FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT (this "Amendment") is
dated December 16, 1999, but effective as of October 8, 1999, among Tesoro
Petroleum Corporation, a Delaware corporation ("TPC"), Tesoro Gas Resources
Company, Inc., a Delaware corporation ("TGRC"), EEX Operating LLC, a Delaware
limited liability company ("EEX Operating"), and EEX Corporation, a Texas
corporation ("EEX Corporation"), for the limited purposes set forth herein and
in the Agreement.
Capitalized terms used and not otherwise defined, or defined as amended, in
this Amendment shall have the meanings given such terms in the Agreement.
WITNESSETH:
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WHEREAS, TPC, TGRC, EEX Operating and EEX Corporation (for limited
purposes), entered into a Stock Purchase Agreement (the "Agreement") dated
October 8, 1999 providing for the sale by TPC and TGRC to EEX Operating of all
shares of capital stock of Tesoro Exploration and Production Company, a Delaware
corporation ("Exploration") and Tesoro Reserves Company, a Delaware corporation
("Reserves"), together with the partnership interests owned by Reserves and
Exploration in Tesoro E&P Company, L.P., a Delaware limited partnership (the
"E&P Partnership"); and
WHEREAS, Section 2.9 of the Agreement provides for the Parties to enter
into put and call options for the purchase of the stock of Tesoro Natural Gas
Company, a Delaware corporation ("Natural Gas"), and Tesoro Gathering Company, a
Delaware corporation ("Gathering"), together with the partnership interests (i)
owned by Natural Gas and Gathering in Tesoro Pipeline Company, L.P., a Delaware
limited partnership (the "Pipeline Partnership"), and (ii) owned by Natural Gas
and the Pipeline Partnership in the Starr-Zapata Partnership and the Starr
County Gathering System; and
WHEREAS, Section 9.12(b) of the Agreement provides for the Parties to
cooperate, at no cost or liability to Buyer, to enable Seller, at Seller's
election, to transfer the Operating Assets (as defined in the Agreement) to
Buyer in a manner enabling the transfer to qualify as a like-kind exchange of
property by Seller within the meaning of Section 1031 of the Code; and
WHEREAS, in connection with a financing contemplated by Section 9.12(c) of
the Agreement, the Agreement will be amended to provide for the possibility of
(i) two separate buyers, one of which will purchase the Common Stock, and the
other of which will purchase the Membership Interests, and (ii) EEX Operating,
which is executing this Amendment in its capacities as the purchaser of the
Common Stock and the Membership Interests, to transfer its rights and
obligations as the buyer of the Common Stock and/or the Membership Interests to
an Affiliate of EEX Operating; and
WHEREAS, in order to effect the sale contemplated by Section 2.9, the like-
kind exchange contemplated by Section 9.12 of the Agreement and the separation
of the buyers of the Common Stock and the Membership Interests, the Parties have
agreed to amend the Agreement in accordance with the terms of this Amendment;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereby agree as follows:
1. Changes to Article I, Definitions.
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a. New Defined Terms The following defined terms shall be added to
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Article I of the Agreement:
"Amendment" shall mean this First Amendment to Stock Purchase Agreement
dated December 16, 1999, among Tesoro Petroleum Corporation, Tesoro Gas
Resources Company, Inc. and EEX Operating LLC, and EEX Corporation, for
limited purposes.
"Coastal" shall mean Coastal States Gas Transmission Company, a Delaware
corporation.
"E&P Buyer" shall mean the buyer of the Membership Interests, and shall
initially be EEX Operating LLC, a Delaware limited liability company.
"E&P Closing Settlement Price" shall mean the E&P Settlement Price
calculated in accordance with the best information available to the Seller
prior to Closing, as reflected on the E&P Settlement Statement delivered
prior to Closing pursuant to Article X and Section 13.2(a).
"E&P Final Settlement Price" shall mean the E&P Settlement Price calculated
in accordance with the best information available to the Parties during the
one hundred twenty (120) day period after Closing, as reflected on the E&P
Final Statement agreed upon pursuant to Article XIII.
"E&P Final Statement" shall mean the final accounting statement with
respect to the Membership Interests to be agreed upon by the Parties no
later than one hundred twenty (120) days after Closing pursuant to Section
13.2(b).
"E&P Partnership" shall mean Tesoro E&P Company, L.P., a Delaware limited
partnership.
"E&P Property Package" shall mean the Properties listed on Schedule I.
"E&P Purchase Price" shall have the meaning given such term in Section
3.1(a) hereof.
"E&P Settlement Price" shall have the meaning set forth in Section 3.2.
"E&P Settlement Statement" shall mean the accounting statement calculating
the E&P Settlement Price described in Section 13.2(a).
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"Exploration and Production Assets" shall mean all property rights and
interests of the E&P Partnership being sold hereunder in the lands and
leases described in Exhibit B, as set forth in Section 2.4(a).
"Exploration LLC" shall mean Tesoro Exploration and Production Company,
LLC, a Delaware limited liability company.
"Grande" shall mean Tesoro Grande Company, LLC, a Delaware limited
liability company.
"Grande Property Package" shall mean the Properties listed on Schedule II.
"Grande Qualified Intermediary" shall mean Bank One Exchange Corporation,
in its capacity as a qualified intermediary to implement a like-kind
exchange of the Grande Property Package under Section 1031 of the Code.
"LLC Purchase Agreements" shall have the meaning set forth in Section
12.2(g) hereof.
"LLCs" shall mean Grande, Southeast, Exploration LLC and Reserves LLC.
"Membership Interests" shall mean all issued and outstanding membership
interests in Exploration LLC, Reserves LLC, Grande and Southeast,
collectively.
"Pipeline Buyer" shall mean the buyer of the Common Stock, and shall
initially be EEX Operating LLC, a Delaware limited liability company.
"Pipeline Closing Settlement Price" shall mean the Settlement Price
calculated in accordance with the best information available to the Seller
prior to Closing, as reflected on the Settlement Statement delivered prior
to Closing pursuant to Article X and Section 13.2(a).
"Pipeline Final Settlement Price" shall mean the Pipeline Settlement Price
calculated in accordance with the best information available to the Parties
during the one hundred twenty (120) day period after Closing, as reflected
on the Pipeline Final Statement agreed upon pursuant to Article XIII.
"Pipeline Final Statement" shall mean the final accounting statement with
respect to the Common Stock to be agreed upon by the Parties no later than
one hundred twenty (120) days after Closing pursuant to Section 13.2(b).
"Pipeline Partnership" shall mean Tesoro Pipeline Company, L.P., a Delaware
limited partnership.
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"Pipeline Properties" shall mean the pipelines and appurtenances, and
rights-of-ways, easements, servitudes, licenses, permits and other rights
and interests in the pipelines listed on Exhibit B-1 attached hereto.
"Pipeline Purchase Price" shall have the meaning given such term in Section
3.1(a) hereof.
"Pipeline Settlement Price" shall have the meaning set forth in Section
3.3.
"Pipeline Settlement Statement" shall mean the accounting statement
calculating the Pipeline Settlement Price described in Section 13.2(a).
"Qualified Intermediary" shall mean both, or either, as applicable, the
Southeast Qualified Intermediary and the Grande Qualified Intermediary.
"Reserves LLC" shall mean Tesoro Reserves Company, LLC, a Delaware limited
liability company.
"Southeast" shall mean Tesoro Southeast Company, LLC, a Delaware limited
liability company.
"Southeast Property Package" shall mean the Properties listed on Schedule
III.
"Southeast Qualified Intermediary" shall mean 44 Exchange Services L.L.C.,
in its capacity as a qualified intermediary to implement a like-kind
exchange of the Southeast Property Package under Section 1031 of the Code.
b. Amended Definitions: The following defined terms in Article I of the
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Agreement shall be amended to read as follows:
"Agreement" shall mean this Stock Purchase Agreement, as amended.
"Allocated Values" shall mean the monetary value allocated to each Property
or group of Properties, the Pipeline Properties and the Hedging Contracts
in Exhibit A.
"Balance Sheets" shall mean the unaudited combined financial balance sheet
of the Subsidiaries and the Partnership as of June 30, 1999, attached
hereto as Exhibits C and C-1.
"Buyer" shall mean (i) EEX Operating LLC, a Delaware limited liability company,
if acting as both the E&P Buyer and the Pipeline Buyer or (ii) the E&P Buyer and
the Pipeline Buyer, collectively, if the E&P Buyer and the Pipeline Buyer are
different Persons.
"Common Stock" shall mean all issued and outstanding shares of common stock
of Natural Gas and Gathering, collectively; further, during the period
Exploration and Reserves remain as corporations, prior to their conversion
to limited liability companies,
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then the term "Common Stock" shall also include all issued and outstanding
shares of common stock of Exploration and Reserves.
"Consent to Assignment" shall mean an existing contractual or legal right
of any third party to consent to a Partnership's assignment of an Operating
Asset or an interest in an Operating Asset to Buyer under such terms as are
set forth in this Agreement.
"Operating Assets" shall mean the Exploration and Production Assets, the
Pipeline Properties and, otherwise, all property rights and interests of
the Partnership being sold hereunder in the lands and leases described in
Exhibit B and Exhibit B-1, as set forth in Section 2.4.
"Partnership" shall mean either or both of the E&P Partnership and the
Pipeline Partnership, as the context may require.
"Preferential Right to Purchase" shall mean the right of any third party
under an existing contract or agreement allowing that third party to
purchase a Property or either of the Starr Partnership's interest in a
Pipeline Property whenever Seller proposes to transfer its interests in a
Partnership under terms such as are set forth in this Agreement.
"Purchase Price" shall mean the sum of the E&P Purchase Price and the
Pipeline Purchase Price.
"Subsidiaries" shall mean Exploration LLC (and Exploration, its predecessor
corporation), Reserves LLC (and Reserves, its predecessor corporation),
Grande, Southeast, Natural Gas and Gathering, collectively.
"Transaction" shall mean the purchase and sale of the Common Stock and the
Membership Interests pursuant to this Agreement and the related
transactions contemplated herein.
c. The following defined terms in Article I of the Agreement shall be
deleted in their entirety:
"Closing Settlement Price"
"Final Settlement Price"
"Final Statement"
"Settlement Price"
"Settlement Statement"
2. Changes to Article II, Purchase And Sale.
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a. Section 2.1 of the Agreement is hereby amended and restated in its
entirety to read as follows:
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2.1 Sale of Membership Interests and Common Stock. Subject to the terms
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and conditions of this Agreement, (a) Seller agrees to sell and assign to
E&P Buyer, and E&P Buyer agrees to purchase and pay for, at Closing, all
the Membership Interests, and (b) Seller agrees to sell and assign to
Pipeline Buyer, and Pipeline Buyer agrees to purchase and pay for, at
Closing, all the Common Stock.
b. Section 2.2 of the Agreement is hereby amended and restated in its
entirety to read as follows:
2.2 Effect of Sale. The sale of the Membership Interests at Closing shall
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transfer to E&P Buyer all of Seller's rights in the LLCs, and the sale of
the Common Stock at Closing shall transfer to Pipeline Buyer all of
Seller's rights in Natural Gas and Gathering. On the Closing Date, the
Subsidiaries shall hold certain interests, assets and liabilities, as set
forth in this Article II. Except as otherwise specifically set forth in
this Agreement, the transfer of Seller's rights in the Subsidiaries shall
assign to Buyer all of Seller's beneficial right, title, interest and
obligations in and to such interests, assets and liabilities held by the
Subsidiaries.
c. Section 2.3 of the Agreement is hereby amended and restated in its
entirety to read as follows:
2.3 Partnership. On the Closing Date, the E&P Partnership and the
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Pipeline Partnership shall be owned in the following manner:
(a) E&P Partnership Exploration LLC, Grande, Southeast and Reserves
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LLC shall collectively own all rights and interests in the E&P
Partnership. Exploration LLC shall be the sole general partner in the
E&P Partnership, and Grande, Southeast and Reserves LLC shall be the
sole limited partners in the E&P Partnership. The partnership rights
and interests described in this Section 2.3(a) shall pass to E&P Buyer
as an attribute of the sale of the Membership Interests pursuant to
this Agreement.
(b) Pipeline Partnership. Natural Gas and Gathering shall
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collectively own all rights and interests in the Pipeline Partnership.
Natural Gas shall be the sole general partner, owning a one percent
(1%) partnership interest, and Gathering shall be the sole limited
partner, owning a ninety-nine percent (99%) partnership interest in
the Pipeline Partnership. The partnership rights and interests
described in this Section 2.3(b) shall pass to Pipeline Buyer as an
attribute of the sale of the Common Stock pursuant to this Agreement.
(c) Starr Partnerships. On the Closing Date, (i) Pipeline Partnership
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shall be the 49% partner and Natural Gas shall be the 1% partner of
Starr-Zapata Partnership and (ii) Pipeline Partnership shall be the
69% partner and Natural Gas shall be the 1% partner of the Starr
County Gathering System. The partnership rights and interests
described in this Section 2.3(c) shall pass to Pipeline Buyer as an
attribute of the sale of the Common Stock pursuant to this Agreement.
