EXHIBIT 10.5
AMENDED AND RESTATED MANAGEMENT INVESTOR
SUBSCRIPTION AGREEMENT
This Amended and Restated Management Investor Subscription Agreement
(this "Investment Agreement") dated effective as of December 31, 1996 is made by
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (the "Investor") for the benefit of Domain Energy Corporation,
a Delaware corporation (the "Company").
R E C I T A L S
WHEREAS, El Paso Tennessee Pipeline Co. (formerly named Tenneco
Inc.) ("Tenneco"), El Paso Natural Gas Company ("El Paso") and El Paso Merger
Company, an indirect wholly-owned subsidiary of El Paso ("Merger Company"),
entered into that certain Amended and Restated Agreement and Plan of Merger
dated as of June 19, 1996 pursuant to which, effective December 12, 1996, Merger
Company merged with and into Tenneco, resulting in Tenneco becoming an indirect,
wholly-owned subsidiary of El Paso;
WHEREAS, the Company has been incorporated at the direction of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President and Chief Executive Officer of Tenneco Ventures
Corporation, an indirect, wholly-owned subsidiary of Tenneco ("Tenneco
Ventures"), and First Reserve Fund VII, Limited Partnership ("Fund VII");
WHEREAS, by assignment from Teleo Ventures, Inc., all of the
outstanding capital stock of which is owned by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, the Company is
a party to a Stock Purchase Agreement, dated as of December 24, 1996 (the "Stock
Purchase Agreement") with El Paso pursuant to which the Company agreed to
purchase from El Paso all of the outstanding capital stock of Tenneco Ventures
and Tenneco Gas Production Corporation (the "Ventures Companies Acquisition");
WHEREAS, pursuant to a Subscription Agreement dated as of December
31, 1996 (the "First Reserve Subscription Agreement"), among the Company and
Fund VII, Fund VII agreed to purchase from the Company, and the Company agreed
to issue and sell to Fund VII, an aggregate of 9,519.4717 shares (the "First
Reserve Shares") of Common Stock of the Company, par value $.01 per share
("Common Stock") at a purchase price of $3,151.4354 per share;
WHEREAS, all securityholders of the Company are required to execute
and deliver the Securityholders' Agreement among the Company and its
securityholders dated as
of December 31, 1996 (the "Securityholders' Agreement") and to be bound thereby;
WHEREAS, pursuant to offers by means of separate Management Investor
Subscription Agreements (collectively, the "Management Investors Subscription
Agreements"), each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (each of such persons individually a "Management Investor"
and, collectively, the "Management Investors") will be permitted to purchase
from the Company, and the Company will be authorized to issue and sell to the
Management Investors an aggregate of up to 517.6542 shares (the "Management
Investors' Shares" and, collectively with the First Reserve Shares, the
"Shares") of Common Stock;
WHEREAS, in reliance on exemptions from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and from applicable state securities laws (the "Blue Sky Laws"), the Shares will
be offered, issued and sold to Fund VII and the Management Investors without
registration under the Securities Act or applicable Blue Sky Laws;
WHEREAS, the Investor recognizes that there are conditions to and
requirements of exemptions applicable to any issuance of securities; and
WHEREAS, the Investor and the Company have entered into that certain
Management Investor Subscription Agreement dated as of December 31, 1996 and
each of them desire to amend and restate such agreement in its entirety;
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows.
ARTICLE I.
SUBSCRIPTION
Section 1.1. SUBSCRIPTION FOR SHARES. Subject to the terms and
provisions of this Investment Agreement, the Investor hereby irrevocably
subscribes for and agrees to purchase 237.9868 Shares (the "Investor Shares") at
$3,151.4354 per Share. Such aggregate subscription price
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(the "Subscription Price") shall be payable in part in cash and in part by the
delivery by the Investor to the Company of a promissory note in the form of that
attached hereto as Exhibit A (the "Note") and a Pledge Agreement pledging the
Investor Shares and other equity securities issued by the Company, in the form
of that attached hereto as Exhibit B (the "Pledge Agreement"). The amount of the
Note will be equal, at the option of the Investor, to a maximum of $249,200.00
(calculated by multiplying 40% by the $623,000.00 severance and retention bonus
payment due the Investor from Tenneco, the obligation to pay which has been
assumed by the Company). The Subscription Price will be paid promptly following
the receipt by the Investor of the severance and retention bonus payment
referred to above, net of applicable withholdings. Upon delivery of the
Subscription Price and the Pledge Agreement, the Company will issue the 237.9868
Investor Shares.
