbrance on the
Properties; or (c) is no longer secured by the Finklestein
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Supersedeas Bond, or that the bonding company issuing such bond has failed or
refused to fulfill its obligations thereunder. Seller agrees to immediately
notify Buyer, or its successors-in-interest to the Properties, in writing, of
any foreclosure proceedings being commenced or threatened with respect to any
of the Properties and shall take whatever measures are necessary, including
payment of the judgment, to prevent the sale of the Properties, or any of them,
to satisfy such judgment. The covenants and obligations of Seller in this
Section 5.02, and Seller's liability and indemnification of Buyer under Article
X hereof with respect thereto and with respect to the Judgment Lien and such
judgment as Retained Liabilities, shall survive until the final and
nonappealable resolution of this matter.
5.03. Foreclosure of the Judgment Lien. If at any time
Seller shall fail to comply with any of its material obligations under Section
5.02, and if foreclosure of the Judgment Lien is commenced, unless Seller cures
such default to Buyer's reasonable satisfaction promptly following notice
thereof from Buyer, or its successors-in-interest, then Buyer, or its
successors-in-interest, may at its option and sole election take such actions
as it shall deem appropriate in its sole discretion to prevent the foreclosure
and sale of any of the Properties, or any interest therein, including the
payment of the judgment secured by the Judgment Lien. Seller shall on demand
reimburse Buyer for all costs and expenses incurred by Buyer, or its assignee,
in connection therewith and hereby releases Buyer, or its assignee, from any
and all Liabilities arising in connection therewith. Seller hereby waives any
right to assert that the costs and expenses incurred by Buyer were not
reasonable and that the payment of such obligation was not appropriate.
ARTICLE VI
ADDITIONAL AGREEMENTS AND COVENANTS
6.01. Public Announcements. Subject to applicable Law and
stock exchange requirements, after Closing, Seller and Buyer will obtain the
approval of the other before issuing, or permitting any of their respective
directors, officers, employees or agents, or any of their respective Affiliates
to issue, any press release or other public announcement with respect to this
Agreement or the transactions contemplated hereby.
6.02. Tax Agreements. (a) Except as otherwise provided in
Section 6.06, Seller shall properly include the Company in the filing of its
consolidated federal income Tax Return and shall properly file any combined,
unitary or consolidated state, local, or foreign Tax Return required to be
filed by Seller and, to the extent required or permitted by law, shall include
the Company in such state, local, or foreign Tax Returns for the Company's
taxable periods or portions thereof ending on and including the Closing Date
which occur prior to the Closing Time, and shall pay all Taxes shown as due on
such returns with respect to the Company, for such periods or portions thereof
ending on or prior to the Closing Date which occurs prior to the Closing Time.
The Buyer shall cause the Company to properly file all federal, state, local,
and foreign Tax Returns required to be filed by the Company or to the extent
required by law to be properly included in the filing of a consolidated federal
income Tax Return of an Affiliate of the Buyer for all taxable periods or
portions thereof ending after the Closing Date and which are not described in
the preceding sentence and those taxable periods or portions thereof which
begin after the Closing Date, and to pay all Taxes due with respect to such
periods or portions thereof.
(b) Buyer shall promptly notify Seller in writing in the
case of an audit or administrative or judicial proceeding of the Company or any
subsidiary thereof that relates to periods ending on or before the Closing
Date. Seller shall have the right at its expense to participate in and control
the conduct of such audit or proceeding but only to the extent that such audit
or proceeding
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relates to a potential adjustment for which Seller has acknowledged liability
in writing, and the issue underlying the proposed adjustment does not recur for
any period ending after the Closing Date; provided, however, if the Seller
subsequently determines that it is not liable for such liability, upon written
notification thereof to the Buyer; the Seller will waive all rights hereunder
to continue the audit or proceeding and such acknowledgment shall have no
further force and effect, it being recognized that such waiver does not
preclude the Buyer from asserting its indemnification rights, if any, with
respect to such liability, and that the Seller is still liable for all costs
and expenses of the audit or proceeding incurred prior to such waiver which
Seller shall satisfy promptly. The Seller shall keep the Buyer informed of the
progress of any such audit or proceeding and if it appears in the reasonable
discretion of the Buyer that such audit or proceeding may adversely affect the
Buyer, the Buyer also may participate in any such audit or proceeding at its
own expense. Buyer shall cooperate on a reasonable basis with the Seller to
enable the Seller to take all actions with respect to such audit or proceeding.
If after proper notification, Seller does not assume the defense of any such
audit or proceedings, or upon assuming the defense of any such audit or
proceeding waives its rights hereunder to continue the audit or proceeding,
Buyer may defend and settle the same (for Seller's account) in such manner as
it may deem appropriate and, in this event, Seller shall pay promptly all
reasonable expenses incurred by Buyer in defending or settling such audit or
proceeding. With respect to a potential adjustment for which both the Seller
and the Buyer could be liable, or which involves an issue that recurs in a
period ending after the Closing Date (whether or not the subject of audit at
such time), (i) both the Buyer and Seller may participate at their own expense
in the audit or proceeding, and (ii) the audit or proceeding shall be
controlled by that party which would bear the burden of the greater portion of
the sum of the adjustment and any corresponding adjustments that may reasonably
be anticipated for a future Tax period. Neither Buyer nor Seller shall enter
into any compromise or agree to settle any claim pursuant to any Tax audit or
proceeding which would adversely affect the other party for such year or a
subsequent year without the written consent of the other party, which consent
may not be unreasonably withheld.
(c) The Seller shall pay all amounts due under this
Section 6.02, including all Taxes, interest, reasonable expenses and penalties,
promptly upon notice by the Buyer that the Seller has a liability for a
determinable amount under this Section 6.02; provided that the Buyer shall
refund promptly any such amounts to the Seller upon a determination that the
Seller is not liable hereunder; provided, further however, that the Seller is
provided with calculations or other materials supporting such liability.
Taxes, interest and penalties shall not be payable by Seller pursuant to this
Section 6.02 earlier than the date a final determination is made by the
appropriate taxing authority or court with respect to the Tax in question.
(d) Notwithstanding anything to the contrary, any and all
existing agreements arising out of or relating to the allocation of sharing of
Taxes between the Company, and any subsidiary of the Company, and any member of
the affiliated group, within the meaning of Section 1504(a) of the Code, of
which the Seller is a member or was a member shall be terminated with respect
to the Company or any subsidiary of the Company as of the Closing Date, with
the Company or any subsidiary of the Company thereof having no further rights,
obligations, or liabilities thereunder with respect to any taxable period prior
to, including or after the Closing Date.
6.03. Buyer Transactions. If reasonably requested by
Buyer, Seller shall use its reasonable efforts to do all things and take all
actions requested in connection with the Asset Purchase and Sale Agreement,
including providing any notices, obtaining any waivers of Preference Rights and
satisfying all Transfer Requirements.
6.04. Company Records. (i) Buyer shall retain the
Corporate Records until the seventh anniversary of the Closing Date and give
Seller reasonable access to such records during
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such period; provided, however, if Buyer shall desire to destroy any Corporate
Records prior to such seventh anniversary, Buyer shall promptly notify Seller
of which records it intends to destroy, and if Seller so requests, Buyer shall
return such records to Seller.
(ii) Buyer agrees to maintain (or cause the Company or
its successor-in-interest to the Properties to maintain) the Data in accordance
with Buyer's or such successor's records retention policies, but in any event
for a period of five (5) years after Closing.
(iii) The Seller may copy any of the Data prior to the
Closing and retain such copies, other than copies of the Data identified in
clause (iv) of the definition of such term.
6.05. Company Obligations. From and after Closing, Buyer
agrees to cause the Company to perform and comply with each of the actions and
obligations required or stipulated in this Agreement to be performed or
complied with by the Company (other than with respect to Retained Liabilities)
and not to take any action which would prevent such performance and compliance
by the Company; provided, that, without limiting the representations,
warranties, covenants and agreements of the Buyer which are set forth in other
Sections of this Agreement or releasing the Buyer or any Affiliate of Buyer
from any duty, obligation or requirement under the Uniform Fraudulent Transfer
Act or any other Law, neither Buyer nor any Affiliate of Buyer (other than the
Company) shall be required to contribute any capital to the Company by virtue
of Buyer's obligations under this Section.
6.06. Taxes. (a) Buyer shall not make any election under
Section 338 of the Code with respect to the purchase of the Company Shares and
Buyer shall be liable for any Tax resulting from an election under Section 338
of the Code (or similar state statute) with respect to the Company made by
Buyer or an Affiliate of the Buyer. Buyer agrees to cause the Company to
remain in existence and to continue to own the Properties until at least the
beginning of the day after the Closing Date.
(b) The Seller shall be responsible for the payment of
the following Taxes (except to the extent that the provisions of Sections
1.04(c) and 1.09 are inconsistent herewith) and for any loss, damage, liability
or expense including reasonable fees for attorneys and other outside
consultants, incurred in contesting or otherwise in connection with any such
Taxes: (i) Taxes imposed on the Company, any subsidiary of the Company, or on
or in connection with the Properties with respect to taxable periods ending on
or before the Closing Time which occurs on the Closing Date; (ii) with respect
to taxable periods beginning before the Closing Time which occurs on the
Closing Date and ending after the Closing Time which occurs on the Closing
Date, Taxes imposed on the Company, any subsidiary of the Company, or on or in
connection with the Properties which are allocable, pursuant to Section
6.06(c), to the portion of such period ending on the Closing Time which occurs
on the Closing Date; (iii) Taxes imposed on any member of any affiliated group
with which any of the Company or any subsidiary of the Company file or have
filed a Tax return on a consolidated, combined or unitary basis for a taxable
period ending on or before the Closing Time which occurs on the Closing Date;
(iv) Taxes imposed as a result of any breach of warranty or misrepresentation
under Section 2.11; and (v) all real property transfer, stock, stamp or similar
Taxes payable in connection with the transactions contemplated hereunder.
Subject to Sections 1.04 and 1.09, Buyer shall be responsible for the payment
of all Taxes imposed upon the Company or on or in connection with the
Properties with respect to any transactions occurring in and allocable to a
taxable period or portions thereof beginning after the Closing Time which
occurs on the Closing Date that is allocable pursuant to this Section 6.06 or,
with respect to any taxable period or portion thereof which ends after the
Closing Time but includes the Closing Date, the portion of such period
beginning immediately after the Closing Time through the end of such period
thereof. Any
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allocation of income, deductions or other tax items required to determine any
Taxes attributable to any period including or ending on the Closing Date shall
be made by means of a closing of the books of the Company as of the Closing
Time which occurs on the Closing Date. Notwithstanding anything herein to the
contrary, Seller shall not be responsible for the payment of any Taxes with
respect to Signal Capital Holdings Corporation for any period ending on or
prior to January 28, 1997 or for any portion of a taxable period beginning
before January 28, 1997 and ending after January 28, 1997 that is allocable to
the portion of such period ending on January 28, 1997 in a manner consistent
with Section 6.06(c) hereof by substituting therein January 28, 1997 for the
Closing Date.