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d. The introductory paragraph of Section 2.4 of the Agreement is amended
and restated in its entirety to read as follows:
On the Closing Date, the Partnership and the Starr Partnerships shall
own the Operating Assets, subject to the Permitted Encumbrances, and
excluding the items set forth on Schedule 2.4 and as otherwise limited
herein as follows:
e. The following paragraph (c) is added to Section 2.4 of the Agreement:
(c) Pipeline Assets.
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(i) Rights, title and interests of the Pipeline Partnership and
the Starr Partnerships in the Pipeline Properties in Starr,
Edwards, Val Verde and Zapata Counties, Texas, as described in
Exhibit B-1;
(ii) Rights, obligations, title and interests of the Pipeline
Partnership and the Starr Partnerships in and to permits, orders,
abstracts of title, leases, deeds, operating agreements,
participation agreements, and other agreements and instruments
applicable to the Pipeline Properties;
(iii) Rights, obligations, title and interests in easements,
rights of way, licenses and permits and all other rights,
privileges, benefits and powers conferred upon the owner and
holder of interests in the Pipeline Properties.
(iv) Rights and interests in records and maps, contract files
and records, accounting files, data and records, all computer
software and other materials (whether electronically stored or
otherwise) used or held for use by Seller, the Subsidiaries, the
Pipeline Partnership or the Starr Partnerships, or any of their
direct or indirect parents, subsidiaries or other Affiliates
(other than Coastal), regarding ownership or operation of the
Pipeline Properties, and other files, documents and records of
Seller, the Subsidiaries, the Pipeline Partnership or the Starr
Partnerships, or any of their direct or indirect parents,
subsidiaries or other Affiliates (other than Coastal), which
relate to the Pipeline Properties.
f. Section 2.9 of the Agreement is hereby deleted in its entirety.
3. Changes to Article III, Purchase Price and Settlement Price.
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a. Section 3.1 of the Agreement is hereby amended and restated in its
entirety to read as follows:
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3.1 Purchase Price.
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(a) Purchase Price. The monetary consideration ("E&P Purchase Price")
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for the sale and conveyance of all the Membership Interests to E&P
Buyer, effective as of the date of Closing, is E&P Buyer's payment of
$215,253,969 in cash. The monetary consideration ("Pipeline Purchase
Price") for the sale and conveyance of all the Common Stock to
Pipeline Buyer, effective as of the date of Closing, is Pipeline
Buyer's payment of $6,746,031 in cash.
(b) Allocation of E&P Purchase Price. The E&P Purchase Price shall
---------------------------------
be allocated among the Grande Property Package, the Southeast Property
Package and the E&P Property Package as follows:
(i) Grande Property Package -- $115,304,126
(ii) Southeast Property Package -- $ 14,426,631
(iii) E&P Property Package -- $ 85,523,212
Total -- $215,253,969
(c) The parties agree that the allocation of the E&P Purchase Price
provided herein, and any inability to allocate the E&P Purchase Price
as provided herein, shall not affect the total E&P Purchase Price paid
by E&P Buyer under this Agreement, and the total adjustments to the
E&P Purchase Price described in this Agreement (including without
limitation Section 3.2 and Article XIII).
(d) None of the E&P Buyer, the Pipeline Buyer, or any Affiliate of
either Buyer shall be obligated to pay Seller the E&P Purchase Price,
the Pipeline Purchase Price, or any amounts for any of the Membership
Interests or the Common Stock, or pursuant to indemnification claims,
except pursuant to this Agreement.
b. Section 3.2 of the Agreement is hereby amended and restated in its
entirety to read as follows:
3.2 E&P Settlement Price. Pursuant to the provisions as described
--------------------
below, the E&P Purchase Price to be paid by E&P Buyer will be subject to
certain adjustments made at Closing and within one hundred twenty (120)
days thereafter, as set forth in Article XIII, to determine the E&P
Settlement Price amount that will actually be paid by E&P Buyer. The E&P
Settlement Price will be allocated separately for the E&P Property Package,
the Grande Property Package and the Southeast Property Package, and shall
be calculated as follows:
(a) Increases. The E&P Purchase Price shall be increased by the
following amounts:
(i) An amount equal to the expenses attributable to the Membership
Interests, the E&P Partnership or the Properties (without
duplication) properly accrued in accordance with GAAP and past
practice, and as provided for in Section 13.3, attributable to
the period from the Effective Time to the end of business on
the Closing Date; provided, however, that such expenses shall
exclude all (1) depreciation, depletion and amortization, (2)
income and franchise taxes, (3) one-half of the amount accrued
by the Subsidiaries and the Partnership under incentive
compensation arrangements for the Retained Employees, as
provided in Section 9.9(c), and (4) severance obligations and
other amounts accrued under any employment retention and
management stability agreements, as provided in Section 9.9(b);
provided, further, however that Seller, the Subsidiaries and
the Partnership shall be permitted to accrue no more than
$40,000 per month from the close of business on June 30, 1999
to the Closing Date for corporate general and administrative
expenses;
(ii) An amount equal to the capital expenditures relating to the
Business attributable to the Membership Interests, the E&P
Partnership or the Properties (without duplication), properly
accrued in accordance with GAAP and past practice attributable
to the period from the Effective Time to the end of business on
the Closing Date; and
(iii) The amount of change in Working Capital attributable to the
Membership Interests, the E&P Partnership or the Properties
(without duplication) between the Effective Time and the end of
business on the Closing Date, if the amount of change is a
positive number.
(b) Decreases. The E&P Purchase Price shall be decreased by the
following amounts:
(i) An amount equal to the revenues properly accrued in accordance
with GAAP and past practice attributable to the Membership
Interests, the E&P Partnership or the Properties (without
duplication) and attributable to the period from the Effective
Time to the end of business on the Closing Date;
(ii) An amount equal to any Settlement Price Adjustment, subject to
the application of Section 13.1;
(iii) The amount of the Allocated Value of any Properties that third
parties shall have purchased before the Closing through the
exercise of Preferential Rights to Purchase or pursuant to any
other sale permitted by Section 9.2(a); and
(iv) The amount, stated as a positive number, of any change in
Working Capital attributable to the Membership Interests, the
E&P Partnership or the Properties (without duplication) between
the Effective Time and the end of business on the Closing Date,
if and only if, the amount of change is a negative number.
The E&P Purchase Price as adjusted pursuant to this Section 3.2 is herein
called the "E&P Settlement Price."
c. The following Section 3.3 is hereby added to the Agreement:
3.3 Pipeline Settlement Price. Pursuant to the provisions as
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described below, the Pipeline Purchase Price to be paid by Pipeline Buyer
will be subject to certain adjustments made at Closing and within one
hundred twenty (120) days thereafter, as set forth in Article XIII, to
determine the Pipeline Settlement Price amount that will actually be paid
by Pipeline Buyer, and shall be calculated as follows:
(a) Increases. The Pipeline Purchase Price shall be increased by the
following amounts:
(i) An amount equal to the expenses attributable to the Common
Stock (excluding Reserves and Exploration), the Pipeline
Partnership or the Pipeline Properties (without duplication)
properly accrued in accordance with GAAP and past practice, and
as provided for in Section 13.3, attributable to the period
from the Effective Time to the end of business on the Closing
Date; provided, however, that such expenses shall exclude all
(1) depreciation, depletion and amortization, (2) income and
franchise taxes, (3) amounts accrued by the Subsidiaries and
the Partnership under incentive compensation arrangements for
the Retained Employees, as provided in Section 9.9(c), and (4)
severance obligations and other amounts accrued under any
employment retention and management stability agreements, as
provided in Section 9.9(b); provided, further, however that
Seller, the Subsidiaries and the Partnership shall not be
permitted to accrue any corporate general and administrative
expenses from the close of business on June 30, 1999 to the
Closing Date;
(ii) An amount equal to the capital expenditures relating to the
Business attributable to the Common Stock (excluding Reserves
and Exploration), the Pipeline Partnership or the Pipeline
Properties (without duplication), properly accrued in
accordance with GAAP and past practice attributable to the
period from the Effective Time to the end of business on the
Closing Date; and
(iii) The amount of change in Working Capital attributable to the
Common Stock (excluding Reserves and Exploration), the Pipeline
Partnership or the Pipeline Properties (without duplication),
between the Effective Time and the end of business on the
Closing Date, if the amount of change is a positive number.
(b) Decreases. The Pipeline Purchase Price shall be decreased by the
following amounts:
(i) An amount equal to the revenues attributable to the Common
Stock (excluding Reserves and Exploration), the Pipeline
Partnership or the Pipeline Properties (without duplication)
properly accrued in accordance with GAAP and past practice
attributable to the period from the Effective Time to the end
of business on the Closing Date;
(ii) An amount equal to any Settlement Price Adjustment, subject to
the application of Section 13.1;
(iii) The amount of the Allocated Value of the Pipeline Properties
that third parties shall have purchased before the Closing
through the exercise of Preferential Rights to Purchase or
pursuant to any other sale permitted by Section 9.2(a); and
(iv) The amount, stated as a positive number, of any change in
Working Capital, attributable to the Common Stock (excluding
Reserves and Exploration), the Pipeline Partnership or the
Pipeline Properties (without duplication), between the
Effective Time and the end of business on the Closing Date, if
and only if, the amount of change is a negative number.
The Pipeline Purchase Price as adjusted pursuant to this Section 3.2 is
herein called the "Pipeline Settlement Price."
4. Changes to Article IV, Representations and Warranties.
a. Section 4.1 of the Agreement is hereby amended and restated in its
entirety to read as follows:
(a) Disclosure. To Seller's Knowledge, the representations and
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warranties set forth in this Section 4.1 of this Agreement, the exhibits to
this Agreement, and the information, documents and Balance Sheets provided
under the terms of this Agreement represent full and fair disclosure as of
the date of this Agreement and do not contain any untrue statement of any
material fact or omit any material fact necessary in order to make the
facts stated not misleading.
b. Paragraph (e) of Section 4.2 of the Agreement is amended and restated
in its entirety to read as follows:
(e) Investment Intent. The Common Stock and the Membership Interests
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are being purchased for Buyer's own account and not with a view to, or for
resale in connection with, any distribution or public offering thereof
within the meaning of the Securities Act. Buyer understands that the
Common Stock and the Membership Interests have not been registered under
the Securities Act by reason of their issuance in transactions exempt from
the registration and prospectus delivery requirements of the Securities Act
pursuant to Section 4(2) thereof. Buyer is knowledgeable, competent, and
experienced in the oil and gas industry and has independently evaluated and
interpreted the technical data and other information regarding the
Operating Assets prior to entering into this Agreement, understands and is
financially able to bear the risk associated with ownership of the
Subsidiaries and the Partnership, and will independently conduct all the
due diligence investigations and reviews of all matters concerning the
Subsidiaries, the Partnership and the Operating Assets as it deems
necessary prior to Closing. Buyer acknowledges that Buyer is not relying
upon any statement or representations made by Seller concerning the present
or future value of, or anticipated income, costs, or profits, if any, to be
derived from, the Subsidiaries, the Partnership or the Operating Assets,
and Buyer has relied solely upon its independent inspections, estimates,
computations, evaluations, reports, studies, knowledge and other
information regarding the Subsidiaries, the Partnership and the Operating
Assets.
c. The following Section 4.3 shall be added to the Agreement as follows:
4.3 Seller's Representations and Warranties to Be Made at Closing.
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Effective as of the Closing Date, Seller shall represent and warrant that:
(a) Disclosure. To Seller's Knowledge, the representations and warranties
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set forth in this Section 4.3, the exhibits to this Agreement, and the
information, documents and Balance Sheets provided under the terms of this
Agreement represent full and fair disclosure as of the Closing Date and do
not contain any untrue statement of any material fact or omit any material
fact necessary in order to make the facts stated not misleading.
(b) Authorization and Enforceability.
--------------------------------
(i) This Agreement and the Transaction have been duly
authorized by each Seller.
(ii) Neither the execution and delivery of this Agreement by
Seller, nor the consummation by Seller of the transactions
contemplated hereby, will violate or conflict with, or
result in the acceleration of rights, benefits or
obligations under, (1) any provision of any Seller's,
Subsidiary's, Partnership's or Starr Partnership's
respective Charters, Bylaws, management agreements,
limited liability company agreements, operating agreements
or partnership agreements, or (2) any applicable statute,
law, regulation or Governmental Order to which Seller or
the Subsidiaries or the Partnerships or the assets and
properties of such entities, including without limitation
the Operating Assets, are bound or subject.
(iii) This Agreement has been duly executed and delivered by
each Seller and constitutes the valid and binding
obligation of each Seller, enforceable against it in
accordance with its 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).
(iv) Except as set forth on Schedule 4.1(b)(iv), or as
otherwise specifically provided herein, the execution,
delivery, and performance of this Agreement (assuming that
all applicable consents are received and all applicable
Preferential Rights to Purchase individual Operating
Assets are waived) will not (A) be in violation of any
provisions of any regulation or order that could
reasonably be expected to adversely affect the ownership
or operations of the Operating Asset affected thereby or
give rise to damages, penalties or claims of third
parties, or (B) result in the breach of, or constitute a
default under, any indenture or other material agreement
or instrument to which any Seller, Subsidiary, Partnership
or Starr Partnership is bound.