Section 1.2. INDEMNIFICATION. The Investor understands and
acknowledges the meaning and legal consequences of the representations,
warranties and agreements made by the Investor in this Investment Agreement and
that the Company has relied upon such representations, warranties and
agreements, and the Investor hereby agrees to indemnify and hold harmless the
Company, and all directors, officers, employees, stockholders, agents and
representatives thereof, from and against any and all claims, demands, losses,
damages, expenses or liabilities (including without limitation attorneys' fees)
due to or arising out of a breach of any such representations, warranties or
agreements. Notwithstanding the foregoing, however, no representation, warranty
or agreement made herein by the Investor shall in any manner be deemed to
constitute a waiver of any rights available to the Investor under federal or
state securities laws.
ARTICLE II.
INVESTMENT CONSIDERATIONS AND
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.1. CERTAIN INVESTMENT CONSIDERATIONS. In addition to the
other information reviewed by the Investor in connection with the Investor's
evaluation of an investment in the Shares and in addition to the other
investment considerations set forth in this Investment Agreement, the Investor
understands and has carefully considered each of the following investment
considerations prior to the Investor's investment in the Investor Shares:
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(a) CONTROL BY THE FIRST RESERVE ENTITIES. Upon consummation of the
Ventures Companies Acquisition and the issuance and sale of the Shares under the
First Reserve Subscription Agreement and the Management Investors Subscription
Agreements (assuming all Management Investors' Shares offered thereby are fully
subscribed), (i) the First Reserve Entities will collectively own 9,519.4717
shares of Common Stock, representing 94.8426% of the then issued and outstanding
shares of Common Stock, and (ii) the Management Investors will collectively own
517.6542 shares of Common Stock, representing 5.1574% of the then issued and
outstanding shares of Common Stock. As a consequence thereof, the First Reserve
Entities will have voting control of the Company. Under the terms of the
Securityholders' Agreement, (i) the Board will consist of five members, three of
whom the First Reserve Entities will have the right to designate and two of whom
the Management Investors will have the right to designate, and (ii) all
Significant Transactions (as such term is defined in the Securityholders'
Agreement, and which term includes mergers and sales of assets) may be
authorized and effected only by a vote of at least a majority of the whole
Board. Because such a majority requires three members of the Board, the First
Reserve Entities will have the ability to control all Significant Transactions
by means of their three Board designees.
(b) NO ASSURANCE OF PROFITS. The Investor recognizes that no
assurances of profits, ability to repay debt, cash distributions or capital
appreciation have been made or can be made regarding the Company.
(c) INDEBTEDNESS AND CAPITAL STRUCTURE. In connection with the
consummation of the Ventures Companies Acquisition, the Company has entered into
a Credit Agreement among the Company, certain subsidiaries of the Company, as
subsidiary guarantors (the "Subsidiary Guarantors"), certain lenders
(collectively, the "Lenders"), and The Chase Manhattan Bank, as Administrative
Agent for the Lenders (the "Credit Agreement"). The Company has borrowed
approximately $61.2 million under the Credit Agreement to finance in part the
Ventures Companies Acquisition. Consequently, the Company has a substantial
level of outstanding indebtedness. Specifically, as a result of the Ventures
Companies Acquisition and related transactions, the Company has total
consolidated indebtedness for money borrowed of approximately $89.4 million and,
upon consummation of the subscriptions by the Management Investors, will have
stockholders' equity of approximately $31.6 million. The total debt-to-total
capitalization ratio of the Company upon the consummation of the Ventures
Companies Acquisition and the subscriptions by
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the Management Investors is expected to be approximately .74 to 1.0 on a fully
consolidated basis.