(c) In the case of Taxes that are payable with respect to
a taxable period that begins before the Closing Time which occurs on the
Closing Date and ends after the Closing Time which occurs on the Closing Date,
except as may otherwise be required pursuant to the provisions of Sections
1.04(c) and 1.09, the portion of any such Tax that is allocable to the portion
of the period ending on the Closing Time which occurs on the Closing Date shall
be: (i) in the case of Taxes that are either (x) based upon or related to
income or receipts, or (y) imposed in connection with any sale or other
transfer or assignment of property (real or personal, tangible or intangible),
deemed equal to the amount which would be payable if the taxable year ended
with the Closing Time which occurs on the Closing Date (except that, solely for
purposes of determining the marginal tax rate applicable to income or receipts
during such period in a jurisdiction in which such tax rate depends upon the
level of income or receipts, annualized income or receipts may be taken into
account if appropriate for an equitable sharing of such Taxes); and (ii) in the
case of Taxes not described in subparagraph (i) that are imposed on a periodic
basis and measured by the level of any item, deemed to be the amount of such
Taxes for the entire period (or, in the case of such Taxes determined on an
arrears basis, the amount of such Taxes for the immediately preceding period)
multiplied by a fraction the numerator of which is the number of calendar days
in the period ending on the Closing Date and the denominator of which is the
number of calendar days in the entire period.
(d) Buyer and Seller agree that with respect to the
consolidated federal income Tax Return or any combined, unitary or consolidated
state, local or foreign Tax Return which includes the Seller and all Tax
Returns of the Company, all transactions involving the Company, or any
subsidiary of the Company that occur on the Closing Date but after Buyer's
purchase of the Company Shares (including any liquidating distributions by the
Company, or any subsidiary of the Company, and any sale of any of the
Company's, or any subsidiary of the Company's, assets) shall be treated as
occurring at the beginning of the day following the Closing Date and shall be
the responsibility of the Buyer. Buyer agrees that the common parent of the
affiliated group of corporations which includes the Seller may elect to retain
any net operating loss carryovers or capital loss carryovers of the Company, or
any subsidiary of the Company, under Treasury Regulations Section 1.1502-20(g).
After the Closing Date, Buyer and Seller shall fully cooperate, and shall make
available as reasonably requested all information and documents relating to Tax
liabilities (potential or actual) attributable to periods ending on or after
the Closing Date.
(e) Subject to Section 1.04(c), any tax refund (including
any interest with respect thereto) relating to the Company, any subsidiary of
the Company or on or in connection with the Properties for any taxable period
ending on or prior to the Closing Date, or for a taxable period ending after
the Closing Date that includes the Closing Date and is allocable to the portion
of such period up to the Closing Date pursuant to the methodology under Section
6.06(c) shall be the property of the Seller, shall be paid over promptly to the
Seller and if received by the Buyer or the Company or any subsidiary of the
Company shall be payable promptly to the Seller; provided, however, that any
benefit resulting from the utilization of any Company tax benefit item in any
period or portion thereof beginning after the Closing Date shall be for the
benefit of the Company and the Buyer. Notwithstanding the foregoing sentence:
(i) any tax refund (or equivalent benefit to
Stock Purchase Agreement
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the Seller through a reduction in Tax liability) for a period ending on or
before the Closing Date arising out of the carryback of a loss or credit
incurred by the Company, any subsidiary of the Company or on or in connection
with the Properties in a taxable year ending after the Closing Date shall be
payable promptly to the Buyer to the extent that such loss or credit results
from any transaction that occurs after the Closing Date, and (ii) if, as of
such time, if any, as the Buyer shall receive a refund that would be the
property of the Seller and payable to the Seller under the foregoing sentence,
to the extent Taxes have been asserted in writing that would be required to be
paid by the Seller pursuant to Sections 6.02 or 6.06 hereunder, all or part of
such refund up to an amount equal to 120% of such Taxes shall, at the option of
the Buyer, be deposited by the Buyer in escrow for the satisfaction of any
amounts payable under Sections 6.02 or 6.06 that have been asserted and remain
unsatisfied. Such escrow shall be released promptly to Seller upon satisfaction
of such Taxes, except that if additional Taxes that would be required to be
paid by the Seller pursuant to Sections 6.02 or 6.06 hereunder subsequently
have been asserted, Buyer may at its option retain an amount equal to 120% of
such Taxes in escrow until such Taxes have been satisfied.
(f) Notwithstanding anything to the contrary contained in
this Agreement, any gain or income recognized in connection with the sale by
Seller of the Company or any subsidiary of the Company, regardless of the
characterization of such sale and regardless of the period in which such gain
or income is required or deemed to be recognized for federal, state, local,
foreign or other tax purposes, shall be for the account of the Seller, the
Buyer shall not have any indemnification obligation with respect thereto and if
the Buyer properly pays any Taxes, interest and penalties with respect to such
sale after Seller's failure to pay such Taxes, interest and penalties when due
as provided in Section 6.02(c), then Seller shall promptly reimburse Buyer for
any such Taxes, interest, penalties and reasonable expenses and other amounts
with respect to such sale.
6.07. Name Change; Use of TransTexas Name, Etc. As soon as
reasonably possible after Closing, but in no event later than 30 days after
Closing, Buyer shall cease using all stationery and letterhead, and shall
remove all signs, insignias, marketing logos and trademarks from all of the
assets and properties of Company, containing the name "TransTexas" or any
derivative thereof (the "TransTexas Name"), and shall make the requisite
filings, and provide the requisite notices to, the appropriate governmental
agencies to place the title or other indicia of ownership, including operation
of the Properties and of the assets and properties of Company, in a name other
than the TransTexas Name.
ARTICLE VII
CLOSING
7.01. Closing. At the closing of the transactions
contemplated hereby (the "Closing") the activities specified in this Article
VII are occurring.
7.02. Seller's Closing Obligations. At Closing, Seller is
executing, acknowledging (where appropriate), and delivering, or causing to be
executed, acknowledged (where appropriate), and delivered, to Buyer, or its
designee, the following (the "Closing Documents"):
(i) this Agreement;
(ii) the Preliminary Settlement Statement;
(iii) the stock certificates representing (a) all issued
and outstanding Company Shares and (b) the Shares, endorsed in blank
or accompanied by duly executed assignment
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documents;
(iv) an officer's certificate, dated as of the Closing
Date, executed by a duly authorized officer of Seller, to the effect
that to such officer's knowledge: (a) the representations and
warranties of Seller contained in this Agreement are true and correct
in all material respects as of Closing; provided, that,
representations and warranties containing a materiality standard shall
be true and correct as of Closing; (b) Seller has performed and
complied in all material respects with each of its covenants,
conditions, duties, and obligations arising under or with respect to
the Interim Operating Agreement; (c) no Action (excluding any such
matter initiated by Buyer or any of its Affiliates) is pending or
threatened before any court or governmental agency seeking to enjoin
or restrain or prohibit, delay, or restrain the performance of or to
obtain damages or other relief in connection with this Agreement, the
Asset Purchase and Sale Agreement, any Ancillary Agreement, or the
consummation of the transactions contemplated hereby or thereby; and
(d) the Downstream Conveyance and Haynes Lease Conveyance have been
validly executed, acknowledged, and delivered;
(v) Certificate of Ed Donahue, Secretary of Seller, dated
as of the Closing Date, certifying the incumbency and signatures of
the officers of Seller and that attached to such certificate is a true
and complete copy of (a) the Certificate of Incorporation of Seller,
(b) the By-laws of Seller, and (c) the resolutions of the Board of
Directors of Seller authorizing the execution and delivery of this
Agreement, the Interim Operating Agreement, Assignment of Rights,
Dispute Resolution Agreement, Ancillary Agreements, Estoppel
Certificate from Seller, Excluded Asset Conveyance, Haynes Lease
Conveyance, and the Downstream Conveyance, and the transactions
contemplated by each of the foregoing agreements, dated as of May 27,
1997;
(vi) Certificate of Ed Donahue, Secretary of the Company,
dated as of the Closing Date, certifying the incumbency and signatures
of the officers of the Company and that attached to such certificate
is a true and complete copy of (a) the Certificate of Incorporation of
the Company, (b) the By-laws of the Company, (c) the resolutions of
the Board of Directors of the Company authorizing the execution and
delivery of the Downstream Conveyance, Haynes Lease Conveyance, and
the Excluded Asset Conveyance, and the transactions contemplated
thereby, dated as of May 27, 1997, and (d) the unanimous written
consent of Seller, its sole stockholder, as to the Downstream
Conveyance, Haynes Lease Conveyance, and the Excluded Asset Conveyance
and the transactions contemplated thereby, dated as of May 27, 1997;
(vii) a written opinion, dated as of the Closing Date, of
Gardere Wynne Sewell & Riggs, L.L.P., counsel for Seller in a form
acceptable to Buyer;
(viii) resignations or terminations of the officers and
directors of the Company from their status as officers or directors
effective as of the Closing;
(ix) a non-foreign affidavit in a form acceptable to
Buyer, dated as of the Closing Date;
(x) counterparts of the Ancillary Agreements;
(xi) counterparts of the Assignment of Rights;
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(xii) the Downstream Conveyance and Haynes Lease
Conveyance;
(xiii) counterparts of the Lien Releases, or recorded copies
thereof if recorded prior to Closing;
(xiv) counterparts of all other releases, or recorded
copies thereof if recorded before Closing, in form acceptable to
Buyer, of the burdens and encumbrances required by Buyer to be
obtained by Seller prior to Closing;
(xv) the Excluded Asset Conveyance;
(xvi) a certified check payable to Buyer, or its designee,
in an amount equal to the amount of funds held in the suspense
accounts, or other similar accounts holding the funds of others,
identified in Schedule 1.08;
(xvii) evidence that all ad valorem taxes through the year
1996 have been paid;
(xviii) all original consents, waivers, exercises, and other
necessary documents arising with respect to Transfer Restrictions and
Preference Rights in connection with the transactions contemplated by
this Agreement and the Asset Purchase and Sale Agreement;
(xix) to the extent required, applications to transfer the
Permits to Buyer or its designee;
(xx) the Guarantee, together with an opinion of Gardere
Wynne Sewell & Riggs, L.L.P., with respect to the Guarantee and
addressed to Buyer, Conoco, and Lobo Pipeline Company, all in form
acceptable to Buyer, Conoco, and Lobo Pipeline Company;
(xxi) the Ancillary Guarantee, together with an opinion of
Gardere Wynne Sewell & Riggs, L.L.P., with respect to the Ancillary
Guarantee, and addressed to Conoco and Lobo Pipeline Company, all in a
form acceptable to Conoco and Lobo Pipeline Company;
(xxii) waivers of all claims arising or accruing before the
Closing Date against the Company executed by each TransTexas Entity
reasonably requested by Buyer in a form acceptable to Buyer (the
"Estoppel Certificates");
(xxiii) counterparts of the Memorandum of Option; and
(xxiv) the Corporate Records and Data.
7.03. Buyer's Closing Obligations. At Closing, Buyer is
executing, acknowledging (where appropriate), and delivering, or causing to be
executed, acknowledged (where appropriate), and delivered, to Seller the
following:
(i) this Agreement;
(ii) the Preliminary Settlement Statement;
(iii) a bank check, payable to Seller, in the amount of
one-hundred million dollars ($100,000,000), the Promissory Note, and a
pledge and security agreement in favor of Seller, dated as of the date
hereof;
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(iv) an officer's certificate, dated as of the Closing
Date, executed by a duly authorized officer of Buyer, to the effect
that to such officer's knowledge (a) the representations and
warranties of Buyer contained in this Agreement are true and correct
in all material respects as of Closing; provided, that,
representations and warranties containing a materiality standard shall
be true and correct as of Closing; and (b) no Action (excluding any
such matter initiated by Seller or any of its Affiliates) is pending
or threatened before any court or governmental agency seeking to
enjoin or restrain or prohibit, delay, or restrain the performance of
or to obtain damages or other relief in connection with this Agreement
or the Asset Purchase and Sale Agreement, or the consummation of the
transactions contemplated hereby or thereby;
(v) a certificate of Diane M. Welsh, Vice President of
the Buyer, dated as of the Closing Date, certifying the incumbency and
signatures of certain officers of the Buyer and that attached to such
certificate is a true and complete copy of (i) the Certificate of
Incorporation of the Buyer, (ii) the By-laws of the Buyer, (iii) the
Trust Agreement of the Trust; (iv) written instructions of the
Majority in Interest of Beneficiaries under the Trust Agreement dated
as of May 16, 1997 and such other certifications and attachments as
are acceptable to the Seller.