(v) Except as set forth on Schedule 4.1(b)(v) or as otherwise
specifically provided herein, no consent, waiver,
approval, order or authorization of, notice to, or
registration, declaration, designation, qualification or
filing with, any Governmental Authority or third Person,
domestic or foreign, is or has been or will be required on
the part of Seller in connection with the execution and
delivery of this Agreement or the consummation by Seller
of the transactions contemplated hereby or thereby, other
than (A) consents and Preferential Rights to Purchase
affecting individual Operating Assets; (B) filings
required (1) to form Grande and Southeast under Delaware
law, (2) to convert Reserves into Reserves LLC under
Delaware law and (3) to convert Exploration into
Exploration LLC under Delaware law; (C) tax filings or (D)
where the failure to obtain such consents, waivers,
approvals, orders or authorizations or to make or effect
such registrations, declarations, designations,
qualifications or filings (1) is not reasonably likely to
prevent or materially delay consummation of the
transactions contemplated by this Agreement (2) could
reasonably be expected to adversely affect the Business or
(3) could give rise to damages, penalties or claims of
third parties.
(c) Organizational Status.
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(i) Each Seller: (1) is a corporation duly organized, validly
existing and in good standing under the laws of Delaware,
(2) is duly qualified to transact business in each
jurisdiction where the nature and extent of its business
and properties require such qualification, and (3)
possesses all requisite authority and power to conduct its
business and execute, deliver and comply with the terms
and provisions of this Agreement and to perform all of its
obligations hereunder. There are no pending or threatened
Actions (or basis therefor) for the dissolution,
liquidation, insolvency, or rehabilitation of any Seller.
(ii) Exploration LLC (1) is a limited liability company duly
organized, validly existing and in good standing under the
laws of Delaware, (2) is duly qualified to transact
business in each jurisdiction where the nature and extent
of its business and properties require such qualification,
and (3) possesses all requisite authority and power to
conduct its business. There are no pending or threatened
Actions (or basis therefor) for the dissolution,
liquidation, insolvency, or rehabilitation of Exploration
LLC.
(iii) Reserves LLC (1) is a limited liability company duly
organized, validly existing and in good standing under the
laws of Delaware, (2) is duly qualified to transact
business in each jurisdiction where the nature and extent
of its business and properties require such qualification,
and (3) possesses all requisite authority and power to
conduct its business. There are no pending or threatened
Actions (or basis therefor) for the dissolution,
liquidation, insolvency, or rehabilitation of Reserves
LLC.
(iv) Grande(1) is a limited liability company duly organized,
validly existing and in good standing under the laws of
Delaware, (2) is duly qualified to transact business in
each jurisdiction where the nature and extent of its
business and properties require such qualification, and
(3) possesses all requisite authority and power to conduct
its business. There are no pending or threatened Actions
(or basis therefor) for the dissolution, liquidation,
insolvency, or rehabilitation of Grande.
(v) Southeast (1) is a limited liability company duly
organized, validly existing and in good standing under the
laws of Delaware, (2) is duly qualified to transact
business in each jurisdiction where the nature and extent
of its business and properties require such qualification,
and (3) possesses all requisite authority and power to
conduct its business. There are no pending or threatened
Actions (or basis therefor) for the dissolution,
liquidation, insolvency, or rehabilitation of Southeast.
(vi) The E&P Partnership (1) is a limited partnership duly
organized, validly existing and in good standing under the
laws of Delaware, (2) is duly qualified to transact
business in each jurisdiction where the nature and extent
of its business and properties require such qualification,
and (3) possesses all requisite authority and power to
conduct its business. There are no pending or threatened
Actions (or basis therefor) for the dissolution,
liquidation, insolvency, or rehabilitation of the E&P
Partnership.
(vii) The Pipeline Partnership (1) is a limited partnership duly
organized, validly existing and in good standing under the
laws of Delaware, (2) is duly qualified to transact
business in each jurisdiction where the nature and extent
of its business and properties require such qualification,
and (3) possesses all requisite authority and power to
conduct its business. There are no pending or threatened
Actions (or basis therefor) for the dissolution,
liquidation, insolvency, or rehabilitation of the Pipeline
Partnership.
(viii) Gathering (1) is a corporation duly organized, validly
existing and in good standing under the laws of Delaware,
(2) is duly qualified to transact business in each
jurisdiction where the nature and extent of its business
and properties require such qualification, and (3)
possesses all requisite authority and power to conduct its
business. There are no pending or threatened Actions (or
basis therefor) for the dissolution, liquidation,
insolvency, or rehabilitation of Gathering.
(ix) Natural Gas (1) is a corporation duly organized, validly
existing and in good standing under the laws of Delaware,
(2) is duly qualified to transact business in each
jurisdiction where the nature and extent of its business
and properties require such qualification, and (3)
possesses all requisite authority and power to conduct its
business. There are no pending or threatened Actions (or
basis therefor) for the dissolution, liquidation,
insolvency, or rehabilitation of Natural Gas.
(x) Starr-Zapata Partnership (1) is a general partnership duly
formed and validly existing under the laws of Texas and
(2) possesses all requisite authority and power to conduct
its business. To Seller's Knowledge, there are no pending
or threatened Actions (or basis therefor) for the
dissolution, liquidation, insolvency, or rehabilitation of
Starr-Zapata Partnership.
(xi) Starr County Gathering System (1) is a general partnership
duly formed and validly existing under the laws of Texas
and (2) possesses all requisite authority and power to
conduct its business. To Seller's Knowledge, there are no
pending or threatened Actions (or basis therefor) for the
dissolution, liquidation, insolvency, or rehabilitation of
Starr County Gathering System.
(d) Subsidiary and Other Equity Interests.
-------------------------------------
(i) Exploration LLC has no subsidiaries and does not own any
stock or other interest in any other corporation,
partnership, joint venture, or other business entity, with
the exception of the E&P Partnership.
(ii) Reserves LLC has no subsidiaries and does not own any
stock or other interest in any other corporation,
partnership, joint venture, or other business entity, with
the exception of the E&P Partnership.
(iii) Grande has no subsidiaries and does not own any stock or
other interest in any other corporation, partnership,
joint venture, or other business entity, with the
exception of the E&P Partnership.
(iv) Southeast has no subsidiaries and does not own any stock
or other interest in any other corporation, partnership,
joint venture, or other business entity, with the
exception of the E&P Partnership.
(v) The E&P Partnership has no subsidiaries and does not own
any stock or other interest in any other corporation,
partnership, joint venture, or other business entity.
(vi) Natural Gas has no subsidiaries and does not own any stock
or other interest in any other corporation, partnership,
joint venture, or other business entity, with the
exception of the Pipeline Partnership and the Starr
Partnerships.
(vii) Gathering has no subsidiaries and does not own any stock
or other interest in any other corporation, partnership,
joint venture, or other business entity, with the
exception of the Pipeline Partnership.
(viii) The Pipeline Partnership has no subsidiaries and does not
own any stock or other interest in any other corporation,
partnership, joint venture, or other business entity, with
the exception of the Starr Partnerships.
(ix) Starr-Zapata Pipe Line has no subsidiaries and does not
own any stock or other interest in any other corporation,
partnership, joint venture, or other business entity.
(ix) Starr County Gathering System has no subsidiaries and does
not own any stock or other interest in any other
corporation, partnership, joint venture, or other business
entity
(e) Membership Interests and Partnership Interests.
-----------------------------------------------
(i) Exploration LLC has authorized membership interests, of
which all are issued and outstanding and owned by Tesoro
Gas Resources Company, Inc. The membership interests of
Exploration LLC have been duly authorized by Exploration
LLC, and the membership interests of Exploration LLC owned
by Tesoro Gas Resources Company, Inc. are validly issued
and outstanding, fully paid and nonassessable. There are
no preemptive rights, or authorized or outstanding
subscriptions, options, consents to assignment or rights
of first refusal, convertible securities, warrants, calls,
stock appreciation rights, phantom stock, profit
participation, or other similar rights, or other
agreements or commitments obligating Seller or Exploration
LLC to issue or to transfer (or preventing the transfer
of) any membership interests, capital stock or other
equity interest in Exploration LLC.
(ii) Reserves LLC has authorized membership interests, of which
all are issued and outstanding and owned by Tesoro Gas
Resources Company, Inc. The membership interests of
Reserves LLC have been duly authorized by Reserves, and
the membership interests of Reserves LLC owned by Tesoro
Gas Resources Company, Inc. are validly issued and
outstanding, fully paid and nonassessable. There are no
preemptive rights, subscriptions, options, consents to
assignment or rights of first refusal, convertible
securities, warrants, calls, stock appreciation rights,
phantom stock, profit participation, or other similar
rights, or other agreements or commitments obligating
Seller or Reserves LLC to issue or to transfer (or
preventing the transfer of) any membership interests,
capital stock or other equity interest in Reserves LLC.
(iii) Grande has authorized membership interests, of which all
are issued and outstanding and owned by Tesoro Gas
Resources Company, Inc. The membership interests of Grande
have been duly authorized by Grande, and the membership
interests of Grande owned by Tesoro Gas Resources Company,
Inc. are validly issued and outstanding, fully paid and
nonassessable. There are no preemptive rights,
subscriptions, options, consents to assignment or rights
of first refusal, convertible securities, warrants, calls,
stock appreciation rights, phantom stock, profit
participation, or other similar rights, or other
agreements or commitments obligating Seller or Grande to
issue or to transfer (or preventing the transfer of) any
membership interests, capital stock or other equity
interest in Grande.
(iv) Southeast has authorized membership interests, of which
all are issued and outstanding and owned by Tesoro Gas
Resources Company, Inc. The membership interests of
Southeast have been duly authorized by Southeast, and the
membership interests of
Southeast owned by Tesoro Gas Resources Company, Inc. are
validly issued and outstanding, fully paid and
nonassessable. There are no preemptive rights,
subscriptions, options, consents to assignment or rights
of first refusal, convertible securities, warrants, calls,
stock appreciation rights, phantom stock, profit
participation, or other similar rights, or other
agreements or commitments obligating Seller or Southeast
to issue or to transfer (or preventing the transfer of)
any membership interests, capital stock or other equity
interest in Southeast.
(v) In the E&P Partnership, the entire Series A limited
partnership interest is held by Reserves LLC, the entire
Series B limited partnership interest is held by Grande,
the entire Series C limited partnership interest is held
by Southeast, and the general partnership interest is held
by Exploration LLC. Such interests are duly authorized
under the agreement governing the E&P Partnership, as
currently amended, and are valid. There are no preemptive
rights, or authorized or outstanding subscriptions,
options, consents to assignment or rights of first
refusal, convertible securities, warrants, calls,
appreciation rights, phantom interests, profit
participation, or other similar rights, or other
agreements or commitments obligating Seller, the
Partnership, Reserves LLC, Grande, LLC, Southeast, LLC or
Exploration to issue or to transfer (or preventing the
transfer of) any equity interest in the E&P Partnership.
(vi) Seller has delivered to Buyer correct and complete copies
of each Subsidiary's, each Partnership's and each Starr
Partnership's respective Charter, Bylaws, organizational
documents, management agreement, limited liability company
agreement, operating agreement or partnership agreement,
as amended to date, and the minute books of each
Subsidiary and Partnership. No Subsidiary, Partnership or
Starr Partnership is in breach of any provision of its
Charter, Bylaws organizational documents, management
agreement, limited liability company agreement, operating
agreement or partnership agreement.
(vii) Natural Gas has authorized capital stock consisting of
1,000 shares of $1.00 par value common stock, of which
1,000 shares are issued and outstanding, with all of such
shares owned by Tesoro Petroleum Corporation. The common
stock has been duly authorized by Natural Gas and the
shares owned by Tesoro Petroleum Corporation are validly
issued and outstanding, fully paid and nonassessable.
There are no preemptive rights, or authorized or
outstanding subscriptions, options, consents to assignment
or rights of first refusal, convertible securities,
warrants, calls, stock appreciation rights, phantom stock,
profit
participation, or other similar rights, or other
agreements or commitments obligating Seller or Natural Gas
to issue or to transfer (or preventing the transfer of)
any common stock or other equity interest in Natural Gas.
(viii) Gathering has authorized capital stock consisting of 1,000
shares of $1.00 par value common stock, of which 1,000
shares are issued and outstanding, with all of such shares
owned by Tesoro Gas Resources Company, Inc. The common
stock has been duly authorized by Gathering, and the
shares owned by Tesoro Gas Resources Company, Inc. are
validly issued and outstanding, fully paid and
nonassessable. There are no preemptive rights,
subscriptions, options, consents to assignment or rights
of first refusal, convertible securities, warrants, calls,
stock appreciation rights, phantom stock, profit
participation, or other similar rights, or other
agreements or commitments obligating Seller or Gathering
to issue or to transfer (or preventing the transfer of)
any common stock or other equity interest in Gathering.
(ix) In the Pipeline Partnership, a 99% limited partnership
interest is held by Gathering, and a 1% general
partnership interest is held by Natural Gas. Such
interests are duly authorized under the agreement forming
the Pipeline Partnership and are valid. There are no
preemptive rights, or authorized or outstanding
subscriptions, options, consents to assignment or rights
of first refusal, convertible securities, warrants, calls,
appreciation rights, phantom interests, profit
participation, or other similar rights, or other
agreements or commitments obligating Seller, the Pipeline
Partnership, Natural Gas or Gathering to issue or to
transfer (or preventing the transfer of) any equity
interest in the Pipeline Partnership.
