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EXHIBIT 2.2
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:
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:
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1. CHANGES TO ARTICLE I, DEFINITIONS.
a. New Defined Terms The following defined terms shall be added to 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).
"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.
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"GRANDE" shall mean Tesoro Grande 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.
"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).
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"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 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
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, 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.
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"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.
a. Section 2.1 of the Agreement is hereby amended and restated in its
entirety to read as follows:
2.1 SALE OF MEMBERSHIP INTERESTS AND COMMON STOCK. Subject to the terms 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
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
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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 Pipeline
Partnership shall be owned in the following manner:
(a) E&P Partnership Exploration LLC, Grande, Southeast and Reserves 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 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
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.
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 existing subparagraphs (vi) and (vii) of Section 2.4(a) are
renumbered (vii) and (viii), respectively, and a new subparagraph (vi)
is added as follows:
(vi) All the rights, title and interests of Seller and the Partnership
in and to the Bob West Field compression facility and the Bob
West Field amine plant;
f. The following paragraph (c) is added to Section 2.4 of the Agreement:
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(c) Pipeline Assets.
(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.
g. Section 2.9 of the Agreement is hereby deleted in its entirety.
3. CHANGES TO ARTICLE III, PURCHASE PRICE AND SETTLEMENT PRICE.
a. Section 3.1 of the Agreement is hereby amended and restated in its
entirety to read as follows:
3.1 PURCHASE PRICE.
(a) Purchase Price. The monetary consideration ("E&P Purchase Price")
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
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(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;
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(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 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
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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."
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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
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
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.
Effective as of the Closing Date, Seller shall represent and warrant that:
(a) Disclosure. To Seller's Knowledge, the representations and warranties
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.
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(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, or (C)
cause the recognition of gain for which the Buyer (or, after the
Closing, the Subsidiaries) will be responsible for the tax
thereon or subject any Subsidiary or its assets to any Tax other
than Tax for which Seller is responsible under Article XVI.
(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
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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.
(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
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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
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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
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(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
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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 (representing a 99% interest in all of the capital and
assets associated with Series A) is held by Reserves LLC, the
entire Series B limited partnership interest (representing a
100% interest in all of the capital and assets associated with
Series B) is held by Grande and the entire Series C limited
partnership interest (representing a 100% interest in all of the
capital and assets associated with Series C) is held by
Southeast. Exploration LLC is the general partner of the E&P
Partnership (representing a 1% interest in all of the capital
and assets of Series A). 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, Southeast or Exploration LLC 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,
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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
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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
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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
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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.
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(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
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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), or with Buyer's prior written consent,
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;
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(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.
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(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
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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
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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
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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.
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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;
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(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.
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(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) Transfer the Series B limited partnership interest in the E&P
Partnership from Reserves LLC to Grande and transfer the Series C
limited partnership interest in the E&P Partnership from Reserves LLC 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
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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.
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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 or
before the next Business Day after 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 or
before the next Business Day after such cash flow is received by Seller or
an Affiliate of Seller). To the extent Seller does not make the transfer
required by this Section 9.15 on or before the next Business Day after
receipt of such cash flow, Seller agrees to pay to Buyer (a) interest at
the prime rate of Buyer's primary lender (accruing from the second Business
Day after receipt by Seller of such cash flow) on any such cash flow
remaining outstanding for the second and third Business Day after receiving
such funds and (b) the maximum interest allowable by Applicable Law on any
such cash flow remaining outstanding thereafter. 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
failure by Seller to transfer any amounts that, together with any other
amounts not transferred pursuant to this Section 9.15, aggregate greater
than $1 million and that Seller has not transferred within one Business Day
after written notice by Buyer is received by Seller. Buyer and Seller agree
to cooperate in identifying amounts that may need to be transferred by
Seller to Buyer under this Section 9.15.
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.
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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
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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;
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(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
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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
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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,
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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.
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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
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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.
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18. CHANGES TO ARTICLE XVIII, NOTICES.
a. Section 18.1 of the Agreement is amended such that notices to Seller
shall be delivered to the following address instead of the address listed
in the Agreement prior to this Amendment:
Tesoro Petroleum Company
300 Concord Plaza Drive
San Antonio, Texas 78216-6999
Attention: James C. Reed, Jr.
Fax Number: (210) 283-2400
Phone Number: (210) 828-8484
b. 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.
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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 or any provisions of the exhibits or schedules), 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.
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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.
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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 CORPORATION EEX OPERATING LLC
BY: EEX CORPORATION
By: /s/ SHARON L. LAYMAN By: /s/ RICHARD S. LANGDON
-------------------------------- ------------------------------
Name: Sharon L. Layman Name: Richard S. Langdon
------------------------------ ----------------------------
Title: Vice President and Treasurer Title: EVP & CFO
----------------------------- ---------------------------
TESORO GAS RESOURCES COMPANY, INC. EEX CORPORATION, FOR PURPOSES OF
SECTION 21.17
By: /s/ JEFFREY B. FABIAN By: /s/ RICHARD S. LANGDON
-------------------------------- ----------------------------------
Name: Jeffrey B. Fabian Name: Richard S. Langdon
------------------------------ --------------------------------
Title: President Title: EVP & CFO
----------------------------- -------------------------------
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The exhibits and schedules listed in Section 22 of the First Amendment to Stock
Purchase Agreement have been omitted. The Registrant will furnish a copy of any
omitted exhibits and schedules to the Securities and Exchange Commission upon
request.