(vi) a written opinion, dated as of the Closing Date, of
Bingham, Dana, & Gould, L.L.P., counsel to Buyer, in a form acceptable
to Seller;
(vii) counterparts of the Ancillary Agreements;
(viii) counterparts of the Assignment of Rights; and
(ix) certified checks in the amounts specified, and
payable to the parties identified, in Schedule 7.03(ix) for purposes
of obtaining all or some of the releases identified in Section
7.02(xiii) and (xiv).
7.04. Payment of Purchase Price. (a) At Closing, Buyer has
tendered to Seller the Purchase Price (as adjusted hereunder) by the following:
(i) the bank check in the amount of One Hundred Million
Dollars ($100,000,000) pursuant to Section 7.03(iii);
(ii) the certified checks specified in Section 7.03(ix);
and
(iii) a demand promissory note (the "Promissory Note") in
the amount of nine hundred twenty-four million, nine hundred
seventy-one thousand, eight hundred and eleven dollars ($924,971,811).
(b) After Closing, Buyer shall pay, or cause to be paid,
such further amounts to Seller as same become due with respect to cured
Property Defects and acquired Outstanding Interests as provided in Section 4.02
hereof.
7.05. Recording of Documents. To the extent not previously
recorded, Buyer and Seller shall cooperate such as to insure that the following
documents are filed of record and recorded concurrently with Closing in the
appropriate real property and other official records, and in the following
order, or other order as the parties shall agree:
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(a) the Downstream Conveyance;
(b) the Haynes Lease Conveyance;
(c) the Excluded Asset Conveyance;
(d) the Lien Releases and the other releases identified
in Section 7.02(xiv);
(e) the Memorandum of Option; and
(f) the Estoppel Certificates.
ARTICLE VIII
SURVIVAL
8.01. Survival. Subject to the further provisions of this
Section 8.01, the duties, obligations, and liabilities of Buyer and Seller
under each of their respective covenants, representations, warranties, and
indemnities contained in this Agreement shall survive the Closing and the
execution and delivery of the Closing Documents and thereafter shall be binding
upon and enforceable against such parties, notwithstanding any investigation
made by or on behalf of the other party. The representations or warranties of
the parties shall not form the basis for or give rise to any claim, demand,
cause of action, counterclaim, defense, damage, indemnity under Article X,
obligation, or liability which is asserted, claimed, made or filed following
the Termination Date, except to the extent of any Liabilities arising from or
in connection with (a) the inaccuracy of any of the representations and
warranties of Seller given in Sections 2.14, 2.16, 2.17, and 2.25 and (b) any
Liability incurred or suffered by Buyer, or its successors and assigns, arising
with respect to Seller or third parties (including any TransTexas Entities),
whether arising in connection with matters constituting a breach of any of
Seller's representations and warranties, including those set forth in clause
(a) above, or otherwise.
ARTICLE IX
LIMITATIONS
9.01. Disclaimer of Warranties. (a) WITHOUT LIMITING
BUYER'S RIGHTS UNDER ANY INSTRUMENT IN THE CHAIN OF TITLE TO THE PROPERTIES AND
SELLER'S INDEMNIFICATION UNDER ARTICLE X, SELLER MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, EXCEPT AS PROVIDED
HEREIN, INCLUDING SECTIONS 2.18 AND 2.25, WITH RESPECT TO THE COMPANY'S TITLE
TO ANY OF THE PROPERTIES.
(b) NOTWITHSTANDING ANYTHING CONTAINED TO THE CONTRARY IN
ANY OTHER PROVISION OF THIS AGREEMENT, IT IS THE EXPLICIT INTENT OF EACH PARTY
HERETO THAT SELLER IS NOT MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, BEYOND THOSE REPRESENTATIONS AND
WARRANTIES EXPRESSLY GIVEN IN THIS AGREEMENT AND, EXCEPT FOR SUCH
REPRESENTATIONS AND WARRANTIES, IT IS UNDERSTOOD THAT BUYER TAKES THE COMPANY
AND THE PROPERTIES "AS IS AND WHERE IS." WITHOUT LIMITING THE GENERALITY OF
THE IMMEDIATELY
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PRECEDING SENTENCE, SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT COMMON LAW, BY STATUTE OR
OTHERWISE, RELATING TO (A) THE CONDITION OF THE PROPERTIES (INCLUDING ANY
IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, OR OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, EXCEPT AS PROVIDED
IN SECTION 2.22; (B) ANY INFRINGEMENT BY SELLER OR ANY OF ITS AFFILIATES OF ANY
PATENT OR PROPRIETARY RIGHT OF ANY THIRD PARTY; (C) THE ACCURACY, COMPLETENESS
OR MATERIALITY OF ANY (i) RESERVE ESTIMATES AND PROJECTIONS, ENGINEERING AND
TECHNICAL EVALUATIONS AND ASSESSMENTS, PRODUCTION RATES, RECOMPLETION
OPPORTUNITIES, DECLINE RATES, GEOLOGICAL OR GEOPHYSICAL DATA OR
INTERPRETATIONS, (ii) THE QUALITY, QUANTITY, RECOVERABILITY OR COST OF RECOVERY
OF ANY HYDROCARBON OR MINERAL RESERVES, (iii) PRODUCT PRICING ASSUMPTIONS, OR
(iv) THE ABILITY TO SELL OR MARKET ANY HYDROCARBONS OR MINERALS FROM OR
ATTRIBUTABLE TO THE PROPERTIES, AND (D) THE RIGHT OF ANY ASSIGNEE OF THE
PROPERTIES TO USE OR CHARGE ANY TARIFF GRANTED TO THE COMPANY BY THE RAILROAD
COMMISSION OF TEXAS OR THE FEDERAL ENERGY REGULATORY COMMISSION.
9.02. Texas Deceptive Trade Practices Act Waiver. BUYER
(A) REPRESENTS AND WARRANTS TO SELLER THAT IT (i) IS ACQUIRING THE PROPERTIES
FOR COMMERCIAL OR BUSINESS USE, (ii) IS REPRESENTED BY LEGAL COUNSEL, (iii)
ACKNOWLEDGES THE CONSIDERATION PAID OR TO BE PAID FOR THE PROPERTIES WILL
EXCEED $500,000, AND (iv) HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND
BUSINESS MATTERS SUCH THAT IT ENABLES IT TO EVALUATE THE MERITS AND RISKS OF
THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT AND IS NOT IN A SIGNIFICANTLY
DISPARATE BARGAINING POSITION WITH RESPECT TO THE SELLER; AND (B) HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY AND ALL RIGHTS OR REMEDIES IT MAY
HAVE UNDER THE DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT OF THE STATE
OF TEXAS, TEX. BUS. & COM. CODE SECTION 17.41 ET SEQ. TO THE MAXIMUM EXTENT IT
CAN DO SO UNDER APPLICABLE LAW, IF SUCH ACT WOULD FOR ANY REASON BE DEEMED
APPLICABLE TO THE TRANSACTIONS CONTEMPLATED HEREBY.
WAIVER OF CONSUMER RIGHTS
BUYER WAIVES ITS RIGHTS UNDER THE DECEPTIVE TRADE PRACTICES -
CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ, BUSINESS & COMMERCE
CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER
CONSULTATION WITH AN ATTORNEY OF BUYER'S OWN SELECTION, BUYER
VOLUNTARILY CONSENTS TO THIS WAIVER.
FURTHERMORE, WITH RESPECT TO ASSETS WHICH ARE LOCATED IN A STATE OTHER
THAN TEXAS, BUYER WAIVES ANY COMPARABLE PROVISION OF THE LAW OF THE
STATE WHERE THE ASSETS ARE LOCATED.
9.03. Damages. NOTWITHSTANDING ANYTHING CONTAINED TO THE
CONTRARY IN ANY OTHER PROVISION OF THIS AGREEMENT, SELLER AND BUYER AGREE THAT
THE RECOVERY BY EITHER PARTY HERETO OF ANY DAMAGES SUFFERED OR INCURRED BY IT
AS A RESULT OF ANY BREACH BY THE OTHER PARTY OF ANY OF ITS REPRESENTATIONS,
WARRANTIES OR OBLIGATIONS UNDER
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THIS AGREEMENT SHALL BE LIMITED TO THE ACTUAL DAMAGES SUFFERED OR INCURRED BY
THE NON-BREACHING PARTY AS A RESULT OF THE BREACH BY THE BREACHING PARTY OF ITS
REPRESENTATIONS, WARRANTIES OR OBLIGATIONS HEREUNDER, AND IN NO EVENT SHALL THE
BREACHING PARTY BE LIABLE TO THE NON-BREACHING PARTY FOR ANY CONSEQUENTIAL,
SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES (INCLUDING ANY DAMAGES ON ACCOUNT OF
LOST PROFITS OR OPPORTUNITIES OR LOST OR DELAYED PRODUCTION, AS SUCH TERMS ARE
CUSTOMARILY USED IN THE OIL AND GAS INDUSTRY) SUFFERED OR INCURRED BY THE
NON-BREACHING PARTY AS A RESULT OF THE BREACH BY THE BREACHING PARTY OF ANY OF
ITS REPRESENTATIONS, WARRANTIES OR OBLIGATIONS HEREUNDER, INCLUDING ANY SUCH
DAMAGES AND CLAIMS ARISING OUT OF THE SOLE, JOINT, AND/OR COMPARATIVE
NEGLIGENCE, STRICT LIABILITY, OR FAULT OF THE BREACHING PARTY. This Section
9.03 shall operate only to limit a party's liability and shall not operate to
increase or expand any contractual obligation of a party hereunder or cause any
contractual obligation of a party hereunder to survive longer than provided in
Section 8.01.
9.04. Shares. Notwithstanding anything contained herein to
the contrary in any other provision of this Agreement, except as set forth in
Section 2.04(b), it is the explicit intent of EACH PARTY HERETO THAT SELLER IS
MAKING NO REPRESENTATIONS OR WARRANTIES WHATSOEVER RELATING TO THE SHARES OR
SIGNAL CAPITAL HOLDINGS CORPORATION.
ARTICLE X
ALLOCATION OF LIABILITIES; INDEMNIFICATION
10.01. Assumption of Costs and Liabilities. Upon Closing
the Company shall retain, and the Buyer accepts, assumes, and agrees to pay,
perform, and discharge when due, the Assumed Obligations, and Seller accepts,
assumes, and agrees to pay, perform and discharge when due all Retained
Liabilities. In no event will Seller's or Buyer's assumption of Liabilities
operate to ratify, revive, or reinstate any Liability that has expired,
terminated, or been discharged by bankruptcy, limitations, or otherwise, or
create any liability to any third party that does not otherwise exist.
10.02. Assignment of Excluded Assets. At Closing, Seller is
causing the Company to convey and assign to Seller, and Seller is accepting,
the Excluded Assets. The Excluded Assets are being conveyed and assigned
pursuant to that certain Conveyance, Assignment, and Bill of Sale (Excluded
Assets) in a form acceptable to Buyer and Seller (the "Excluded Asset
Conveyance"). To the extent of any conflict between the terms and provisions
of this Agreement and the Excluded Asset Conveyance, this Agreement shall
control and govern.