(x) In Starr County Gathering, a 69% general partnership
interest is held by Pipeline, a 1% general partnership
interest is held by Natural Gas, and a 30% general
partnership interest is held by Coastal. Such interests
have been duly authorized under the agreement forming
Starr County Gathering, and are valid. Except as set forth
in the Starr County Joint Venture Agreement, there are no
preemptive rights, or authorized or outstanding
subscriptions, options, consents to assignment or rights
of first refusal, convertible securities, warrants, calls,
appreciation rights, phantom interests, profit
participation, or other similar rights, or other
agreements or commitments obligating Seller, the Pipeline
Partnership, Natural Gas, Starr County Gathering, or, to
Seller's Knowledge, Coastal, to issue or to transfer (or
preventing the transfer of) any equity interest in Starr
County Gathering.
(xi) In the Starr-Zapata Partnership, a 49% general partnership
interest is held by Pipeline, a 1% general partnership
interest is held by Natural Gas, and a 50% general
partnership interest is held by Coastal. Such interests
have been duly authorized under the agreement forming the
Starr-Zapata Partnership, and are valid. Except as set
forth in the Starr-Zapata Partnership Agreement, there are
no preemptive rights, or authorized or outstanding
subscriptions, options, consents to assignment or rights
of first refusal, convertible securities, warrants, calls,
appreciation rights, phantom interests, profit
participation, or other similar rights, or other
agreements or commitments obligating Seller, the Pipeline
Partnership, Natural Gas, Starr County Gathering, or, to
Seller's Knowledge, Coastal to issue or to transfer (or
preventing the transfer of) any equity interest in Starr
County Gathering.
(f) Title to Stock, Partnership Interests and Assets.
------------------------------------------------
(i) All of the issued and outstanding membership interests of
Exploration LLC, Reserves LLC, Grande and Southeast, which
consist only of the Membership Interests, are owned of
record and beneficially with good and valid title by
Tesoro Gas Resources Company, Inc., free and clear of any
Encumbrance. Upon delivery to E&P Buyer of the
certificates for the Membership Interests in the manner
and with the powers described in Section 12.2(b), assuming
that E&P Buyer pays the consideration contemplated by this
Agreement and has no notice of any adverse claim, good and
valid title to the Membership Interests will have been
transferred to E&P Buyer, free and clear of any
Encumbrances. Neither Tesoro Petroleum Corporation nor
Tesoro Gas Resources Company, Inc. has received any notice
of any adverse claim to their interests in and to the
title to the Membership Interests.
(ii) All of the issued and outstanding partnership interests in
the E&P Partnership are owned of record and beneficially
with good and valid title by Reserves LLC, Grande,
Southeast and Exploration LLC as described in Section
4.3(e)(v), free and clear of any Encumbrance. Neither
Reserves LLC, Grande, Southeast nor Exploration LLC has
received any notice of any adverse claim to their
respective interests in the Partnership.
(iii) Each Subsidiary and Partnership has good title to all of
the assets and properties (except the Operating Assets)
which it owns or purports to own, including the Financial
Assets and Liabilities reflected on the Balance Sheets,
except for properties sold, consumed or otherwise disposed
of in the ordinary course of business since the date of
the Balance Sheets, free and clear of any Encumbrances
other than Permitted Encumbrances.
(iv) All of the issued and outstanding shares of capital stock
of Natural Gas and Gathering, which consist only of the
Common Stock, are owned of record and beneficially by
Tesoro Petroleum Corporation and Tesoro Gas Resources
Company, Inc., respectively, free and clear of any
Encumbrance. Upon delivery to Pipeline Buyer in the manner
and with the powers described in Section 12.2(a) of the
certificates for the Common Stock of Natural Gas and
Gathering, assuming that Pipeline Buyer pays the
consideration contemplated by the Agreement and has no
notice of any adverse claim, good and valid title to the
Common Stock represented by such certificate will have
been transferred to Buyer, free and clear of any
Encumbrances. Neither Tesoro Petroleum Corporation nor
Tesoro Gas Resources Company, Inc. has received any notice
of any adverse claim to their respective title to the
Common Stock.
(v) All of the issued and outstanding partnership interests in
the Pipeline Partnership are owned of record and
beneficially with good and valid title by Natural Gas and
Gathering, free and clear of any Encumbrance. Neither
Natural Gas nor Gathering has received any notice of any
adverse claim to their respective interests in the
Pipeline Partnership.
(vi) All of the issued and outstanding partnership interests in
the Starr Partnerships are owned of record and
beneficially with good and valid title by Pipeline,
Natural Gas and Coastal, and with respect to Pipeline and
Natural Gas, free and clear of any Encumbrance. Neither
Natural Gas nor Pipeline has received any notice of any
adverse claim to their respective interests in the Starr
Partnerships.
(g) Litigation. Except as set forth in Schedule 4.1(g), no Seller,
----------
Subsidiary, Partnership or Starr Partnership has been served with and, to
Seller's Knowledge, there are no pending or threatened Actions before any
Governmental Authority against or affecting any Seller, Subsidiary,
Partnership or Starr Partnership or any of the Operating Assets, which, if
adversely determined, either would be reasonably expected to expose any
Subsidiary, Partnership or Starr Partnership to a risk of loss of greater
than $100,000 after the Effective Time or would interfere with Seller's
ability or right to execute and deliver this Agreement or consummate the
transactions contemplated by this Agreement.
(h) Labor Matters. Except as set forth on Schedule 4.1(h), there are
-------------
no contracts, agreements, or other arrangements whereby the Subsidiaries or
the Partnership are obligated to compensate or provide health and welfare
benefit plans or retirement benefits to any employees or other persons,
except for employment agreements that are terminable at will, without
breach or penalty. To Sellers' Knowledge, each Seller, Subsidiary,
Partnership and Starr Partnership is in compliance with all federal, state,
and local laws respecting employment and employment practices, terms and
conditions of employment, and wages and hours and is not engaged in any
unfair labor practice with regard to those persons employed in connection
with a Subsidiary's, Partnership's or Starr Partnership's operations. No
employee of any Subsidiary, Partnership or Starr
Partnership is covered under any collective bargaining agreement. There is
no unfair labor practice complaint against any Subsidiary, Partnership or
Starr Partnership pending or, to Seller's Knowledge, threatened before the
National Labor Relations Board or any comparable state or local
Governmental Authority. There is no labor strike, slowdown or work stoppage
pending or, to Seller's Knowledge, threatened against or directly affecting
a Subsidiary, Partnership or Starr Partnership and no grievance or any
Action arising out of or under collective bargaining agreements is pending
or, to Seller's Knowledge, threatened against any Subsidiary, Partnership
or Starr Partnership.
(i) Taxes.
-----
(i) Except as set forth in Schedule 4.1(i), each Seller,
Subsidiary and Partnership has timely filed or caused to
be timely filed (or will timely file or cause to be timely
filed) with the appropriate Taxing Authorities all Tax
Returns required to be filed on or prior to the Closing
Date by or with respect to such Subsidiary or Partnership
(or their respective Operating Assets) and has timely paid
or adequately provided for (or will timely pay or
adequately provide for) all Taxes shown thereon as owing,
except where the failure to file such Tax Returns or pay
any such Taxes would not, or could not reasonably be
expected to, in the aggregate, result in losses or costs
or expenses to the Subsidiaries, the Partnership and the
Starr Partnerships in excess of $100,000 after the Closing
Date.
(ii) Sellers and the Subsidiaries are members of an affiliated
group of corporations which file consolidated federal
income tax returns ("Tesoro Group") with Tesoro Petroleum
Corporation as the common parent ("Tesoro Parent"). The
Tesoro Group has been subject to normal and routine
audits, examinations and adjustments of Taxes from time to
time, but there are no current audits or audits for which
written notification has been received (in either case,
with respect to or which include the Subsidiaries), other
than those set forth in Schedule 4.1(i). There are no
written agreements with any Taxing Authority with respect
to or including the Subsidiaries which will in any way
affect the Subsidiaries' liability for Taxes after the
Closing Date.
(iii) Except as set forth in Schedule 4.1(i), no assessment,
deficiency or adjustment for any Taxes has been asserted
in writing or, to the knowledge of Sellers, is proposed
with respect to any Tax Return of, or which includes, the
Subsidiaries.
(iv) Except as set forth in Schedule 4.1(i), there is not in
force any extension of time with respect to the due date
for the filing of any Tax Return of or with respect to or
which includes the Subsidiaries or any waiver or agreement
for any extension of time for the assessment or payment of
any Tax of or with respect to or which includes the
Subsidiaries.
(v) Except for Taxes due with respect to Tax Returns that will
be paid by Tesoro Parent (and not subject to reimbursement
by the Subsidiaries), the accounting records of the
Subsidiaries will include immediately prior to the Closing
Date adequate provisions for the payment of all Taxes of
the Subsidiaries for all taxable periods or portions
thereof through the Closing Date.
(vi) All Tax allocation or sharing agreements or arrangements
have been or will be canceled on or prior to the Closing
Date. No payments are or will become due by the
Subsidiaries after the Closing Date pursuant to any such
agreement or arrangement.
(vii) Except as set forth on Schedule 4.1(i), none of the
Sellers or the Subsidiaries will, as a result of the
transactions contemplated by this Agreement, be obligated
to make a payment after the Closing Date to an individual
that would be a "parachute payment" as defined in Section
280G of the Code without regard to whether such payment is
reasonable compensation for personal services performed or
to be performed in the future.
(viii) The Subsidiaries have not participated in or cooperated
with an international boycott within the meaning of
Section 999 of the Code.
(ix) No Subsidiary has filed a consent under Code Section
341(f) concerning collapsible corporations.
(x) No Subsidiary or Partnership has been a United States real
property holding corporation within the meaning of Code
Section 897(c)(2) during the applicable period specified
in Code Section 897(c)(1)(A)(ii).
(xi) All monies required to be withheld by either Seller, any
Subsidiary or any Partnership and paid to Taxing
Authorities for all Taxes have been (i) collected or
withheld and either paid to the respective Taxing
Authorities or set aside in accounts for such purpose or
(ii) properly reflected in the Balance Sheets.
(j) Balance Sheets.
--------------
(i) The Balance Sheets have been prepared in accordance with
GAAP applied on a basis consistent with prior periods,
except as described in the notes thereto, which will
reflect that the Partnership and the Subsidiaries have
been accounted for as part of a consolidated financial
group with their affiliates and not as completely separate
stand-alone entities.
(ii) The Balance Sheets present fairly, in all material
respects, the financial condition of the combined
Partnership and the Subsidiaries as of June 30, 1999. The
books and records of the
Subsidiaries and the Partnership from which the Balance
Sheets were prepared were complete and accurate in all
material respects at the time of such preparation.
(iii) Each Subsidiary and Partnership has no Liabilities, except
for Liabilities (1) reflected in the Balance Sheets, (2)
incurred by the Subsidiaries or the Partnership in the
ordinary course of business and consistent with past
practices since the date of the Balance Sheets, or (3)
which are Permitted Encumbrances, (4) for which the Buyer
is being indemnified hereunder, or (5) which individually
amount to a loss or liability of not greater than $100,000
or in the aggregate amount to a loss or liability of not
greater than $250,000. As used in this subparagraph, the
term "Liabilities" excludes any Liabilities not required
to be reflected in the Balance Sheets under GAAP.
(k) Absence of Certain Changes. Except as set forth in Schedule
--------------------------
4.1(k), or as otherwise contemplated by this Agreement (including without
limitation Sections 2.5, 2.6, 9.4(b) and 10.6), since the close of business
on June 30, 1999:
(i) no Subsidiary, Partnership or Starr Partnership has sold,
leased, transferred, or assigned any assets other than
surplus equipment not necessary for operations of the
Business having a value less than $25,000 and for a
reasonable consideration;
(ii) no Subsidiary, Partnership or Starr Partnership has
incurred, assumed or become subject to any additional
indebtedness for money borrowed or purchase money
indebtedness, including capitalized leases;
(iii) no Subsidiary, Partnership or Starr Partnership has
entered into any transaction not in the ordinary course of
business, except as contemplated by this Agreement;
(iv) there have been no additional Encumbrances placed on the
assets of any Subsidiary, Partnership or Starr Partnership
other than Permitted Encumbrances;
(v) no event has occurred which constitutes a Material Adverse
Effect;
(vi) no Subsidiary, Partnership or Starr Partnership has made
any loan to, or entered into any contract with (other than
severance agreements for which Seller shall remain
responsible), any of its directors or officers;
(vii) no Subsidiary has issued, sold, or otherwise disposed of
any of its interests in any Partnership, and no Subsidiary
or Partnership has issued, sold or otherwise disposed of
any of its interests in any Starr Partnership;
(viii) there has been no change made or authorized to the
Charter, Bylaws or Partnership Agreement of any
Subsidiary, Partnership or Starr Partnership;
(ix) no Subsidiary, Partnership or Starr Partnership has
canceled, compromised, waived, or released any debt or
Action (or series of related debts or Actions) involving
more than fifty thousand dollars ($50,000);
(x) no Subsidiary, Partnership or Starr Partnership has
delayed or postponed the payment of accounts payable or
other Liabilities owed either involving more than $50,000
(individually or in the aggregate), other than amounts
which Seller reasonably and in good faith disputes;
(xi) no Subsidiary, Partnership or Starr Partnership has made
any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other
Person (or series of related capital investments, loans,
and acquisitions) involving more than $50,000;
(xii) no Subsidiary, Partnership or Starr Partnership has made
any capital expenditure (or series of related capital
expenditures) involving more than $50,000, except in
connection with operations conducted pursuant to Section
9.2(f);
(xiii) no Subsidiary, Partnership or Starr Partnership has
entered into any Contract (or series of related
Contracts) involving more than $50,000 other than (i) to
effectuate operations set forth on Schedule 9.2(f) or
(ii) constituting joint operating agreements or oil and
gas leases entered into in the ordinary course of
business or (iii) contracts with officers and directors
for which the Seller shall remain responsible;
(xiv) to Seller's Knowledge, no Subsidiary, Partnership or
Starr Partnership has materially breached any Contract by
which it is bound or to which any of its assets is
subject; and
(xv) no Subsidiary or Partnership has declared, set aside, or
paid any dividend or made any distribution with respect
to its interests in any Partnership or Starr Partnership
(whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of its interests in any
Partnership or Starr Partnership, other than in the
ordinary course of business or as contemplated by this
Agreement.