The indebtedness incurred in connection with the financing of the
Ventures Companies Acquisition will pose substantial risks to the holders of the
Shares. Such risks include, but are not limited to, the following: (i)
significant interest expense and principal repayment obligations will be
incurred by the Company; (ii) the ability of the Company to satisfy its
obligations and to reduce its debt will depend upon the Company's future
operating performance, general economic conditions, interest rates, future
prices of oil and gas, and other factors, including factors beyond the control
of the Company; (iii) the Company might not generate sufficient cash flow to pay
interest on or principal of the indebtedness under the Credit Agreement; (iv)
the indebtedness incurred will limit the Company's ability to effect future
financings or acquisitions or to take advantage of significant business
opportunities that may arise and may otherwise restrict corporate activities and
limit the Company's ability to withstand competitive pressures or adverse
economic conditions; and (v) the Company will have restrictions on operations
and use of available cash flow. In addition, as a result of the increased level
of indebtedness and related debt service obligations, the Company will be less
able to meet its obligations in the event of a downturn in the oil and gas
business generally or in the economy.
(d) ASSET ENCUMBRANCES. The Company and the Subsidiary Guarantors
have granted to the Lenders liens on and security interests in substantially all
of their assets. In the event of a default under the Credit Agreement (whether
as a result of the failure to comply with a payment or other covenant, a
cross-default provision or otherwise), the Lenders, who have a prior, secured
claim on substantially all of the assets of the Company and the Subsidiary
Guarantors, may attempt to foreclose on their collateral, in which event the
Company's financial condition, and the value of the Shares would be materially
adversely affected.
(e) RESTRICTIONS AND COVENANTS. The Credit Agreement contains
numerous financial and operating covenants, including restrictions on use of
available cash flow and restrictions on additional financings. Such covenants
and restrictions may limit the Company's ability to conduct its business. The
Company's ability to comply with the terms of the Credit Agreement (including
its ability to comply with such covenants) and to satisfy its other debt
obligations will depend, in part, on the future performance
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of the Company and its subsidiaries. Such future performance will be subject to
prevailing economic conditions and to financial, business and other factors,
including factors beyond the control of the Company. In the event the Company
fails to comply with the various covenants contained in the Credit Agreement, it
could be declared in default thereunder and the debt thereunder could be
accelerated, in which event the Company's financial condition, and the value of
the Shares would be materially adversely affected.
(f) INTEREST RATE SENSITIVITY. The indebtedness incurred under the
Credit Agreement will bear interest at rates which will fluctuate with the Prime
Rate and the Eurodollar rate (as defined therein). Any significant increase in
prevailing interest rates could have a material and adverse effect on the
Company's financial condition.
(g) COMPETITION. The Company's business is highly competitive. A
number of United States and foreign entities will compete with the Company, and
many of the Company's competitors will have greater financial resources than the
Company.
(h) ENVIRONMENTAL MATTERS. As a result of the Ventures Companies
Acquisition, the Company is subject to extensive federal, state and local
environmental laws, regulations and permit requirements. The Company's business
will inherently expose it to various risks, such as the potential for harmful
substances escaping into the environment and causing damage or injury.
Significant costs could be incurred on account of environmental laws or
regulations in the future, and the Company cannot predict the impact on its
operations of new or changed laws or regulations.
(i) TRANSFER RESTRICTIONS; COMPANY CALL. Pursuant to the terms of
the Securityholders' Agreement, the Investor may not sell, transfer or otherwise
dispose of the Shares being purchased by the Investor until the earlier of (i)
five years after the date hereof and (ii) the occurrence of a Qualified Public
Offering (as defined in the Securityholders' Agreement). In addition, the
Securityholders' Agreement generally provides that upon the termination of the
Investor's employment with the Company, the Company has the option, on the terms
and subject to the conditions of the Securityholders' Agreement, to purchase the
Shares being purchased by the Investor pursuant to this Investment Agreement.
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Section 2.2. REPRESENTATIONS, WARRANTIES AND COVENANTS. The
Investor, by executing this Investment Agreement, acknowledges, covenants,
agrees, represents and warrants that:
(1) INVESTMENT FOR OWN ACCOUNT. The Investor Shares are being
acquired by the Investor solely for the Investor's own account, for investment
purposes only and not with a view to, and not for offer or sale in connection
with, any distribution or resale of the Investor Shares, and no one other than
the Investor has or will have any beneficial interest in the Investor Shares.