10.03. Buyer's Indemnification. On and after the Closing
Date Buyer, and Buyer's successors and assigns, and successors and assigns of
an interest in the Properties (but only to the extent relating to Properties
acquired by Buyer's assignees or successors and to periods of time from and
after such assignment), shall be responsible for, shall pay on a current basis,
and shall indemnify, save, hold harmless, discharge, and release Seller, its
Affiliates, successors and permitted assigns, and all of their respective
stockholders, directors, officers, employees, agents and representatives
(collectively, the "Seller Indemnified Parties"), from and against any and (a)
all Assumed Obligations and (b) any Liabilities caused by or resulting from (i)
any inaccuracy of any representation or warranty of Buyer set forth in this
Agreement (determined without regard to Buyer's knowledge) or (ii) any breach
of, or failure to perform or satisfy, any of the covenants and
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obligations of Buyer set forth in this Agreement.
10.04. Seller's Indemnification. Seller shall be
responsible for, shall pay on a current basis, and shall indemnify, save, hold
harmless, discharge and release Buyer, its Affiliates, successors, permitted
assignees, First Union Bank of Connecticut, the Company, and any assignee or
successor of any interest in the Properties, and all of their respective
stockholders, directors, officers, employees, agents and representatives
(collectively, the "Buyer Indemnified Parties"), from and against any and all
(a) Retained Liabilities and (b) any Liabilities caused by or resulting from
(i) any inaccuracy of any representation or warranty of Seller set forth in
this Agreement (determined without regard to any Person's knowledge) or (ii)
any breach of, or failure to perform or satisfy, any of the covenants and
obligations of Seller set forth in this Agreement.
10.05. Express Negligence Rule. THE ASSUMPTION, RELEASE,
AND INDEMNIFICATION PROVISIONS SET FORTH IN THIS AGREEMENT, INCLUDING THOSE
ARISING UNDER SECTIONS 1.04(b)(ii), 5.03, 10.01, 10.03, AND 10.04 HEREOF,
SHALL BE APPLICABLE TO AND INCLUDE AN ASSUMPTION, RELEASE, AND INDEMNIFICATION
OF THE OTHER PARTY FROM AND AGAINST ALL LIABILITIES DESCRIBED THEREIN, WHICH
LIABILITIES INCLUDE LIABILITIES ARISING FROM THE SOLE, JOINT, AND/OR
COMPARATIVE NEGLIGENCE, STRICT LIABILITY, OR FAULT OF THE OTHER PARTY, IF ANY.
BUYER AND SELLER ACKNOWLEDGE AND AGREE THAT THIS AGREEMENT AND THIS PROVISION
COMPLY IN ALL RESPECTS WITH THE EXPRESS NEGLIGENCE RULE, AND THIS PROVISION IS
CONSPICUOUS.
10.06. Limits on Seller's Indemnity. (a) Seller's
obligation and liability under this Article X shall not accrue with respect to
Environmental Liabilities until the aggregate of all claims made under Section
10.04 with respect to Environmental Liabilities equal, in the aggregate,
$10,000,000, and then only to the extent of the excess.
(b) Seller's liability under Section 10.04 with respect
to Seller's breach of any of its representations and warranties which has the
same effect as a breach of the title representation made in Section 2.25 shall
be limited to, and shall not exceed, the Allocated Value of the Property or
Properties affected thereby.
10.07. Third Party Claims and Obligations. If a claim by a
third party is made against a Seller Indemnified Party or a Buyer Indemnified
Party (an "Indemnified Party"), or if any Indemnified Party intends to pay any
obligation of another Indemnified Party pursuant to Section 1.04(b), and if
such Indemnified Party intends to seek indemnity or reimbursement with respect
thereto under this Agreement, such Indemnified Party shall promptly furnish
written notice to Buyer or Seller, as the case may be (the "Indemnitor"), of
such claims or obligations. The Indemnitor shall have thirty (30) days after
receipt of such notice to undertake, conduct and control, through counsel of
its own choosing and at its own expense, the settlement or defense thereof, and
the Indemnified Party shall cooperate with it in connection therewith; provided
that the Indemnitor shall permit the Indemnified Party to participate in such
settlement or defense through counsel chosen by such Indemnified Party,
however, the fees and expenses of such counsel shall be borne by such
Indemnified Party. So long as the Indemnitor, at Indemnitor's cost and
expense, (a) has undertaken the defense of, and assumed full responsibility for
all indemnified Liabilities with respect to, such claim or obligation, (b) is
reasonably contesting such claim or obligation in good faith, by appropriate
proceedings, and (c) has taken such action (including the posting of a bond,
deposit or other security) as may be necessary to prevent the attachment of (or
to obtain the release of) any Lien on any of the Properties and to prevent any
action to foreclose a lien against or attachment of the property of the
Indemnified Party for payment of such claim or obligation, the Indemnified
Party
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shall not pay or settle any such claim or obligation. Notwithstanding
compliance by the Indemnitor with the preceding sentence, the Indemnified Party
shall have the right to pay or settle any such claim or obligation, provided
that in such event it shall waive any right to indemnity or reimbursement
therefor by the Indemnitor. Notwithstanding anything herein to the contrary,
if (i) within thirty (30) days after the receipt of the Indemnified Party's
notice hereunder of a claim or obligation, the Indemnitor does not notify the
Indemnified Party that it elects, at Indemnitor's cost and expense, to
undertake the defense thereof and assume full responsibility for all
indemnified Liabilities with respect thereto, or gives such notice and
thereafter fails to pay or contest such claim or obligation in good faith or to
prevent the attachment of (or to obtain the release of) any Lien and to prevent
any action to foreclose a lien against or attachment of the Indemnified Party's
property as contemplated above, or (ii) a party making a claim or asserting an
obligation has asserted that a Property has, may or will be terminated as a
result of such claim or obligation, then the Indemnified Party shall have the
right to contest, settle and/or compromise the claim or obligation and, to the
extent the actions, if any, taken by the Indemnified Party in settling or
compromising such claim are in good faith, the Indemnified Party shall not
thereby waive any right to reimbursement or indemnity therefor pursuant to this
Agreement. If any party shall pay or satisfy the obligation of the other and
receive reimbursement as herein provided, the party on whose behalf such
obligation was paid shall be assigned the right to recover such amount from the
Person to whom such payment was made. Seller shall immediately notify Buyer,
and its successors and assigns of which it has notice, of any claim Seller or
any TransTexas Entity receives alleging, asserting, or seeking a prior,
current, or future termination or loss of any of the Properties, or any portion
thereof.
10.08. Exclusive Remedy. The sole and exclusive remedy of
each of the Indemnified Parties with respect to the representations,
warranties, and covenants of the parties contained in this Agreement shall be
as provided in this Article X. Notwithstanding the foregoing, in no event
shall this Section 10.08 be deemed a waiver or relinquishment: (a) by Buyer of
any right (i) to assert that a Liability is a Retained Liability, (ii) to join
or otherwise bring Seller into any Action as a third party, whether by
impleader, interpleader, or otherwise, with respect to a Retained Liability, or
(iii) to seek contribution from Seller with respect to any Retained Liability;
and (b) by Seller of any right (i) to assert that a Liability is an Assumed
Obligation, (ii) to join or otherwise bring Buyer into any Action as a third
party, whether by impleader, interpleader, or otherwise, with respect to an
Assumed Obligation, or (iii) to seek contribution from Buyer with respect to
any Assumed Obligation.
10.09. Seller's Title Warranty in Prior Conveyances. With
respect to Seller's liability under the warranty of title set forth in the
Downstream Conveyance and the Haynes Lease Conveyance, Seller hereby waives any
right to assert that recovery under such warranty, by the Company, Buyer, or
any successor or assign of any interest in the Properties, is limited to or by
any actual consideration or value received or deemed to be received by Seller
from the Company in connection with such assignments. Seller and Buyer
acknowledge and agree that the consideration received by Seller in connection
with the Downstream Conveyance and the Haynes Lease Conveyance is and shall be
deemed equal and equivalent to, with respect to each Property, the Allocated
Value attributable to such Property, and Seller's liability under the title
warranty in the Downstream Conveyance and the Haynes Lease Conveyance shall be
limited to and shall not exceed such Allocated Value. Buyer agrees that any
assignment by the Company of all or any part of the Properties shall contain a
statement placing subsequent purchasers and creditors on notice of the
foregoing. No successor or assign of Buyer shall be required to place any such
statement in any subsequent assignment, so long as at the time of such
subsequent assignment there is an assignment of the Properties of record in
Zapata and Webb Counties, Texas containing such statement.
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ARTICLE XI
MISCELLANEOUS
11.01. Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other party. In making proof
of this Agreement, it shall not be necessary to produce or account for more
than one such counterpart.
11.02. Governing Law. THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF
RELATING TO CONFLICTS OF LAW RULES THAT WOULD DIRECT THE APPLICATION OF THE
LAWS OF ANOTHER JURISDICTION.
11.03. Entire Agreement. This Agreement and the Appendices,
Schedules and Exhibits hereto, including the Preamble thereto, contain the
entire agreement between the parties with respect to the subject matter hereof
and there are no agreements, understandings, representations or warranties
between the parties other than those set forth or referred to herein.
11.04. Expenses. Seller shall be responsible for (i) all
transfer, stamp, documentary and similar Taxes imposed on the parties hereto
with respect to the purchase and sale of the Company Shares contemplated
pursuant to this Agreement and (ii) all recording, filing or registration fees
for any assignment or conveyance, including any memorandum thereof, delivered
to Buyer under or pursuant to this Agreement. Without limiting the foregoing,
Seller shall be responsible for all recording, filing, and registration fees
arising in connection with the Lien Releases, the releases identified in
Section 7.02(xiv), Excluded Asset Conveyance, Haynes Lease Conveyance,
Memorandum of Option, Estoppel Certificates, and Downstream Conveyance. All
other costs and expenses incurred by each party hereto in connection with all
things required to be done by it hereunder, including attorney's fees,
accountant fees and the expense of environmental and title examination, shall
be borne by the party incurring same. Whether or not the transactions
contemplated by this Agreement are consummated, each of the parties hereto
shall pay the fees and expenses of their respective counsel, accountants,
engineers and other experts and professionals incident to the negotiation and
preparation of this Agreement and consummation of the transactions contemplated
hereby.
11.05. Notices. All notices hereunder shall be in writing
and, unless otherwise provided herein, deemed given and received for all
purposes hereunder when (i) delivered personally, (ii) delivered to a
documented overnight delivery service or, (iii) to the extent receipt is
confirmed delivered to the United States Postal Service or transmitted by
telecopy, telefax or other electronic transmission service, in each case to the
appropriate address or number as set forth below. Notices to Seller shall be
addressed as follows:
TransTexas Gas Corporation
1300 East North Belt, Suite 310
Houston, Texas 77032-2949
Attention: Mr. Arnold Brackenridge
Telecopy No.: (281) 986-8865
with copies to:
Gardere Wynne Sewell & Riggs, L.L.P.
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<PAGE> 45
333 Clay Avenue, Suite 800
Houston, Texas 77002
Attention: Jerry A. DeVault
Telecopy No.: (713) 308-5505
or at such other address or telecopy number, and to the attention of such
other Person, as Seller may designate by written notice to Buyer. Notices to
Buyer shall be addressed to:
First Union Bank of Connecticut
First Union Corporate Trust
10 State House Square
Hartford, Connecticut 06103
Attention: W. Jeffrey Kramer
Telecopy No.: (860) 247-1353
with copies to:
Bingham, Dana & Gould, L.L.P.