(l) Compliance With Law. Since June 30, 1999, no Subsidiary,
-------------------
Partnership or Starr Partnership has violated any law, statute or
regulation which have subjected them to fines or penalties (nor to Seller's
Knowledge have any third parties violated any Applicable Law for which any
Subsidiary, Partnership or Starr Partnership may have any responsibility)
that individually or in the aggregate exceed $100,000. As of the date of
this Agreement, to Seller's Knowledge, each Subsidiary, Partnership and
Starr
Partnership is in compliance in all material respects with all laws,
statutes or regulations applicable to such Subsidiary, Partnership and
Starr Partnership, except where the noncompliance with which would not, in
the aggregate, result in the imposition on the Subsidiaries, the
Partnership and the Starr Partnerships of fines or penalties that
individually or in the aggregate could reasonably be expected to exceed
$100,000.
(m) Operating Assets.
----------------
(i) Seller represents that as of Closing, each Seller's,
Partnership's and Starr Partnership's interest in the
Operating Assets shall be free and clear of any liens other
than Permitted Encumbrances.
(ii) To Seller's Knowledge, the Operating Assets are being
operated in compliance in all material respects with all
applicable federal, state or local laws, and the rules and
regulations of any agency or authority having jurisdiction.
(iii) Except as set forth in Schedule 4.1(m)(iii), each
Subsidiary, Partnership and Starr Partnership possess all
permits, licenses, orders, approvals and authorizations
required by any applicable law, statute, regulation or
Governmental Order, or by the property and contract rights
of third Persons, reasonably necessary to permit the
operation of the Business in the manner currently conducted
by the Subsidiaries, the Partnership and the Starr
Partnerships, except where the failure to possess such
permit, license, order, approval, authorization or rights
would not result in losses, costs or expenses to the
Subsidiaries, the Partnership and the Starr Partnerships,
in the aggregate, in excess of $100,000. No Subsidiary,
Partnership or Starr Partnership has received written
notice from any Governmental Authority that any such
permit, license, order, approval or authorization has been,
or will be, revoked or terminated.
(iv) Except as set forth in Schedule 4.1(m)(iv), immediately
before the Closing Date, the Subsidiaries, the Partnership
and the Starr Partnerships will hold or have the right to
use in the Business all of the assets and properties
(including all licenses and agreements) currently being
used (except those disposed of or expiring in the ordinary
course of business or otherwise as contemplated or
permitted by this Agreement) or which are reasonably
necessary to permit the operation of the Business in the
manner currently conducted by the Subsidiaries, the
Partnership and the Starr Partnerships. Since June 30,
1999, the Subsidiaries, the Partnership and the Starr
Partnerships have conducted no business other than the
Business.
(n) No Brokers' Fees. Except for Credit Suisse First Boston, the fees
----------------
and expenses of which will be paid by Seller, neither Seller nor any of its
directors, officers or employees has employed any broker, finder or
investment banker or incurred any
Liability for any brokerage fees, commissions, finders' fees or similar
fees in connection with the transactions contemplated by this Agreement.
Buyer shall have no responsibility whatsoever, contingent or otherwise, for
any brokers' or finders' fees incurred by any Seller, Subsidiary or
Partnership relating to the Transaction.
(o) Suspense Funds. Schedule 4.1(o) is a true and correct list as of
--------------
August 31, 1999 of all amounts held by the E&P Partnership and/or the
Subsidiaries in suspense accounts, or otherwise, related to the Properties
for the benefit or account of any other Person.
(p) Insurance. As listed on Schedule 4.1(p) Seller, the Subsidiaries,
---------
the Partnership and the Starr Partnerships maintain insurance on and bonds
with respect to the Operating Assets, as set forth on Schedule 4.1(p),
covering such risks and with such deductible amounts as are consistent with
general oil and gas industry practice.
(q) Contracts on Production. Except as set forth on Schedule 4.1(q),
-----------------------
there are no Contracts involving the purchase, marketing, brokering or sale
of Production that require a dedication of Production for a term in excess
of three (3) months that will not be terminable without penalty or other
liability at the sole discretion of the Subsidiaries or the Partnership
upon not more than one (1) month's notice, except for commitments under
operating agreements.
(r) Equipment. Since June 30, 1999, neither Seller, the Subsidiaries,
---------
any Partnership nor the Starr Partnerships, nor to Seller's Knowledge the
operator of any of the Operating Assets, has removed any of the equipment,
facilities or other property from the Operating Assets except in the
ordinary course of business.
(s) Tax Partnerships. Except as disclosed in Schedule 4.1(s), no
----------------
Property is subject to, or considered to be held by, any partnership for
federal income tax purposes, other than tax partnerships under joint
operating agreements.
(t) Disclaimer. Except as otherwise expressly set forth in this
----------
Article and elsewhere in this Agreement, Seller and the Affiliates of
Seller expressly disclaim any representations or warranties of any kind or
nature, express or implied, as to the condition, value or quality of the
assets or properties currently or formerly used, operated, owned, leased,
controlled, possessed, occupied or maintained by the Subsidiaries or the
Partnership, and SELLERS AND ALL OTHER TESORO AFFILIATES SPECIFICALLY
DISCLAIM ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE,
SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO SUCH
ASSETS OR PROPERTIES, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP
THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT,
IT BEING UNDERSTOOD THAT SUCH ASSETS AND PROPERTIES ARE BEING ACQUIRED "AS
IS, WHERE IS" ON THE CLOSING DATE, AND IN THEIR PRESENT CONDITION, WITH ALL
FAULTS, AND THAT BUYER SHALL RELY ON ITS OWN EXAMINATION AND INVESTIGATION
THEREOF.
(u) Environmental Matters. Except as set forth on Schedule 4.1(u), to
---------------------
Seller's Knowledge:
(i) There are no underground storage tanks, as defined in
Applicable Environmental Law, on the Properties or any of
the Operating Assets which constitute a violation of
Environmental Law.
(ii) The Operating Assets contain no friable asbestos, mercury
or polychlorinated biphenyls above 50 ppm or other
Hazardous Substances which constitute a violation of
Applicable Environmental Law.
(iii) The Operating Assets have been used solely for oil and gas
operations and related operations. Except for the
production, storage and transportation of oil, gas and
other hydrocarbons and the storage and disposal of brine in
the ordinary course of business consistent with prevailing
oil and gas industry practices, the Operating Assets have
not been used to dispose of Hazardous Substances. No
Hazardous Substances have been disposed of that would cause
an adverse material impact to any of the Operating Assets.
(iv) There have been no spills or releases of any Hazardous
Substance related to the ownership or operation of the
Operating Assets which constitutes a violation of
Applicable Environmental Law, except for matters that have
been addressed and have no continuing adverse consequence
to any Seller, Subsidiary, Partnership or Starr Partnership
or any of the Operating Assets.
(v) There are no Actions pending or threatened against any
Partnership, Subsidiary, Starr Partnership or either Seller
with respect to any of the Operating Assets relating to the
violation of, liability under, or noncompliance with, any
Applicable Environmental Law; the discharge, disposal or
release of a Hazardous Substance; or the exposure of a
Person or property to a Hazardous Substance. No Seller,
Subsidiary, Partnership or Starr Partnership has any
current contingent liability in connection with the release
of Hazardous Substances.
(vi) The Operating Assets have been, and are operating, in
material compliance under all Applicable Environmental
Laws.
(vii) Each Seller, Subsidiary, Partnership and Starr Partnership
has provided (or within five Business Days from the date
hereof will provide) Buyer all environmental audits, tests,
results of investigations and analyses that have been
performed with respect to the Operating Assets.
(v) Contracts. Except as set forth on Schedule 4.1(v) or Section
---------
4.1(q) and in joint operating agreements entered into in the normal course
of business, the Operating
Assets are not subject to any instrument, agreement or other Contract
evidencing or related to indebtedness for borrowed money. All of the
existing Contracts between any Subsidiary, Partnership, Starr Partnership
and/or either Seller and any of their respective Affiliates with respect to
sales, services or support to any of the Operating Assets or operations on
the Operating Assets shall terminate except for such Contracts otherwise
indicated on Schedule 4.1(v) to survive Closing. Except as set forth on
Schedule 4.1(v) and other than Consents to Assignment or Preferential
Rights to Purchase, to Seller's Knowledge, no Contracts to which any
Seller, Subsidiary, Partnership or Starr Partnership is a party or a
successor-in-interest and to which Buyer will be subject after the
Effective Time contain any provision that prevents Buyer from owning,
managing and operating the Operating Assets in accordance with the
Partnership's or Starr Partnerships' past practices.
(w) Seismic Information. At Closing, subject to the terms of the
-------------------
License Agreement, neither Seller nor any affiliate of Seller other than
the Subsidiaries and the Partnership shall have any further right to any of
the seismic data of the Subsidiaries or the Partnership which has been
assigned or leased to the Subsidiaries, the Partnership and/or the Buyer.
(x) Wells. Except to the extent set forth on Schedule 4.1(x), to
-----
Seller's Knowledge, no well included in the Properties is subject to
material penalties on allowables because of any overproduction or any other
violation of Applicable Law. Except for the wells included in the
Properties and listed in Schedule 4.1(x), there are no wells included in
the Properties that Seller, the Subsidiaries or the E&P Partnership, or to
Seller's Knowledge the operator of such wells, are currently obligated by
Applicable Law, Applicable Environmental Law or order of any Governmental
Authority to plug and abandon within a time certain or that have been shut-
in or temporarily abandoned.
(y) Expenditure Obligations. Except as set forth on Schedule 9.2(f),
-----------------------
the Subsidiaries and the Partnership have not executed or are not otherwise
contractually bound by any authority for expenditure with respect to any of
the Operating Assets under any operating agreement, unit operating
agreement, or other similar agreements that will obligate any of the
Subsidiaries, the Partnership or Buyer to pay, after the Effective Time,
more than $50,000 for a single project, operation or expenditure. Except as
set forth on Schedule 9.2(f), with respect to authorizations for
expenditure relating to any of the Operating Assets, which obligate any
Subsidiary, Partnership or Buyer to pay more than $50,000, (i) there are no
outstanding calls under such authorizations for expenditures for payments
which are due or which the Subsidiaries or the Partnership have committed
to make which have not been made; (ii) there are no material operations
with respect to which any of the Subsidiaries and/or the Partnership has
become a non-consenting party where the effect of such non-consent is not
disclosed on Exhibit B, and (iii) there are no commitments for the
expenditures of funds for drilling or other capital projects other than
projects with respect to which the operator is not required under the
applicable operating agreement to seek consent.
(z) Payout. To Seller's Knowledge, the payout balances with respect
------
to any of the Properties operated by the Partnership that are subject to
future change on account of
reversionary interests, non-consent penalties or similar agreements or
arrangements are set forth on Schedule 4.1(z) and are correct as of the
dates shown on such statements.
(aa) Absence of Certain Changes Regarding Properties. Since June 30,
-----------------------------------------------
1999, except as listed on Schedule 4.1(k), each Subsidiary, Partnership and
Starr Partnership:
(i) has maintained and operated each of the Operating Assets
operated by it as a reasonably prudent operator consistent
with prevailing oil and gas industry practice;
(ii) has used reasonable efforts consistent with its past
practices to cause each of the Operating Assets not
operated by them to be maintained and operated in a good
and workmanlike manner and in substantially the same manner
as theretofore operated;
(iii) has paid timely their share of all costs and expenses
attributable to the Operating Assets, except for such costs
and expenses that they were contesting in good faith by
appropriate action;
(iv) has performed all accounting, royalty disbursement and
reporting requirements, as applicable, related thereto for
the Production; and
(v) has not agreed, whether in writing or otherwise, to take
any action described in this Section 4.3(aa).