100 Pearl Street
Hartford, Connecticut 06103-4507
Attention: James G. Scantling
Telecopy No.: (860) 541-3074
Sherman & Sterling
599 Lexington Ave.
New York, New York 10022
Attention: Gerald Rokoff
Telecopy No.: (212) 848-7179
or at such other address or telecopy number, and to the attention of such other
Person, as Buyer may designate by written notice to Seller.
11.06. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, including all successors and assigns of the
Properties, or any interest therein; provided, however, that the respective
rights and obligations of the parties hereto shall not be assignable or
delegable by any party hereto without the express written consent of the
non-assigning or non-delegating party. Seller expressly consents to the
assignment of Buyer's rights and remedies hereunder pursuant to the terms of
the Assignment of Rights, and to any subsequent assignee of such rights and
remedies.
11.07. Amendments and Waivers. Subject to the terms of the
Assignment of Rights, (i) this Agreement may not be modified, amended,
superseded, or canceled except by an instrument or instruments in writing
signed by Seller and Buyer and (ii) any party hereto may, only by an instrument
in writing, waive compliance by another party hereto with any term or provision
of this Agreement on the part of such other party hereto to be performed or
complied with. The waiver by any party hereto of a breach of any term or
provision of this Agreement shall not be construed as a waiver of any
subsequent breach.
11.08. Appendices, Schedules and Exhibits. All Appendices,
Schedules and Exhibits hereto, including the Preamble thereto, which are
referred to herein are hereby made a part hereof and incorporated herein by
such reference.
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11.09. Interpretation. It is expressly agreed that this
Agreement shall not be construed against any party, and no consideration shall
be given or presumption made, on the basis of who drafted this Agreement or any
particular provision hereof or who supplied the form of Agreement. Each party
agrees that it has been purposefully drawn and correctly reflects their
understanding of the transaction that it contemplates. In construing this
Agreement:
(a) examples and illustrations shall not be construed to
limit, expressly or by implication, the matter they illustrate;
(b) the word "includes" and its derivatives means
"includes, but is not limited to" and corresponding derivative expressions;
(c) a defined term has its defined meaning throughout
this Agreement and each Appendix, Exhibit and Schedule to this Agreement,
including the Preamble thereto, regardless of whether it appears before or
after the place where it is defined;
(d) if there is any conflict or inconsistency between the
main body of this Agreement (including Appendix 1 and 2 which shall be
considered part of the main body of this Agreement) and any Exhibit or
Schedule, and the Preamble thereto, the provisions of the main body of this
Agreement shall prevail;
(e) the headings and titles herein are for convenience
only and shall have no significance in the interpretation hereof; and
(f) the plural shall be deemed to include the singular,
and vice versa.
11.10. Arbitration. It is agreed, as a severable and
independent arbitration agreement separately enforceable from the remainder of
this Agreement, that if the parties hereto, the Company, the Indemnified
Parties or their respective successors, assigns, heirs or legal representatives
of any of the foregoing are unable to amicably resolve any dispute or
difference arising under or out of, in relation to or in any way connected with
this Agreement (whether contractual, tortious, equitable, statutory or
otherwise), such matter shall be finally and exclusively referred to and
settled by arbitration in accordance with the Dispute Resolution Agreement, the
terms and provisions of which are incorporated by reference herein.
11.11. Agreement for the Parties' Benefit Only. Except for
those terms of this Agreement which are intended to benefit and be enforceable
by any of the Indemnified Parties and by the parties to the Assignment of
Rights and their successors and assigns, this Agreement is not intended to
confer upon any Person not a party hereto any rights or remedies hereunder, and
no Person, other than the parties hereto, the Indemnified Parties, or such
parties and their successors and assigns, is entitled to rely on any
representation, warranty, covenant or agreement contained herein.
11.12. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
adverse manner to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to
the extent possible.
Stock Purchase Agreement
Page -40-
<PAGE> 47
11.13. No Recordation. Buyer and Seller expressly covenant
and agree not to record or place of record this Agreement or any copy or
memorandum hereof, other than the Memorandum of Option.
11.14. Time. If the date specified in this Agreement for
giving any notice or taking any action is not a Business Day (or if the period
during which any notice is required to be given or any action taken expires on
a date which is not a Business Day), then the date for giving such notice or
taking such action (and the expiration date of such period during which notice
is required to be given or action taken) shall be the next day which is a
Business Day.
11.15. Further Assurances. After the Closing, Seller,
Company, and Buyer shall execute, acknowledge and deliver, and cause to be
executed, acknowledged and delivered, such instruments and take, or cause to be
taken, such other action as may be necessary or advisable to carry out its
obligations under this Agreement and under any exhibit, document, certificate
or other instrument delivered pursuant hereto.
11.16. No Recourse. It is expressly understood and agreed
by Seller that this Agreement is executed and delivered by Buyer, not in its
individual capacity but solely as trustee under the Trust Agreement, in the
exercise of the powers and authority conferred and vested in it as the trustee
thereunder, and each of the representations, warranties, undertakings and
agreements herein made on the part of the trustee is made and intended not as a
personal representation, warranty, undertaking and agreement by Buyer, other
than the representations and warranties made under Sections 3.01, 3.02, 3.03,
and 3.04, (provided that with respect to Section 3.04(b), this exception shall
only apply to banking and trust laws), but is made and intended for the purpose
of binding only the trust estate created by the Trust Agreement, and all
persons having any claim against Buyer or the trustee under the Trust Agreement
by reason of the transactions contemplated by this Agreement, other than with
respect to the inaccuracy of the specific representations set forth above,
shall look only to the trust estate of the Trust for payments or satisfaction
thereof.
11.17 Contribution Agreement. Nothing in the Contribution
Agreement shall operate to waive, modify, release, or diminish any rights or
remedies, or expand any duties or obligations of the Company, Buyer, or their
successors and assigns, hereunder. In the event of any inconsistency between
the terms and provisions of this Agreement or Seller's Estoppel Certificate
with the terms and provisions of the Contribution Agreement, the terms and
provisions of this Agreement and such Estoppel Certificate shall control and
govern.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
Stock Purchase Agreement
Page -41-
<PAGE> 48
IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of each of the parties as of the day first above written.
SELLER:
TRANSTEXAS GAS CORPORATION
By: /s/ ARNOLD H. BRACKENRIDGE
-----------------------------------
Arnold H. Brackenridge
President
BUYER:
FIRST UNION BANK OF CONNECTICUT, not in
its individual capacity but solely as
Trustee under the Trust Agreement, except
as expressly provided in Section 11.16
By: /s/ W. JEFFREY KRAMER
----------------------------------
W. Jeffrey Kramer
Vice President
Stock Purchase Agreement
Page -42-
<PAGE> 49
APPENDIX 1
TO STOCK PURCHASE AGREEMENT
DEFINITIONS
"Accepted Environmental Defect" shall mean any event, occurrence,
fact, condition, or other matter that is specifically disclosed in Schedule
2.17, unless such event, occurrence, fact, condition, or other matter is
identified therein by an asterisk and initialed by a duly authorized
representative of Buyer and Seller (which matters shall constitute Retained
Liabilities). Notwithstanding the foregoing, in no event shall any event,
occurrence, fact, condition, or other matter be deemed to be an "Accepted
Environmental Defect" if it does not satisfy the requirement set forth above.
"Action" shall mean any claim, demand, filing, investigation, action,
suit, proceeding, including administrative and arbitration proceedings,
condemnation, audit or other legal proceeding by any Person or Governmental
Authority.
"Advisor" shall be as defined in Section 1.07.
"Affected Properties" shall be as defined in Section 4.02(a).
"Affiliate" shall mean, as to the Person specified, any Person
controlling, controlled by or under common control with such specified Person.
The concept of control, controlling or controlled as used in the aforesaid
context means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of another, whether through
the ownership of voting securities, by contract or otherwise. No Person shall
be deemed an Affiliate of any Person by reason of the exercise or existence of
rights, interests or remedies under this Agreement.
"Agreement" means the Stock Purchase Agreement to which this Appendix
1 is attached.
"Agreement for Services" means that Agreement for Services in a form
acceptable to Conoco.
"Agreed Rate" shall mean an annual rate of interest equal to the
lesser of (a) the three month treasury bill rate for the first day of the
applicable interest period as such rate is shown under "Money Rates" in the
Wall Street Journal and (b) the maximum rate of interest allowed by Law.
"Allocated Value" shall be as defined in Section 1.10.
"Ancillary Agreements" shall mean the Gas Transportation Agreements,
Gas Processing Agreement, Agreement for Services, and Master Services Contract.
"Ancillary Guarantee" shall mean a guarantee from John R. Stanley
guaranteeing the payment and performance by Seller and the applicable
TransTexas Entities of their respective duties and obligations under the
Ancillary Agreements, and in a form acceptable to Conoco.
"Asset Purchase and Sale Agreement" shall mean that certain Asset
Purchase Agreement, dated May 30, 1997, by and between Buyer, Lobo Pipeline
Company, and Conoco.
"Assignment of Rights" shall mean that certain Assignment of Rights
and Assumption of Obligations executed and delivered by and among Seller,
Buyer, Lobo Pipeline Company, and
<PAGE> 50
Conoco at Closing.
"Assumed Obligations" shall mean those Liabilities expressly assumed
or agreed to be paid by Buyer hereunder, and all other Liabilities resulting
from, arising out of, or relating to: (a) any act, omission, event, condition,
or circumstance involving or relating to the Properties occurring after the
Closing Time; (b) the ownership or operation of the Properties and the sale of
Company Hydrocarbons, in either case after the Closing Time, except such
Liabilities that are caused by or result from (i) any matter that renders any
representation or warranty of Seller to be untrue or inaccurate (determined
without regard to any Person's knowledge), (ii) any matter disclosed in
Schedules 2.14, 2.16, or 2.17 (other than the Remediation of Accepted
Environmental Defects), (iii) any matter disclosed in any other schedule
referred to in Article II that is identified therein by an asterisk and
initialed by a duly authorized representative of Buyer and Seller, or (iv) the
breach of, or failure to perform or satisfy, any covenant, duty, or obligation
of Seller set forth in the Agreement; (c) the Plugging and Abandonment
Obligations for the Wells; (d) the ownership of the Company Shares or Shares
after Closing; (e) any act or omission of the Buyer; (f) any act or omission of
the Company or Signal Capital Holding Corporation arising with respect to the
ownership or operation of either such entity after Closing; (g) any matter
relating to Signal Capital Holding Corporation prior to January 28, 1997; (h)
any Taxes imposed on or in respect of the Company or the Properties with
respect to the taxable periods from and after the Closing Time (other than
production and severance taxes as provided in Section 1.09); or (i) with
respect to any taxable period beginning before the Closing Time and ending
after the Closing Time, Taxes imposed on or in respect of the Company or the
Properties which are allocable to the portion of such period ending after the
Closing Time (other than production and severance taxes as provided in Section
1.09). Notwithstanding the exclusions from the Assumed Obligations set forth in
clauses (b)(i), (b)(ii), and (b)(iii) above (which matters would otherwise
constitute Retained Liabilities), all Liabilities resulting from or caused by
the acts or omissions of the Company or Buyer, or their successors and assigns,
after Closing, or resulting from any condition, event or circumstance resulting
from, caused by, or continued by the Company or Buyer, or their successors and
assigns, after Closing will be Assumed Obligations.
"Balance Sheet" shall have the meaning assigned in Section 2.06.
"Bankruptcy Act" shall mean the Bankruptcy Reform Act of 1978, as
amended.
"Bankruptcy Code" shall mean the Bankruptcy Code of 1978, 11 U.S.C.
Sections 101 et seq., as amended.
"Business Day" shall mean any day which is not a Saturday, Sunday or
legal holiday recognized by banking institutions in the State of Texas.
"Buyer" shall be as defined in the first paragraph of the Agreement.
"Buyer Indemnified Parties" shall be as defined in Section 10.04.
"Closing" shall be as defined in Section 7.01.
"Closing Date" shall be as defined in the first paragraph of the
Agreement.
"Closing Documents" shall be as defined in Section 7.02.
"Closing Month Accounting Time" shall be as defined in Section
1.02(c)(ii).
<PAGE> 51
"Closing Time" shall be as defined in Section 1.02(c)(i).
"Code" shall be as defined in Section 2.12(a).
"Company" shall be as defined in the preamble to the Agreement.
"Company Hydrocarbons" shall mean, collectively, all (a) Hydrocarbons
produced from or attributable to the Lands, Leases, and Wells on or after the
Closing Month Accounting Time and attributable to Company's Net Revenue
Interest, including all liquid Hydrocarbons extracted or recovered at the Exxon
King Ranch Facility and McKendrick salt water disposal facility from and after
the Closing Month Accounting Time, (b) to the extent not sold or otherwise
disposed of prior to the Closing Month Accounting Time, the Stored
Hydrocarbons, Line Pack, and the underproduction of Hydrocarbons, determined as
of the Effective Date, attributable to the Company's Working Interest, (c) the
Positive Pipeline Imbalances, and (d) the liquid Hydrocarbons recovered from
gas after being delivered to the Pipeline Systems and prior to redelivery to
the shipper, from and after the Closing Month Accounting Time.
"Company Records" shall mean the Corporate Records and Data.
"Company Shares" shall be as defined in Section 1.01.
"Conoco" shall mean Conoco Inc., a Delaware corporation.
"Consent" shall be as defined in Section 2.07(b).
"Contracts" shall mean all contracts and agreements identified in
Schedule I.
"Contribution Agreement" shall mean that certain Asset Contribution
Agreement, dated effective January 31, 1997, by and between Seller and the
Company.
"Corporate Records" shall mean all minute books, stock transfer books,
and other similar records of the Company.
"Corrective Action" shall mean any necessary response to an
administrative proceeding or administrative inquiry or claim of any Person, or
remedial, removal, response, construction, closure, disposal or other
corrective action.
"Curative Action" shall be as defined in Section 4.02(a).
"Cure Period" shall be as defined in Section 4.02(b).
"Data" shall mean all (i) abstracts (including a copy of the "company
abstract"), title opinions, title reports, title policies, lease and land
files, division orders, surveys, analyses, compilations, correspondence,
filings with and reports to regulatory agencies, invoices, certificates of
title, general intangibles, and other documents and instruments that in any
manner relate to the Properties; (ii) computer databases that relate to the
Properties; (iii) geophysical, geological, engineering, exploration, production
and other technical data relating to the Properties, (iv) two-dimensional and
three-dimensional seismic data relating to the Lands, and all interpretations
thereof, including that identified in Schedule II, together with all related
magnetic field recordings, digital processing tapes, seismic acquisition field
tapes, field prints, observer notes, summaries, reports,
<PAGE> 52
maps, and other information pertaining to the acquisition and processing of
such seismic data, whether written or in electronically reproducible form, that
relate to the Properties; (v) other books, records, files, maps, databases, and
magnetic tapes and disks containing financial, title, land, or other
information that relate to the Properties, except to the extent same are
subject to confidentiality or other agreements limiting the disclosure or
transferability of such data and for which Seller or the TransTexas Entities
are unable, after exercising their best efforts, to obtain the necessary
waivers or consents to assignment; and (vi) keys, lock combinations, computer
access codes and other devices or information necessary to permit Buyer to gain
entry to and/or take possession of any of the Properties, to the extent such
Data is in the possession or control of Seller or any TransTexas Entity.
"Dispute Resolution Agreement" shall mean that certain Dispute
Resolution Agreement, dated May 21, 1997, by and among Conoco, Lobo Pipeline
Company, First Intercontinental Leasing, L.P., First Union Bank of Connecticut,
Seller, Company, TransAmerican Natural Gas Corporation, TransAmerican
Exploration Corporation, TNGC Holdings Corporation, TransTexas Drilling
Services, Inc., Southern States Exploration, Inc., and John R. Stanley.
"Downstream Conveyance" shall mean that certain Assignment,
Conveyance, and Bill of Sale (Global), dated May 29, 1997, from TransTexas Gas
Corporation, a Delaware corporation, to Company pertaining to the Properties,
other than those conveyed by the Haynes Lease Conveyance, in a form acceptable
to Buyer.
"Effective Date" shall mean 7:00 a.m., Central Standard Time, on March
1, 1997.
"Employee Plans" shall be as defined in Section 2.12(a).
"Environmental Claim" shall mean any Action or written notice by any
Person alleging potential liability of the Company or any TransTexas Entity
arising out of or resulting from any actual or alleged violation of, or any
remedial obligation under, any Environmental Law (other than any Future Law)
with respect to the Properties or an Offsite Environmental Matter.
"Environmental Condition" means any event, occurrence, fact,
condition, or other matter, the effect of which is to cause or render any of
Seller's representations and warranties in Section 2.17 to be inaccurate,
incorrect, or untrue.
"Environmental Laws" shall include the Clean Air Act, the Clean Water
Act, the Resource Conservation Recovery Act, the Superfund Amendment and
Reauthorization Act, the Toxic Substances Control Act, the Safe Drinking Water
Act, and CERCLA and shall also include all state, local and municipal Laws
dealing with the subject matter of the above listed Federal statutes or
promulgated by any governmental or quasi-governmental agency thereunder in
order to carry out the purposes of any Federal, state, local or municipal Law.
"Environmental Liabilities" shall mean any and all costs (including
costs of remediation), damages, natural resource damages, settlements,
consulting fees, expenses, penalties, fines, taxes, orphan share, prejudgment
and postjudgment interest, court costs, attorneys' fees, and other Liabilities
incurred or imposed (i) pursuant to any order, notice of responsibility,
directive (including requirements embodied in Environmental Laws), injunction,
judgment or similar act (including settlements) by any Governmental Authority
to the extent arising out of or under Environmental Laws or (ii) pursuant to
any claim or cause of action by a Governmental Authority or other Person for
personal injury, property damage, damage to natural resources, remediation or
response costs to the extent arising out of or attributable to any violation
of, or any Remediation obligation under, any
<PAGE> 53
Environmental Law.
"Environmental Permits" shall be as defined in Section 2.17.
"Equipment" shall mean (a) the equipment and other materials described
in Schedule III and (b) all other equipment, fixtures, physical facilities,
tank batteries, improvements, surface and subsurface machinery, goods,
inventory, spare parts, supplies, tools and other tangible personal property,
or interests (including all leasehold rights and interests) therein, including
all casing, tubing, tubular goods, rods, pumping units and engines, Christmas
trees, derricks, separators, compressors, gun barrels, flow lines, tanks,
chemicals, communication systems and equipment, radio towers, remote terminal
units, and computer equipment of every type, nature, and description (including
leasehold interests therein), to the extent that, as of or after the Effective
Time, the same were owned or leased by the Company and used or held for use in
connection with the ownership, operation, maintenance, use, or development of
the Lands, Leases, and Wells, whether located on or off such Lands, but SAVE
AND EXCEPT, from clause (b) only, that equipment located on the Effective Date
at the Laredo Yard.
"Equitable Principles" shall be as defined in Section 2.03.
"ERISA" shall be as defined in Section 2.12(a).
"ERISA Affiliates" shall be as defined in Section 2.12(a).
"Estoppel Certificates" shall have the meaning assigned in Section
7.02.
"Excluded Assets" shall mean the Excluded Systems and Equipment and
the assets described in Section 1.07, together with a pro rata share of all
applicable Incidental Rights directly attributable or appurtenant thereto, to
the extent necessary for the ownership, operation, and use of such Excluded
Assets, and to the extent permitted under applicable Law and the applicable
instruments.
"Excluded Asset Conveyance" shall be as defined in Section 10.02.
"Excluded Systems and Equipment" shall mean those pipelines, gathering
systems, and related facilities, rights-of-way, and equipment specifically
described in Exhibit "B-Part III."
"Exxon King Ranch Facility" means that certain gas processing plant
operated by Exxon Company, USA and situated in Railroad Commission District No.
4, R. King Survey (A-172), Kleberg County, Texas.
"Final Settlement Statement" shall be as defined in Section 1.03(a).
"Financial Statements" shall be as defined in Section 2.06.
"Finklestein Supersedeas Bond" shall be as defined in Section 5.01.
"Future Laws" shall mean (i) any statutes, laws or ordinances enacted
or decreed after the Closing Date (including the elimination of the exclusion
of petroleum from the definition of "hazardous substance" under the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
and the elimination of the exclusion of oil and gas exploration, development
and production wastes from the definition of "hazardous wastes" under the
Resource Conservation and Recovery Act) to the extent the liabilities or
requirements sought to be imposed under such
<PAGE> 54
subsequent statutes, laws or ordinances could not have been imposed under
statutes, laws or ordinances existing as of the Closing Date and (ii) any
regulations, rules, rulings or orders promulgated after the Closing Date to the
extent such regulations, rules, rulings or orders implement new requirements
for matters not addressed or otherwise regulated in regulations, rules, rulings
or orders existing as of the Closing Date or implement more stringent
requirements for matters addressed or otherwise regulated in regulations,
rules, rulings or orders existing as of the Closing Date.
"GAAP" shall mean generally accepted accounting principles,
consistently applied, in the United States oil and gas exploration industry.
"Gas Transportation Agreements" shall mean an Intrastate Firm Gas
Transportation Agreement and an Interruptible Gas Transportation Agreement,
each in a form acceptable to Conoco.
"Gas Processing Agreement" shall mean the Understanding Relating to
Prospective Processing Plants in a form acceptable to Conoco.
"Governmental Authority" shall mean (i) the United States of America,
(ii) any state, county, municipality, or other governmental subdivision within
the United States of America, and (iii) any court or any governmental
department, commission, board, bureau, agency or other instrumentality of the
United States of America or of any state, county, municipality, water rights,
taxing or zoning authority, or other governmental subdivision within the United
States of America, including the Railroad Commission of Texas.
"Guarantee" means a guarantee from John R. Stanley in a form
acceptable to Conoco guarantying the payment and performance of the duties and
obligations of the Seller hereunder.
"Haynes Lease Conveyance" shall mean a Contribution Assignment (Haynes
Leases) in a form acceptable to Buyer.
"Hazardous Materials" shall mean any explosives, radioactive
materials, asbestos material, urea formaldehyde, hydrocarbon contaminants,
underground tanks, pollutants, contaminants, hazardous, corrosive or toxic
substances, special waste or waste of any kind, including compounds known as
chlorobiophenyls and any material or substance the storage, manufacture,
disposal, treatment, generation, use, transport, migration, or release into the
environment of which is prohibited, controlled, regulated or licensed under
Environmental Laws, including, but not limited to, (i) all "hazardous
substances" as that term is defined in Section 101(14) of the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, and (ii)
petroleum and petroleum products.