(bb) Schedule 1B states all liens and mortgages that prior to the Closing
encumbered the Membership Interests, the Common Stock or the Operating Assets,
securing obligations of any Seller, Subsidiary or Partnership (other than those
items listed in clause (ii) through (ix) of the definition of "Permitted
Encumbrances"), and all of the liens and mortgages listed on Schedule 1B have
been released, insofar as they encumber the Membership Interests, the Common
Stock or the Operating Assets.
5. Changes to Article V, Access to Information and Inspection.
----------------------------------------------------------
There are no amendments to Article V of the Agreement.
6. Changes to Article VI, Title
----------------------------
There are no amendments to Article VI of the Agreement.
7. Changes to Article VII, Environmental
-------------------------------------
There are no amendments to Article VII of the Agreement.
8. Changes to Article VIII, Casualty Loss and Condemnation
-------------------------------------------------------
There are no amendments to Article VIII of the Agreement.
9. Changes to Article IX, Covenants
--------------------------------
a. Paragraph (f)(ii)(3) of Section 9.2 of the Agreement is hereby amended
and restated in its entirety to read as follows:
(3) If (A) Buyer advances any funds pursuant to subparagraph (2), and (B)
the Membership Interests are not assigned to E&P Buyer and the Common Stock is
not assigned to Pipeline Buyer at Closing, and (C) Seller does not reimburse
Buyer for all advances made by Buyer with respect to such Operating Assets
pursuant to subparagraph (2) within thirty (30) days after this Agreement
terminates, then Buyer shall own and be entitled to any right of any Partnership
that would have lapsed but for such payment, and in the case of operations,
Seller shall be entitled to receive the penalty which such Partnership, as non-
consenting party, would have suffered under the applicable operating agreement
with respect to such operations as if Buyer were a consenting party thereunder.
b. Section 9.4 is hereby amended and restated in its entirety to read as
follows:
9.4 Covenants Regarding Corporate and Financial Matters.
---------------------------------------------------
(a) Through the Closing Date, except as set forth in
Section 9.4(b) or in Schedule 9.4 or as contemplated by this Agreement
(including without limitation Sections 2.5 and 2.6) or otherwise
consented to or approved by Buyer in writing, which consent or
approval shall not be unreasonably withheld, Seller shall cause each
Subsidiary, Partnership and Starr Partnership not to:
(i) Amend the Charter, Bylaws, management agreements, limited
liability company agreements, operating agreements or other
organizational or management documents of any the Subsidiaries or
amend the partnership agreements of the Partnership or the Starr
Partnerships;
(ii) Incur, assume or become subject to any additional
indebtedness for money borrowed or purchase money indebtedness,
except in the ordinary course of business and consistent with
past practices;
(iii) Except as necessary to effect the transactions
contemplated herein, declare or pay any dividend or make any
other distribution to any shareholder of any of the Subsidiaries
or any partner of any Partnership or Starr Partnership;
(iv) Redeem or otherwise acquire any shares of capital stock of
any of the Subsidiaries or issue any capital stock, membership
interests or other equity interests in any the Subsidiaries or
any option, warrant or right relating thereto or any securities
exchangeable for or convertible into any such shares;
(v) Permit or allow any Subsidiary's, Partnership's or Starr
Partnership's assets or properties to be subject to any
additional Encumbrance (other than Permitted Encumbrances) or
sell, transfer, lease or otherwise dispose of any such assets or
properties, other than surplus equipment not necessary for
operations of the Business and sold for a reasonable
consideration of less than $25,000;
(vi) Make any change in any method of accounting or accounting
practice or policy, other than those required by GAAP;
(vii) Engage in any transactions with an Affiliate of Seller,
other than transactions in the ordinary course and consistent
with past practices;
(viii) Make any changes in the method of selling natural gas,
condensate, oil or products thereof which is not consistent with
past practices;
(ix) Enter into any new derivative or Hedging Contracts with
respect to natural gas, condensate, oil, products thereof,
interest or any other commodities or other financial
instruments; or
(x) Agree, whether in writing or otherwise, to do any of the
foregoing.
(b) Prior to the Closing Date, Seller covenants to take the
following actions to reorganize the E&P Partnership and ownership of the
E&P Partnership:
(i) Contribute the limited partnership interest in the Pipeline
Partnership owned by Tesoro Gas Resources Company, Inc. to Gathering.
(ii) Form Grande and Southeast as Delaware limited liability
companies, with all Membership Interests in each being wholly owned by
Tesoro Gas Resources Company, Inc.
(iii) Contribute all of the capital stock of Exploration to Tesoro Gas
Resources Company, Inc.
(iv) Convert Exploration and Reserves into Delaware limited liability
companies, each of whose sole member is Tesoro Gas Resources Company,
Inc.
(v) Amend the limited partnership agreement of the E&P Partnership
to provide for establishment of series limited partnership interests,
and approve resolutions of the partners in the E&P Partnership
resulting in allocation of profits and losses and distributions from
specific partnership property to specific series of limited partners,
all initially to be held by Reserves LLC, as follows:
(1) Series A Properties listed on Schedule I
("E&P Property Package")
(2) Series B Properties listed on Schedule II
("Grande Property Package")
(3) Series C Properties listed on Schedule III
("Southeast Property Package")(vi) Dividend the Series B and
Series C limited partnership interests in the E&P Partnership from
Reserves LLC to Tesoro Gas Resources Company, Inc.
(vii) Contribute the Series B limited partnership interest in the E&P
Partnership from Tesoro Gas Resources Company, Inc. to Grande and the
Series C limited partnership interest in the E&P Partnership from
Tesoro Gas Resources Company, Inc. to Southeast.
c. Section 9.5 of the Agreement is hereby amended and restated in its
entirety to read as follows:
9.5 No Solicitation of Transactions. Except as otherwise permitted
-------------------------------
herein, from the date of this Agreement through the Closing Date, neither
Seller nor any of their representatives, Affiliates, directors, officers,
employees, subsidiaries or agents will (a) solicit, consider, encourage or
accept any other offers to acquire any of the Membership Interests or the
Common Stock or a Subsidiary's interest or a Partnership's interest in a
Partnership or a Starr Partnership or (b) solicit, consider, encourage or
accept any other offers to acquire any of the assets or properties of any
Partnership (other than as permitted by this Agreement) or (c) assist any
third Person in preparing or soliciting such an offer. Seller shall not
have, and shall cause such representatives, Affiliates, directors,
officers, employees, subsidiaries and agents not to have any discussions,
conversations, negotiations or other communication with any Person(s)
expressing an interest in any such offer.
d. Paragraph (a) of Section 9.10 of the Agreement is hereby amended and
restated in its entirety to read as follows:
(a) Each of Buyer and Seller, as promptly as practicable after the
Agreement Date, shall (i) deliver, or cause to be delivered, all notices
and make, or cause to be made, all such declarations, designations,
registrations, filings and submissions under all statutes, laws,
regulations and Governmental Orders applicable to it as may be required for
it to consummate the sale of the Membership Interests and the Common Stock
and the other transactions contemplated hereby in accordance with the terms
of this Agreement; (ii) use commercially reasonable efforts to obtain, or
cause to be obtained, all authorizations, approvals, orders, consents and
waivers from all Persons necessary to consummate the foregoing; and (iii)
use commercially reasonable efforts to take, or cause to be taken, all
other actions necessary, proper or advisable in order for it to fulfill its
respective obligations hereunder and to carry out the intentions of the
parties expressed herein. The preceding sentence notwithstanding, neither
party shall have any obligation to waive any condition herein for its
benefit or any performance hereunder by any other party.
e. Section 9.12 of the Agreement is hereby amended to add a new
subsection (c) to read as follows and to renumber existing subsection (c)
as subsection (d):
(c) Seller shall reimburse Buyer for Buyer's reasonable costs and
expenses incurred in connection with evaluating and implementing the
like kind exchange transaction, including without limitation, legal
and accounting fees incurred in connection with evaluating and
implementing the like kind exchange transaction and revising this
Agreement. Seller shall reimburse Buyer in cash for such costs and
expenses within ten (10) days after receiving a notice from Buyer
describing such costs and expenses in reasonable detail, and
requesting payment.
f. Section 9.14 of the Agreement is hereby amended and restated in its
entirety as follows:
9.14 Performance of Covenants with Respect to Starr Partnerships.
-----------------------------------------------------------
Seller shall perform, or shall cause the Subsidiaries or the Partnership to
perform, the covenants set forth in Sections 9.1, 9.2, 9.4, 9.5, 9.6, 9.10,
9.11 and 9.12 with respect to the Starr Partnerships to the extent
permitted by the Starr-County Joint Venture Agreement or the Starr-Zapata
Partnership Agreement.
g. Section 9.15 of the Agreement is hereby amended and restated in its
entirety as follows:
9.15 Covenant and Indemnity with Respect to Cash Flow. Seller
------------------------------------------------
covenants to use its best efforts to insure that after the Closing all
cash, checks, wire transfers and other cash flow attributable to the
Operating Assets received by Seller or any Affiliate of Seller will be
transferred on the same day such cash flow is received by Seller or such
Affiliate of Seller to an account designated by Buyer prior to the Closing
(such that the transfer is recorded by the transferring bank on the same
day such cash flow is received by Seller or an Affiliate of Seller).
Seller agrees to indemnify and hold the Buyer Group harmless for any
Damages asserted against, resulting to, imposed upon or incurred by the
Buyer Group arising from any breach of this covenant.
h. Section 9.16 of the Agreement is hereby deleted.
i. Section 9.17 of the Agreement is hereby deleted.
10. Changes to Article X, Pre-Closing Procedures.
--------------------------------------------
a. Section 10.5 of the Agreement is hereby amended and restated in its
entirety to read as follows:
10.5 Wire Transfer Instructions. At least two (2) Business Days
--------------------------
prior to the Closing Date, Seller shall provide to E&P Buyer and Pipeline
Buyer wire transfer instructions designating a bank account and Federal
Reserve ABA designation ID number, at a bank within the United States of
America where the E&P Closing Settlement Price and the Pipeline Closing
Settlement Price shall be transferred. For sales through Qualified
Intermediaries, such accounts shall be the accounts established by the
Qualified Intermediaries for this transaction.
b. A new Section 10.6 is hereby added to the Agreement as follows:
10.6 Qualified Intermediaries. Seller may assign to Qualified
------------------------
Intermediaries its rights to proceeds of the sale of the membership
interests of Grande and Southeast as follows:
(a) Seller may assign to the Grande Qualified Intermediary, as a
qualified intermediary under Section 1031 of the Code, all of Seller's
rights in the proceeds of the sale of the membership interests in Grande,
for the portion of the Purchase Price allocated to the Grande Property
Package. Seller is selling and assigning to E&P Buyer all of the membership
interests in Grande, for the portion of the Purchase Price allocated to the
Grande Property Package, pursuant to this Agreement and, subject to Section
21.4, an agreement in the form attached as Exhibit II to this Agreement,
and all proceeds owed Seller for the sale of Grande will be paid to the
Grande Qualified Intermediary.
(b) Seller and Reserves LLC may assign to the Southeast Qualified
Intermediary, as a qualified intermediary under Section 1031 of the Code,
all of Seller's rights in the proceeds of the sale of the membership
interests in Southeast, for the portion of the Purchase Price allocated to
the Southeast Property Package. Seller is selling and assigning to E&P
Buyer all of the membership interests in Southeast, for the portion of the
Purchase Price allocated to the Southeast Property Package, pursuant to
this Agreement and, subject to Section 21.4, an agreement in the form
attached as Exhibit III to this Agreement, and all proceeds owed Seller for
the sale of Southeast will be paid to the Southeast Qualified Intermediary.
11. Changes to Article XI, Closing Conditions
-----------------------------------------
a. Paragraph (a) of Section 11.2 of the Agreement is hereby amended and
restated in its entirety to read as follows:
(a) Representations. Except as provided otherwise in Section 9.13,
---------------
the representations and warranties of Seller contained in Section 4.3
(other than with respect to paragraphs (u), (w), (x), (y), (z) and (aa) of
Section 4.3) shall be true and correct in all material respects on the
Closing Date as though made on and as of that date; provided, however, that
the accuracy of the representations and warranties in subparagraphs (k)(i),
(ix), (x), (xi), (xii) and (xiii) of Section 4.3 shall, for purposes of
satisfying this condition, not be affected to the extent of inaccuracies
resulting solely from Buyer unreasonably withholding its prior written
consent (after written request by Seller duly provided to Buyer) to the
action taken by (or omission of) Seller, the Subsidiaries or the
Partnership which caused such representations and warranties to be
inaccurate.
b. Paragraph (c) of Section 11.2 of the Agreement is hereby amended and
restated in its entirety to read as follows:
(c) Corporate Certificates and Opinion. The Seller shall have
----------------------------------
delivered to Buyer: (i) a certificate of an executive officer of each
Seller, dated the Closing Date, certifying on behalf of such Seller that
the representations made in Section 4.3, are true and correct as of the
Closing Date; (ii) a certificate of incumbency for each Seller, (iii) a
certificate of good standing for the E&P Partnership and the Pipeline
Partnership as Delaware limited partnerships, and for each Seller and each
of the Subsidiaries as Delaware corporations or as Delaware LLCs, as
applicable; (iv) certified resolutions of the Boards of Directors of each
Seller, authorizing each Seller to enter into this Agreement and the
Transaction and to perform its obligations at Closing; and (v) an opinion
of counsel for the Seller, acceptable to Buyer, dated the Closing Date, as
to such matters as may reasonably be requested by Buyer and its counsel and
are typical for transactions such as the Transaction.
c. The following is added as a new paragraph (k) of Section 11.2 of
the Agreement:
(k) Seller shall have delivered proof, acceptable to Buyer in its
reasonable discretion, of the effectiveness of a post-effective amendment to
Seller's Registration Statement on Form S-3 (Reg. No. 333-51789), as amended,
removing any entities being transferred hereunder (including, without
limitation, Exploration, the E&P Partnership, Natural Gas and the Pipeline
Partnership) as co-registrants under such registration statement.
12. Changes to Article XII, Closing
-------------------------------
a. Section 12.1 of the Agreement is hereby amended and restated in its
entirety to read as follows:
12.1 Closing. The closing of the Transaction (the "Closing") shall
-------
be held on December 17, 1999 (the "Closing Date"), at 9:00 a.m. Houston
time, at the office of Seller's counsel, 1301 McKinney, Suite 5100,
Houston, Texas 77010, or at such other date or place as the parties may
direct; provided, however, that if all conditions to Closing set forth in
Article XI have not been waived or satisfied prior to December 17, 1999,
the Closing Date shall be on the second Business Day following the waiver
or satisfaction of such conditions.
b. Section 12.2 of the Agreement is hereby amended and restated in its
entirety to read as follows:
12.2 Seller's Closing Obligations. At Closing, Seller shall deliver
----------------------------
to Buyer the following:
(a) Stock certificates representing all of the Common Stock, duly
endorsed in blank or with separate duly executed stock powers duly endorsed
in blank;
(b) The certificates representing membership interests for each of
Reserves LLC, Exploration LLC, Grande and Southeast, respectively, duly
endorsed in blank or with separate duly executed powers duly endorsed in
blank;
(c) The stock books, stock ledgers, minute books, organizational
documents and corporate seal for each of the Subsidiaries who are
corporations;
(d) All organizational documents and books and records of Grande,
Southeast, Reserves LLC and Exploration LLC;
(e) All books and records of the E&P Partnership and the Pipeline
Partnership;
(f) The resignations of the officers, managers and directors of each
of the Subsidiaries, the E&P Partnership and the Pipeline Partnership;
(g) Executed originals of (i) the Purchase Agreement covering the
sale of the membership interests in Reserves LLC, (ii) the Purchase
Agreement covering the sale of the membership interests of Grande, and
(iii) the Purchase Agreement covering the sale of the membership interests
of Southeast (collectively, the "LLC Purchase Agreements"), using the
respective forms attached as Exhibit I, Exhibit II and Exhibit III to this
Agreement;
(h) Instruments assigning Seller's rights under each such Purchase
Agreement of Grande and Southeast to a respective Qualified Intermediary;
(i) A certificate of each Seller signed under penalties of perjury
(i) stating that it is not a foreign corporation, foreign partnership,
foreign trust or foreign estate, (ii) providing its U.S. Employer
Identification Number (if applicable) and (iii) providing its address, all
pursuant to Section 1445 of the Code.
(j) Such other documents or authorizations as Buyer may reasonably
request, or as might be reasonably necessary to assign all of Seller's
interest in the Subsidiaries, each Partnership, the Starr Partnerships and
the Operating Assets to Buyer in accordance with the provisions hereof;
(k) The certificates of Seller referred to in Section 11.2(c) hereof;
(l) The opinion of counsel referred to in Section 11.2(c) hereof; and
(m) Releases, in a form acceptable to Buyer, of all liens and
mortgages listed on Schedule 1B.
c. Section 12.3 is hereby amended to read as follows:
12.3 Buyer's Closing Obligations. At Closing, Buyer shall deliver to
---------------------------
Seller the following:
(a) The E&P Closing Settlement Price and the Pipeline Closing
Settlement Price, paid in immediately available funds, by wire transfer
into the U.S. bank account designated by Seller for the Membership
Interests and the Common Stock; proceeds for
sale of each of Grande and Southeast shall be paid by wire transfer to the
account designated by the Qualified Intermediary for such sale;
(b) The certificates of Buyer referred to in Section 11.1(c) hereof;
(c) The opinions of counsel referred to in Section 11.1(c) hereof;
and
(d) Executed originals of the LLC Purchase Agreements using the
respective forms attached as Exhibit I, Exhibit II and Exhibit III to the
Agreement;
13. Changes to Article XIII, Adjustment Basket; Proration of Revenues
-----------------------------------------------------------------
and Costs
---------
a. Section 13.2 of the Agreement is hereby amended and restated in its
entirety to read as follows:
(a) Pre-Closing Settlement Statements. The E&P Settlement Statement
---------------------------------
and the Pipeline Settlement Statement are attached hereto as Exhibit IV and
Exhibit V, respectively.
(b) Final Statements.
----------------
(i) As soon as practicable after the Closing Date, but in no
event later than one hundred twenty (120) days thereafter, E&P Buyer shall
prepare and submit to Seller a draft E&P Final Statement, which shall show
the calculation of the adjusted E&P Final Settlement Price, as allocated to
the E&P Property Package, the Grande Property Package and the Southeast
Property Package, based upon the best information then available. Such E&P
Final Statement shall separately break out and allocate the estimated
accounting adjustments and/or prorations of amounts attributable to the E&P
Settlement Price, as allocated to each of the E&P Property Package, the
Grande Property Package and the Southeast Property Package. Seller shall
have the right to audit such E&P Final Statement and all supporting data
and accountings. As soon as practicable after receipt of the E&P Final
Statement, but in any event within thirty (30) days after receipt thereof,
Seller shall deliver to E&P Buyer a written report containing the changes,
if any, which Seller proposes be made to such E&P Final Statement. If no
response is made by Seller within such thirty (30) day period, it shall be
presumed that Seller concurs with such E&P Final Statement, and such E&P
Final Statement shall be the basis for the E&P Final Settlement Price. If
Seller submits a response, the Seller and E&P Buyer shall cooperate in good
faith to produce not later than one hundred eighty (180) days after the
Closing Date as accurate an E&P Final Statement as possible based upon the
information then available. After agreement upon an E&P Final Statement
setting forth the E&P Final Settlement Price, the difference between such
E&P Final Settlement Price and the E&P Closing Settlement Price paid at
Closing shall be paid within five (5) Business Days thereafter by the Party
owing the same.
(ii) As soon as practicable after the Closing Date, but in no
event later than one hundred twenty (120) days thereafter, Pipeline Buyer
shall prepare and submit to Seller a draft Pipeline Final Statement, which
shall show the calculation of the adjusted
Pipeline Final Settlement Price, based upon the best information then
available. Seller shall have the right to audit such Pipeline Final
Statement and all supporting data and accountings. As soon as practicable
after receipt of the Pipeline Final Statement, but in any event within
thirty (30) days after receipt thereof, Seller shall deliver to Pipeline
Buyer a written report containing the changes, if any, which Seller
proposes be made to such Pipeline Final Statement. If no response is made
by Seller within such thirty (30) day period, it shall be presumed that
Seller concurs with such Pipeline Final Statement, and such Pipeline Final
Statement shall be the basis for the Pipeline Final Settlement Price for
the Common Stock. If Seller submits a response, the Seller and E&P Buyer
shall cooperate in good faith to produce not later than one hundred eighty
(180) days after the Closing Date as accurate a Pipeline Final Statement as
possible based upon the information then available. After agreement upon a
Pipeline Final Statement setting forth the Pipeline Final Settlement Price
for the Common Stock, the difference between such Pipeline Final Settlement
Price and the Pipeline Closing Settlement Price paid at Closing shall be
paid within five (5) Business Days thereafter by the Party owing the same.
b. Section 13.3 of the Agreement is hereby amended to add the following
paragraph (c):
(c) Taxes and tax prorations attributable to each of the E&P Property
Package, the Grande Property Package, the Southeast Property Package and
the Common Stock shall be allocated and accounted for separately, provided
that such allocation shall not affect the total division of tax burdens and
the total tax prorations hereunder.
14. Changes to Article XIV, Post-Closing Procedures
-----------------------------------------------
There are no amendments to Article XIV to the Agreement.
15. Changes to Article XV, Survival, Indemnities
--------------------------------------------
a. Section 15.1 of the Agreement is hereby amended and restated in its
entirety to read as follows:
15.1 Survival. All representations, warranties or covenants made
--------
herein, except for those in Sections 4.1(a), 4.1(e), 4.1(f), 4.1(g),
4.1(i), 4.1(k), 4.1(l), 4.1(m), 4.1(n), 4.1(o), 4.1(q), 4.1(u), 4.1(v),
4.1(w), 4.1(x), 4.1(y), 4.1(z), 4.1(aa), 4.1(bb) (with respect to Operating
Assets only), 4.2(e), 4.2(i), 4.3(a), 4.3(e), 4.3(f), 4.3(g), 4.3(i),
4.3(k), 4.3(l), 4.3(m), 4.3(n), 4.3(o), 4.3(q), 4.3(u), 4.3(v), 4.3(w),
4.3(x), 4.3(y), 4.3(z), 4.3(aa), 4.3(bb) (with respect to Operating Assets
only), Sections 5.6, 7.1, 7.2, 7.3, 7.4, 8.3, 9.1, 9.2(e), 9.9(d), 9.12(b),
9.12(c), 9.13, 9.14 and 9.15, and Articles XV, XVI, XVII and XXI, shall
survive for two years from the Closing Date. The covenants made in Section
9.13 shall survive until the Parties reach agreement on the E&P Final
Statement and the Pipeline Final Statement pursuant to Section 13.2. The
representations and warranties or covenants made in Sections 4.1(a),
4.1(g), 4.1(k), 4.1(l), 4.1(m), 4.1(o), 4.1(q), 4.1(u), 4.1(v), 4.1(w),
4.1(x), 4.1(y), 4.1(z), 4.1(aa), 4.1(bb) (with respect to
Operating Assets only), 4.3(a), 4.3(g), 4.3(k), 4.3(l), 4.3(m), 4.3(o),
4.3(q), 4.3(u), 4.3(v), 4.3(w), 4.3(x), 4.3(y), 4.3(z), 4.3(aa), 4.3(bb)
and Section 9.1 shall not survive Closing and shall automatically expire
upon Closing. The representations, releases, covenants, indemnities,
defenses and hold harmless obligations and other obligations referenced in
Sections 4.1(e), 4.1(f), 4.1(i), 4.1(n), 4.2(e), 4.2(i), 4.3(e), 4.3(f),
4.3(i), 4.3(n), 5.6, 7.1, 7.2, 7.3, 7.4, 8.3, 9.2(e), 9.9(d), 9.12(b),
9.12(c), 9.14 and 9.15 and this Article XV, and all provisions of Articles
XVI, XVII and XXI, shall each survive Closing, and each shall continue to
remain fully enforceable in accordance with its terms.
b. Section 15.2 of the Agreement is hereby amended and restated in its
entirety as follows:
15.2 Buyer's Indemnity. EXCEPT AS EXPRESSLY AND SPECIFICALLY
-----------------
INDICATED OTHERWISE IN THIS AGREEMENT (INCLUDING WITHOUT LIMITATION
SECTIONS 9.9(D) AND 15.3), AFTER THE CLOSING DATE, BUYER SHALL AND HEREBY
DOES RELEASE, DEFEND, INDEMNIFY, SAVE, AND HOLD HARMLESS SELLER AND THEIR
RESPECTIVE OFFICERS, DIRECTORS, AFFILIATES, EMPLOYEES, ATTORNEYS,
CONTRACTORS AND AGENTS, AGAINST ANY AND ALL DAMAGES WHICH ARISE OUT OF OR
IN CONNECTION WITH THE OWNERSHIP OF, OPERATION OF, PRODUCTION FROM OR
ACCOUNTING BY, INCOME OF OR PAYMENTS BY THE PARTNERSHIP, THE SUBSIDIARIES
OR THE OPERATING ASSETS, AT ANY TIME EITHER BEFORE OR AFTER THE EFFECTIVE
TIME, OR WHICH ARISE OUT OF ANY ENVIRONMENTAL CONDITION OR OTHER HAZARDOUS
CONDITION RELATING TO OR AFFECTING ANY OPERATING ASSET AT ANY TIME EITHER
BEFORE OR AFTER THE EFFECTIVE TIME, INCLUDING WITHOUT LIMITATION, ALL SUCH
COSTS, CLAIMS OR LIABILITIES ARISING OUT OF SELLER'S NEGLIGENCE OR STRICT
LIABILITY.
c. Section 15.3 of the Agreement is hereby amended and restated in its
entirety as follows:
15.3 Seller's Indemnity.
------------------
(a) SUBJECT TO THE TERMS AND CONDITIONS OF THIS ARTICLE XV, SELLER
SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS BUYER, AND ITS PARENT OR
SUBSIDIARY COMPANIES, PARTNERS AND OTHER AFFILIATES (INCLUDING AFTER
CLOSING, THE SUBSIDIARIES AND THE PARTNERSHIP), AND THEIR RESPECTIVE
OFFICERS, DIRECTORS, AFFILIATES, EMPLOYEES, ATTORNEYS, CONTRACTORS AND
AGENTS (HEREINAFTER COLLECTIVELY REFERRED TO AS THE "BUYER GROUP"), FROM
AND AGAINST ANY AND ALL DAMAGES ASSERTED AGAINST, RESULTING TO, IMPOSED
UPON, OR INCURRED BY THE BUYER GROUP, DIRECTLY OR INDIRECTLY, BY
REASON OF OR RESULTING FROM OR RELATING TO (I) ANY BREACH BY SELLER (FOR
WHICH SELLER SHALL BE RESPONSIBLE) OF ITS SURVIVING REPRESENTATIONS,
WARRANTIES, COVENANTS OR AGREEMENTS CONTAINED IN THIS AGREEMENT, (II) ANY
LIABILITIES OF THE SUBSIDIARIES AND THE PARTNERSHIP WHICH ARE UNRELATED TO
THE OPERATING ASSETS, (III) ANY LIABILITIES OF THE SUBSIDIARIES AND THE
PARTNERSHIP FOR INCOME TAXES PRIOR TO CLOSING, AND (IV) ANY EXISTING
LIABILITIES OF THE SUBSIDIARIES AND THE PARTNERSHIP OWED UNDER FEDERAL
LEASES FOR PRIOR ROYALTIES RELATED TO THE PERIOD OF TIME PRIOR TO CLOSING.