"Hydrocarbons" shall mean all severed crude oil, natural gas,
casinghead gas, drip gasoline, natural gasoline, petroleum, natural gas
liquids, plant products, condensate, and other liquid and gaseous hydrocarbons
and minerals of every kind and description.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"HSR Rules" shall mean the rules promulgated by the Federal Trade
Commission under the HSR Act, as in effect on the Closing Date.
"Incidental Rights" shall mean all right, title and interest of the
Company on the Closing
<PAGE> 55
Date in and to the following: (i) all rights with respect to the use and
occupancy of the surface of and the subsurface depths under the Lands, other
than Pipeline Rights-of-Way, pertaining to the Excluded Assets; (ii) all rights
with respect to any pooled, communitized or unitized acreage by virtue of any
Excluded Asset being a part thereof; (iii) all agreements and contracts related
or attributable to the Excluded Assets; (iv) all real and personal property
located upon the Excluded Assets and used in connection with the exploration,
development or operation of the Excluded Assets; and (v) the Company Records
pertaining to the Excluded Assets.
"Indemnified Party" shall be as defined in Section 10.07.
"Indemnitor" shall be as defined in Section 10.07.
"Initial Contribution Conveyances" shall mean that certain (i)
Assignment and Conveyance, dated effective as of January 31, 1997, from
TransTexas Gas Corporation to TransTexas Transmission Corporation, filed of
record and recorded in Volume 476, Page 095 of the Official Records of Webb
County, Texas, (ii) Assignment and Conveyance, dated February 1, 1997, from
TransTexas Gas Corporation to TransTexas Transmission Corporation, filed of
record and recorded in Volume 558, Page 169 of the Official Records of Zapata
County, Texas, (iii) Mineral Deed, dated effective as of January 31, 1997, from
TransTexas Gas Corporation to TransTexas Transmission Corporation, filed of
record and recorded in Volume 476, Page 063 of the Official Records of Webb
County, Texas, (iv) Mineral Deed, dated effective as of January 31, 1997, from
TransTexas Gas Corporation to TransTexas Transmission Corporation, filed of
record and recorded in Volume 558, Page 135 of the Official Records of Zapata
County, Texas, (v) Royalty Deed, dated effective as of January 31, 1997, from
TransTexas Gas Corporation to TransTexas Transmission Corporation, filed of
record and recorded in Volume 558, Page 132 of the Official Records of Zapata
County, Texas.
"Interim Operating Agreement" shall mean that certain Interim
Operating Agreement, dated effective as of March 1, 1997, by and between Seller
and Conoco, as amended.
"IRS" shall be as defined in Section 2.12(c).
"Judgment Lien" shall be as defined in Section 5.01.
A party shall be deemed to have "knowledge" of a fact, circumstance,
or condition if it is known, or should have been known after due inquiry, by
such party, or by any of its officers, directors, or employees at a supervisory
level or above, or by any contract employee in Houston, Texas, landman,
division order analyst, accountant, attorney, engineer, geophysicist, or
geoscientist employed or retained by such party.
"Lands" shall mean all lands described or referred to in the Leases to
the extent conveyed of record into Seller (or any TransTexas Entity), including
the aerial extent of the lands and the depths described or referred to therein,
and the gross and net acreages specified with respect thereto in Exhibit "A-
Part V," and any properties and lands pooled, unitized, or consolidated
therewith; provided, however, "Lands" shall not include any lands heretofore
released of record by Seller (or its predecessors-in-title) or lands that must
be released under the terms of the Leases or in accordance with Law, but it
shall include lands required to be released as a consequence of Seller's,
Company's, or any TransTexas Entity's breach of the terms of any Lease. To the
extent the column headed "Depth Restrictions" in Exhibit "A-Part V" does not
specify any depth limitations, the definition of "Lands" hereunder is further
subject to any depth restrictions contained in any retained acreage, earning,
or other provisions under any of the Leases.
<PAGE> 56
"Laredo Yard" means the following tracts or parcels or tracts of land
described in the following instruments:
(i) Warranty Deed between Bulldog Steel Products, Inc., as
Grantor, and Southwest Texas Services, Inc., as Grantee, dated
September 1, 1985, recorded in Volume 1100, Page 335 of the
Real Property Records of Webb County, Texas (880-013);
(ii) Warranty Deed between Alberto J. Martinez, et al., as Grantor,
and GHR Energy Corp., as Grantee, dated September 17, 1981,
recorded in Volume 671, Page 421 of the Real Property Records
of Webb County, Texas (880-013.01);
(iii) Warranty Deed between Juan B. Carranza E., as Grantor, and
Southwest Texas Services, Inc., as Grantee, dated October 30,
1985, recorded in Volume 1138, Page 23 of the Real Property
Records of Webb County, Texas (880-013.03);
(iv) Warranty Deed between J.D. Homes, Inc., as Grantor, and
TransAmerican Natural Gas Corporation, as Grantee, dated June
15, 1990, recorded in Volume 1429, Page 385 of the Real
Property Records of Webb County, Texas. (880-028) Corrected
Warranty Deed recorded in Volume 1448, Page 680 of the
Official Records of Webb County, Texas;
[(v) Warranty Deed between Delia Maria Trujillo Moctezuma, as
Grantor, and TransTexas Gas Corporation, as Grantee, dated
August 2, 1995, recorded in Volume 523, Page 847 of the
Official Records of Zapata County, Texas (880-040); and
(vi) Warranty Deed between Starr Produce Company, as Grantor, and
TransTexas Transmission Corporation, as Grantee, dated August
28, 1995, recorded in Volume 736, Page 478 of the Official
Records of Starr County, Texas (880-041).
"Law" shall mean any applicable statute, law (including common law),
ordinance, regulation, rule, ruling, order, writ, injunction, judgment,
decision, decree or other official act of or by any Governmental Authority.
"Leases" shall mean the fee mineral interests, oil, gas and mineral
leasehold interests and other leasehold interests, subleases, mineral
servitudes, licenses, concessions, working interests, farmout or farmin rights,
royalty, overriding royalty or other non-working or carried interests,
operating rights or other rights and interests described or referred to in
Exhibits "A-Part I" and "A-Part III."
"Liabilities" shall mean all direct or indirect, demands, claims,
notices of violation, notices of probable violation, filings, investigations,
administrative proceedings, actions, causes of action, suits, other legal
proceedings, judgments, assessments, damages, deficiencies, Taxes, penalties,
fines, obligations, responsibilities, liabilities, payments, charges, costs,
and expenses (including costs and expenses of operating the Properties) of any
kind or character (whether or not asserted prior to the Closing Time, and
whether known or unknown, fixed or unfixed, conditional or unconditional, based
on negligence, strict liability or otherwise, choate or inchoate, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent, or
otherwise), including penalties and interest on any amount payable as a result
of any of the foregoing, any legal or other expenses reasonably incurred in
connection with investigating or defending any claim, demand, or legal
proceeding, and all amounts paid in settlement of claims, demands, or legal
proceedings, but only to the extent that the foregoing are valid and
subsisting.
<PAGE> 57
"Lien Releases" shall mean duly executed and acknowledged releases of
those Retained Contracts, including UCC termination statements, designated by
Buyer and in form and substance mutually acceptable to Buyer and Seller in
their sole discretion.
"Lien" means any encumbrance, mortgage, lien, pledge, charge, security
interest, claim, easement, right, agreement, instrument, obligation, burden or
defect, including any and all liens, encumbrances, duties, obligations, and
liabilities arising under or with respect to any of the Retained Contracts.
"Line Pack" shall mean the volume of gaseous Hydrocarbons (expressed
in MMBtus) maintained in the Pipeline Systems on the Effective Date in order to
maintain pressure and effect the uninterrupted flow or transportation of gas
through the Pipeline Systems, which volume is as set forth in Appendix 2.
"Master Services Contract" means that Master Services Contract in a
form acceptable to Conoco.
"Memorandum of Option" shall be as defined in Section 4.02(h).
"Negative Pipeline Imbalance" shall mean the (a) total quantity of
gaseous Hydrocarbons (expressed in MMBtus) by which the cumulative total
receipts of gaseous Hydrocarbons from a shipper on the Pipeline Systems exceeds
the cumulative total deliveries of gaseous Hydrocarbons to the shipper on the
Pipeline Systems, determined as of the Closing Month Accounting Time, and (b)
the total quantity of gaseous Hydrocarbons (expressed in MMBtus) by which the
total cumulative nominated and confirmed deliveries of gaseous Hydrocarbons to
an interconnected third party pipeline on the Pipeline Systems exceeds the
total cumulative actual deliveries of gaseous Hydrocarbons to the
interconnected third party pipeline on the Pipeline Systems, as of the Closing
Month Accounting Time.
"Net Revenue Interest" means an overall interest in Hydrocarbons
produced from or attributable to the Lands, Leases, and Wells, after deducting
all lessors' royalties, overriding royalties, production payments, and other
interests or burdens on Hydrocarbons produced from the Lands, Leases, and
Wells.
"Notice of Acquisition" shall be as defined in Section 4.02(f).
"Notice of Cure" shall be as defined in Section 4.02(b).
"Offsite Environmental Matter" shall mean any Environmental Condition
(i) resulting from Hazardous Materials originating from the Properties that
have migrated or have been transported for disposal, reclamation or recycling
from the Properties prior to the Closing Date to properties owned by third
Persons or (ii) arising from or attributable to property previously owned by
the Company and conveyed or alienated by the Company prior to the Closing Date.
"Outstanding Interest Price" shall be as defined in Section 4.02(e).
"Outstanding Interest Terms" shall be as defined in Section 4.02(a).
"Outstanding Interests" shall be as defined in Section 4.02(a).
"Payment Rights" shall mean all (a) accounts receivable, notes
receivable, cash, cash
<PAGE> 58
equivalents, trade credits, general intangibles (as defined in the Texas
Uniform Commercial Code), profits, monies, and revenues attributable under GAAP
to the Properties with respect to any period of time on or after the Closing
Monthly Accounting Time; (b) funds held in suspense accounts, or other similar
accounts holding the funds of others, relating to the Properties; (c) claims or
causes of action of the Company (i) arising from acts, omissions or events, or
damage to or destruction of Property occurring after the Closing Time or (ii)
arising under or with respect to any contract affecting the Properties that
would result in Assumed Obligations (including claims for adjustments or
refunds); (d) all rights and interests of the Company (i) under any policy of
insurance or indemnity, (ii) under any bond, other than the Finklestein
Supersedeas Bond, or (iii) to any insurance or condemnation proceeds or awards,
to the extent arising in each case from acts, omissions, or events, or damage
to or destruction of Property occurring after the Closing Time; (e) all claims
of the Company for refunds of or loss carry forwards with respect to (i)
production taxes or any other taxes (other than real and personal property
taxes) attributable under GAAP to any period after the Closing Month Accounting
Time and (ii) real and personal property taxes attributable to any period after
the Effective Date; (f) all proceeds, income and revenues attributable under
GAAP to the Properties for any period after the Closing Monthly Accounting
Time; (g) all audit rights arising under any agreement or contract or otherwise
with respect to any time period after the Closing Time; and (h) liens and
security interests in favor of Company, whether choate or inchoate, under any
law, rule or regulation or under any contract arising under GAAP from the
ownership, operation, or sale or other disposition of any of the Properties on
or after the Closing Time.
"Permits" shall mean all franchises, licenses, permits, approvals,
consents, certificates and other authorizations and other rights granted by
Governmental Authorities, and all certificates of necessity, grants, and other
rights (except those that by their nature or express terms are not assignable)
that relate to the Properties or the ownership, operation, or use of any
thereof, including those described in Schedule IV hereto.
"Permitted Encumbrances" shall mean any of the following matters:
(a) all agreements, instruments, documents, liens,
encumbrances, and other matters described on Schedules I, 2.14, 2.16,
2.19, 2.20, and 4.02, unless such agreements, instruments, documents,
liens, encumbrances, and other matters are identified therein by an
asterisk and initialed by a duly authorized representative of Buyer
and Seller;
(b) any materialman's, mechanics', repairman's,
employees', contractors', operators' or other similar liens, security
interests or charges for liquidated amounts (i) arising in the
ordinary course of business incidental to construction, maintenance,
development, production or operation of the Properties or the
production or processing of Hydrocarbons therefrom, that are not
delinquent or (ii) asserted against any of the Properties on or before
January 1, 1992, to the extent that the Purchase Price has been
decreased, as reflected in the Preliminary Settlement Statement, for
such Lien;
(c) any liens for Taxes not yet delinquent;
(d) any liens or security interests created by Law or
reserved in oil, gas and/or mineral leases for royalty, bonus or
rental or for compliance with the terms of the Properties;
(e) all Preference Rights and Transfer Requirements
listed in Schedule 2.15;
(f) any easements, rights-of-way, servitudes, permits,
licenses, surface leases and other rights with respect to surface
operations to the extent such matters do not interfere in
<PAGE> 59
any material respect with the Company's operation of the portion of
the Properties burdened thereby;
(g) all royalties, overriding royalties, net profits
interests, carried interests, reversionary interests and other burdens
to the extent that the net cumulative effect of such burdens, as to a
particular Property, does not operate to reduce the Net Revenue
Interest of the Company in such Property below that specified in
Exhibits A-Part II" and "A-Part V;"
(h) rights reserved to or vested in any Governmental
Authority to control or regulate any of the wells or units included in
the Properties and all applicable laws, rules, regulations and orders
of such authorities so long as the same have not been applied to
decrease the Company's Net Revenue Interest below the Net Revenue
Interest specified in Exhibits "A-Part II," and "A-Part V;"
(i) traditional rights of reassignment requiring notice
and/or the reassignment (or granting an opportunity to receive a
reassignment) of a leasehold interest to the holders of such
reassignment rights prior to surrendering or releasing such leasehold
interest; and
(j) any and all claims with respect to the Properties
arising by, through, or under any Person, other than the Seller,
Company, any other TransTexas Entity, and any prior or current
Affiliate of any thereof.
"Person" shall mean any Governmental Authority or any individual,
firm, partnership, corporation, joint venture, trust, unincorporated
organization or other entity or organization.
"Pipeline Assets" shall mean the Pipeline Systems, the Pipeline
Rights-of-Way, and the Pipeline Equipment.
"Pipeline Equipment" shall mean (a) the equipment and other materials
described in Schedule V, and any leasehold interest therein, and (b) all other
pipe, valves, fittings, compressors, tanks, gauges, meters and other measuring
equipment, regulators, extractors, communication equipment, radio towers and
repeater stations, power lines, fuel lines, generators, motors, buildings,
storage tanks and facilities, improvements, fittings, fixtures, machinery,
equipment, tools, supplies, spare parts, materials, computer equipment,
vehicles, and other property of every kind and nature, including inventories
thereof, which as of or after the Effective Date were owned or leased by the
Company and used or useful for or in connection with the Pipeline Systems, the
ownership or operation thereof, or the measurement, metering, transferring,
gathering, transportation, storage, treatment, handling, containment or
compression of gas or other liquid or gaseous Hydrocarbons therein, but SAVE
AND EXCEPT, from clause (b) only, (i) that equipment located on the Effective
Date at the Laredo Yard and (ii) the Excluded Systems and Equipment.
"Pipeline Rights-of-Way" shall mean (a) those certain rights-of-way,
easements, fee interests, leasehold interests, estates, property rights, and
other rights and interests in land created by or arising under or with respect
to the conveyances, deeds, leases and other instruments listed in Exhibit
"B-Part II," and all other rights, interests, and privileges granted by such
instruments or reserved to the grantee in such instruments, and (b) all other
rights-of-way, easements, fee interests, leasehold interests, estates, property
rights and other rights and interests in land situated in Webb, Zapata, Jim
Hogg, Duval, Jim Wells, and Nueces Counties, Texas of every kind and nature
which as of or after the Effective Date were owned by the Company and acquired,
used, or useful for or in connection with the metering, measurement, gathering,
transportation, treatment, compression or other handling of Hydrocarbons, but
SAVE AND EXCEPT, from clause (b) only, the Excluded
<PAGE> 60
Systems and Equipment.
"Pipeline Systems" shall mean (a) the pipelines and gathering systems
that on or after the Effective Date were situated on, over, or across the lands
subject to the Pipeline Rights-of-Way described in Exhibit "B-Part II" and the
Lands, which pipelines and gathering systems are generally described, for
illustrative and informational purposes only, in Exhibit "B-Part I," and (b)
all other pipelines, gathering systems and related facilities, and all
appurtenances thereto, located in Webb, Zapata, Jim Hogg, Duval, Jim Wells and
Nueces Counties, Texas, whether located on or off the Lands or the lands
subject to the Pipeline Rights-of -Way, which as of or after the Effective Date
were owned by the Company, but SAVE AND EXCEPT any abandoned pipeline and
gathering systems, or portions or components thereof, and further excluding,
from clause (b) only, the Excluded Systems and Equipment.
"Plan" shall be as defined in Section 2.28(c).
"Plugging and Abandonment Obligations" shall mean any and all
Liabilities arising out of or attributable to the plugging and abandonment or
any obligation to plug or abandon any well located on the Lands in accordance
with all Laws and Leases applicable thereto.
"Positive Pipeline Imbalance" shall mean (a) the total quantity of
gaseous Hydrocarbons (expressed in MMBtus) by which the cumulative total
deliveries of gaseous Hydrocarbons to a shipper on the Pipeline Systems exceeds
the total cumulative receipts of gaseous Hydrocarbons from the shipper on the
Pipeline Systems, determined as of the Closing Month Accounting Time, and (b)
the total quantity of gaseous Hydrocarbons (expressed in MMBtus) by which the
total cumulative actual deliveries of gaseous Hydrocarbons to an interconnected
third party pipeline on the Pipeline Systems exceeds the total cumulative
nominated and confirmed deliveries of gaseous Hydrocarbons to the
interconnected third party pipeline on the Pipeline Systems, determined as of
the Closing Month Accounting Time.
"Pre-Closing Company Hydrocarbons" shall mean those liquid and gaseous
Hydrocarbons described or referred to in Section 1.02(c)(ii), (iii), and (iv).
"Preference Rights" shall mean any right or agreement that enables or
may enable any Person to purchase, acquire, or otherwise encumber any Property,
Excluded Assets, Company Shares, or Shares, or any interest therein or in a
portion thereof, as a result of or in connection with any sale, assignment,
encumbrance, or other transfer of any interest in the Properties, Excluded
Assets, Company Shares, or the Shares.
"Preliminary Settlement Statement" shall be as defined in Section
1.02(a).
"Promissory Note" shall be as defined in Section 7.04.
"Properties" shall mean, collectively, the Leases, Lands, Wells,
Company Hydrocarbons, Equipment, Pipeline Assets, Data, Contracts, Surface
Contracts, Payment Rights, and Permits.
"Property Defects" shall be as defined in Section 4.02(a).
"Purchase Price" shall be as defined in Section 1.01.
"Remediate" and "Remediation" shall mean, with respect to an Accepted
Environmental Defect, the implementation and completion of any Corrective
Actions required under Environmental
<PAGE> 61
Laws, Leases, or Contracts to correct or remove such defect.
"Retained Contracts" shall mean the contracts, agreements, leases,
drilling funds, drilling programs, production payments, net profits interests,
indentures, trust agreements, deeds of trust, mortgages, and other instruments
identified or referred to in Schedule VI.
"Retained Liabilities" shall mean all Liabilities of or arising with
respect to the Company, the Properties, the Excluded Assets, and the Retained
Contracts, other than the Assumed Obligations.
"Seller" shall be as defined in the first paragraph of the Agreement.
"Seller Indemnified Parties" shall be as defined in Section 10.03.
"Shares" shall mean those 125.55 shares of the Common Stock of Signal
Capital Holdings Corporation.
"Special Warranty Conveyance" shall be as defined in Section 4.02(c).
"Statements of Operations" shall be as defined in Section 2.06.
"Stored Hydrocarbons" shall mean the quantity of liquid Hydrocarbons
attributable to the Properties in storage on the Effective Date as set forth in
Appendix 2, which quantity does not include any liquid Hydrocarbons in storage
at the Exxon King Ranch Facility on the Effective Date.
"Supporting Information" shall be as defined in Section 1.03(a).
"Surface Contracts" shall mean (a) the instruments and interests
described or referred to in Exhibit "A-Part IV" and (b) all other fee
interests, leasehold interests, estates, servitudes, easements, privileges,
right-of-way agreements, licenses, permits, or other agreements relating to the
use or ownership of surface and subsurface properties and structures which as
of or after the Effective Date were owned by the Company and used or held for
use in connection with the exploration, production, or development of
Hydrocarbons from the Lands, Leases, and Wells, or for the gathering,
transportation, or the disposal of water and other materials (other than
Hydrocarbons) produced therefrom.
"Tax" shall mean any federal, state, local, or foreign tax or similar
assessment or fee, together with all interest, fines, penalties and additions
thereto.
"Tax Returns" shall be as defined in Section 2.11.
"Termination Date" shall mean the fifth (5th) anniversary of the
Closing Date.
"TransAmerican" shall mean TransAmerican Natural Gas Corporation, a
Delaware corporation.
"Transfer Requirement" shall mean any consent, approval,
authorization, or permit of, or filing with or notification to, any Person
which is required to be obtained, made, given, or complied with for or in
connection with any sale, assignment, transfer, delegation, or encumbrance of
the Company Shares, Shares, or any Property, Excluded Asset, Retained
Liability, or Assumed Obligation, or any interest therein.
<PAGE> 62
"TransTexas Entities" shall mean John R. Stanley and TransAmerican;
any Affiliate of John R. Stanley or TransAmerican; and any predecessor by
merger or otherwise of TransAmerican or any such Affiliate.
"TransTexas Name" shall be as defined in Section 6.07.
"Treasury Regulations" shall mean the U.S. Department of Treasury
Regulations promulgated under the Code, whether proposed, temporary, or final,
as amended and in effect as of the Closing Time (including corresponding
provisions of succeeding regulations).
"Trust" shall mean the trust created pursuant to the Trust Agreement.
"Trust Agreement" shall be as defined in the first paragraph of the
Agreement.
"Value" shall be as defined in Section 4.02(a).
"VEBA" shall be as defined in Section 2.12(b).
"Wells" shall mean those oil, condensate, or natural gas wells, water
source wells, and water and other types of injection or disposal wells and
systems located on the Lands or used or held for use in connection with any
Lands, Leases, or wells under a Surface Contract, whether producing, shut-in,
or temporarily abandoned, including those wells identified in Exhibit "A-Part
II," but SAVE AND EXCEPT those wells that have been permanently plugged and
abandoned prior to Closing.
"Working Interest" shall mean that share of all of the costs,
expenses, burdens, and obligations of any type or nature attributable to
Company's (or other designated Person's) interest in any Lands, Lease, or Well.