(b) SELLER HEREBY AGREES TO AND DOES INDEMNIFY, DEFEND AND HOLD
HARMLESS E&P BUYER AND PIPELINE BUYER FROM AND AGAINST ANY DAMAGES
RESULTING FROM CLAIMS BY COASTAL AND/OR ITS ASSIGNS RELATING TO ANY ADVERSE
TAX CONSEQUENCES TO COASTAL AND/OR ITS ASSIGNS ARISING AS A RESULT OF THE
TRANSACTIONS AND/OR THE TRANSACTIONS OCCURRING PURSUANT TO THE LLC PURCHASE
AGREEMENTS.
16. Changes to Article XVI, Tax Matters
-----------------------------------
a. Section 16.2(e) of the Agreement is amended and restated in its
entirety as follows:
(e) Seller shall cause the Pipeline Partnership to make an election
under Section 754 of the Code to adjust the basis of the assets of such
partnerships, and shall use its reasonable efforts to cause the Starr
Partnerships, if permitted by the applicable Charter, to make an election
under Section 754 of the Code to adjust the basis of the assets of such
partnerships. Seller must amend all internal partnership agreements
accordingly prior to the Closing Date.
b. Section 16.2(j) of the Agreement shall be amended and restated in its
entirety to read as follows:
(j) Both Seller and Buyer will join in making a timely and effective
election under Section 338(h)(10) of the Code (and any comparable provision
of foreign, state or local law) with respect to the purchase by Buyer of
the stock of Gathering hereunder (together with the elections under Section
338(g) of the Code and any comparable provision of foreign, state or local
law, the "Section 338(h)(10) Elections"). At the Closing, Seller and Buyer
shall execute IRS Form 8023, completed to the extent reasonably practicable
for Gathering. Seller and Buyer agree to take all other action and file
all other necessary reports to elect validly pursuant to Section 338(h)(10)
of the Code to treat the Transaction as a sale of assets as opposed to a
sale of the stock of Gathering. Within 120 days after the Closing Date,
Buyer shall deliver to Seller any additional information or required
schedules thereto and any similar forms under applicable state or local law
(the "Forms") with respect to Taxes relating to Buyer's purchase of the
stock of Gathering and its interests in Pipeline. Provided that the
information on such Forms is, in
the reasonable determination of Seller, correct and complete in all
material respects, Seller will consent to the filing of such Forms. Seller
and Buyer shall cooperate fully with each other and make available to each
other such Tax data and other information as may be reasonably required by
Seller or Buyer in order to prepare and timely file the Forms and any other
required statements or schedules. With respect to the Sections 338(h)(10)
Elections, the Modified Aggregate Deemed Sales Price as defined in Treas.
Reg. Section 1.338(h)(10)-1 shall be allocated among the stock of Gathering
pursuant to Treas. Reg. Section 1.338(h)(10)-1. The Buyer and the Seller
shall use their good faith best efforts to agree upon such allocation. The
Seller shall provide to the Buyer a schedule and supporting material
reflecting such allocation for the Buyer's review and consent, which
consent shall not be unreasonably withheld. The parties shall take no
action inconsistent with, or fail to take any action necessary for the
validity of, the Section 338(h)(10) Elections for Gathering, and shall
adopt and utilize the asset values determined from such allocation for the
purpose of all tax returns filed by them, and shall not voluntarily take
any action inconsistent therewith upon examination of any tax return, in
any refund claim, in any litigation or otherwise with respect to such tax
returns. In the event that Buyer and Seller are unable to resolve any
disagreements regarding the allocation of the "modified aggregate deemed
sales price" (as defined under applicable Treasury Regulations) among the
assets or other aspects of the Forms, Buyer (i) shall be entitled to file
the Forms, but only if either the information not agreed upon is deleted or
the Forms reflect that the information has not been agreed upon; or (ii) if
acceptable to Buyer and Seller within 30 days after notice of such
disagreement, the matter in dispute shall be resolved as soon as
practicable by a "Big Five" independent accounting firm or, if the
disagreement involves valuation, to a nationally recognized appraisal firm
mutually satisfactory to the parties (but in no event longer than 30 days),
which resolution shall be binding and conclusive upon Buyer and Seller
without further appeal therefrom. Buyer and Seller shall bear equally the
fees and expenses of such firm. Buyer will timely file the Forms, and any
required supplements thereto, in the manner prescribed by Treasury
Regulation 1.338(h)(10)-1(d) or the corresponding provisions of applicable
foreign, state or local law, and will provide written evidence to Seller
that it has done so. Buyer and Seller agree that neither of them will take,
or permit any of their Affiliates to take, any action to modify or revoke
the elections contained in or the content of any Forms without the express
written consent of the other.
17. Changes to Article XVII, Default and Remedies
---------------------------------------------
a. Section 17.3 of the Agreement shall be amended and restated in its
entirety to read as follows:
17.3 Waiver of Extraordinary Damages. TO THE FULL EXTENT ALLOWED BY
-------------------------------
LAW, AND EXCEPT AS MAY BE INCLUDED IN THIRD PARTY DAMAGES SUBJECT TO ANY
INDEMNITY OBLIGATION HEREUNDER, THE PARTIES HEREBY WAIVE AND RELEASE ANY
RIGHTS OR CLAIMS TO PUNITIVE OR EXEMPLARY DAMAGES RESULTING FROM A BREACH
OF THIS AGREEMENT. THE PARTIES HEREBY WAIVE THE APPLICATION OF THE TEXAS
DECEPTIVE TRADE PRACTICES- CONSUMER PROTECTION ACT TO THE TRANSACTION.
b. Section 17.4 of the Agreement shall be amended and restated in its
entirety to read as follows:
17.4 Waiver of Jury Trial. SELLER AND BUYER DO HEREBY IRREVOCABLY
--------------------
WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO A TRIAL
BY JURY IN ANY ACTION, SUIT OR OTHER LEGAL PROCEEDING BASED UPON, ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTION.
18. Changes to Article XVIII, Notices.
----------------------------------
Section 18.1 of the Agreement is amended such that copies of notices to the
E&P Buyer or the Pipeline Buyer shall be delivered to the following address
instead of the address listed in the Agreement prior to this Amendment:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue
Suite 4100
Dallas, Texas 75201
Attention: Michael E. Dillard, P.C.
Fax Number: (214) 969-4343
Phone Number: (214) 969-2876
19. Changes to Article XIX, Confidentiality and Disclosure.
-------------------------------------------------------
There are no amendments to Article XIX to the Agreement.
20. Changes to Article XX, Termination.
-----------------------------------
There are no amendments to Article XX to the Agreement.
21. Changes to Article XX, Miscellaneous.
-------------------------------------
a. Section 21.1 of the Agreement shall be amended and restated to read in
its entirety as follows:
21.1 Entire Agreement. This Agreement, as amended, together with the
----------------
LLC Purchase Agreements, embody the entire agreement between the Parties
(superseding all prior agreements, negotiations, representations,
discussions, arrangements and understandings related to the subject matter
hereof), and may be supplemented, altered, amended, modified or revoked
only by a written instrument signed by each of the Parties; provided,
however, the Confidentiality Agreement dated June 17, 1999, between the
Parties shall remain effective until Closing. If the sale of the Operating
Assets to Buyer is not consummated, then the Confidentiality Agreement
shall remain effective as stated therein.
b. Section 21.4 of the Agreement shall be amended and restated to read in
its entirety as follows:
21.4 Interpretation. Words of any gender used in this Agreement
--------------
shall be held and construed to include any other gender, and words in the
singular shall be held to include the plural, unless the context otherwise
requires. None of the terms or conditions of this Agreement, including any
Exhibits or Schedules hereto, shall be construed for or against any Party
hereto on the basis that such Party did or did not author the same. All
terms of this Agreement and the Exhibits shall be harmonized, but in the
event of any conflict between the definition of a term in Article I and a
more complete description or limitation of such term in a subsequent
Article, the subsequent Article shall prevail. The LLC Purchase Agreements
are being executed in connection with this Agreement, and the instruments
shall be harmonized, to the extent possible, provided however, that no
Party shall be entitled to receive duplicate payments (including, without
limitation, duplicate payment of any purchase price) or other relief
regarding the same matters under both this Agreement, as amended and an LLC
Purchase Agreement. In the event of any conflict, redundancy or
inconsistency between the terms of this Agreement, as amended, and an LLC
Purchase Agreement or any other agreements or documents executed in
connection with this Transaction (including without limitation any
conflict, redundancy or inconsistency with respect to the provisions
relating to indemnification, payment of purchase price, adjustments to the
purchase price, transfer of the Common Stock or Membership Interests,
representations, warranties and covenants), the provisions of this
Agreement, as amended, shall control and prevail. The Article and Section
headings are for convenience only and shall have no significance in the
interpretation hereof.
c. Section 21.9 of the Agreement shall be amended and restated in its
entirety as follows:
21.9 Binding Effect, Assignment. All the terms, provisions,
--------------------------
covenants, representations, warranties and conditions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
Parties and, except as otherwise
prohibited, their respective successors; however, this Agreement and the
rights and obligations hereunder shall not be assignable or delegable by
any Party without the express written consent of the non-assigning or non-
delegating Parties, which consent may be withheld for any or no reason;
provided that Buyer may assign some or all its rights, duties and
obligations under this Agreement to an Affiliate of EEX Corporation. Any
assignment or delegation requiring consent which is made without such
consent will be void.
d. Section 21.15 of the Agreement shall be amended by adding the
following as a new sentence at the end thereof:
If E&P Buyer and Pipeline Buyer are different Persons as a result of a
permitted assignment of the rights and obligations of either E&P Buyer or
Pipeline Buyer hereunder, E&P Buyer and Pipeline Buyer shall be jointly and
severally liable for all of the duties and obligations of E&P Buyer and
Pipeline Buyer hereunder.
e. Section 21.17 of the Agreement shall be amended and restated in its
entirety as follows:
21.17 EEX Corporation Guarantee. EEX Corporation (a) agrees to be
-------------------------
jointly and severally liable with E&P Buyer and Pipeline Buyer for all of
E&P Buyer's and Pipeline Buyer's payment obligations under this Agreement
and (b) irrevocably and unconditionally guarantees the performance by E&P
Buyer and Pipeline Buyer of their respective indemnity obligations under
Article XV.
22. Addition of Exhibits and Schedules.
-----------------------------------
The Agreement is amended to add the following exhibits and schedules to the
Agreement, each of which is attached to this Amendment:
Exhibit B-1 Pipeline Properties
Exhibit C-1 Pipeline Balance Sheet
Exhibit I Reserves LLC Purchase Agreement
Exhibit II Grande LLC Purchase Agreement
Exhibit III Southeast LLC Purchase Agreement
Exhibit IV E&P Settlement Statement
Exhibit V Pipeline Settlement Statement
Schedule I E&P Property Package
Schedule II Grande Property Package
Schedule III Southeast Property Package
23. General Amendment Provisions.
-----------------------------
The parties hereto acknowledge that the terms of the Agreement, as amended
by this Amendment, shall continue in full force and effect. This Amendment
shall be governed and construed and enforced in accordance with the laws of the
State of Texas, without giving effect to principles of conflict of laws. This
Amendment may be executed in any number of counterparts, and each and every
counterpart shall be deemed for all purposes one agreement.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
by their duly authorized officers as of the date first above written.
SELLER BUYER
- ------ -----
TESORO PETROLEUM EEX OPERATING LLC
CORPORATION
By: EEX CORPORATION
By:________________________________ By:______________________________
Name:______________________________ Name:____________________________
Title:_____________________________ Title:___________________________
TESORO GAS RESOURCES EEX CORPORATION, for purposes of
COMPANY, INC. Section 21.17
By:________________________________ By:______________________________
Name:______________________________ Name:____________________________
Title:_____________________________ Title:___________________________