(2) ADEQUATE INFORMATION. The Company has made available and the
Investor has fully and completely reviewed all such information that the
Investor considers necessary or appropriate to evaluate the risks and merits of
an investment in the Investor Shares (including without limitation, the Stock
Purchase Agreement, the First Reserve Subscription Agreement, the
Securityholders' Agreement and the Credit Agreement). The Investor has not
distributed this Investment Agreement or such information to any person or
entity other than the Investor's legal and tax advisors, if any, and no one
other than such persons and entities and the Investor has used this Investment
Agreement or such information.
(3) OPPORTUNITY TO QUESTION. The Investor has had the opportunity to
question, and has questioned, to the extent the Investor has deemed necessary or
appropriate, representatives of the Company so as to receive answers and verify
information obtained in the Investor's examination of the Company, including
without limitation the information referred to in paragraph (2) of this Section
2.2 and all other documents or information that the Investor has reviewed in
relation to his or her investment in the Investor Shares.
(4) NO OTHER REPRESENTATIONS. No oral or written representations
have been made to the Investor in connection with the Investor's acquisition of
the Investor Shares that were in any way inconsistent with the information
reviewed by the Investor.
(5) KNOWLEDGE AND EXPERIENCE. The Investor has such knowledge and
experience in financial, tax and business matters, including without limitation
substantial experience in evaluating and investing in common stock and other
securities (including without limitation the common stock and other securities
of new and speculative companies and companies engaged in oil and gas
exploration and production), so as to enable the Investor to utilize the
information
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referred to in paragraph (2) of this Section 2.2 and all other information made
available to the Investor in order to evaluate the risks and merits of an
investment in the Investor Shares and to make an informed investment decision
with respect thereto. In addition, the Investor has been advised to consult with
an attorney regarding legal matters concerning the Company and to consult with a
tax advisor regarding the tax consequences of investing in the Company and
purchasing the Investor Shares.
(6) INDEPENDENT DECISION. The Investor is not relying on the Company
or any references to any legal or other opinion in the materials reviewed by the
Investor with respect to the tax considerations of the Investor relating to an
investment in the Investor Shares pursuant to Section 1.1 hereof. The Investor
has relied solely on its own examination and independent investigation of the
Company, the Investor Shares and Securityholders' Agreement in making its
decision to acquire the Investor Shares.
(7) FINANCIAL CONDITION. The Investor's financial condition and
income are such that (i) the Investor is under no present need to dispose of any
portion of the Investor Shares to satisfy any existing or contemplated
undertaking or indebtedness and (ii) the Investor is able to bear the economic
risk of investment in the Investor Shares, including the risk of losing the
entire investment and the risk of not being able to sell or transfer any of the
Investor Shares for an indefinite period of time. In this regard, the Investor
recognizes that the Securityholders' Agreement contains a prohibition on any
transfer of such Shares for a period of five years from the date of issuance.
(8) RESTRICTED SECURITIES. The Investor understands that the
Investor may be required to bear the economic risk of investment in the Investor
Shares for an indefinite period of time because the Investor Shares (a) may not,
without full compliance with the registration and prospectus delivery
requirements of the Securities Act and applicable Blue Sky Laws, be offered,
sold or delivered except in a transaction exempt from, or not subject to, the
registration and prospectus delivery requirements of the Securities Act and
applicable Blue Sky Laws and (b) are additionally subject to all of the
prohibitions, restrictions and other limitations on transfer set forth in the
Securityholders' Agreement. The Investor understands that the Company has no
obligation to cause or permit the registration of any of the Investor Shares
under the Securities Act or any Blue Sky Laws except as may be set forth in the
Securityholders' Agreement.
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(9) RESTRICTIONS ON RESALE OR TRANSFER. The Investor will not
transfer or pledge any or all of the Investor Shares in violation of the
Securityholders' Agreement or the Securities Act or any applicable Blue Sky Laws
and in the event that the Investor pledges any of the Investor Shares (to the
extent permitted under the Securityholders' Agreement, the Securities Act and
any applicable Blue Sky Laws), the Investor will comply with the
Securityholders' Agreement in connection therewith, will advise the pledgee of
the transfer restrictions imposed on the Investor Shares by this Investment
Agreement and will use its best efforts to obtain an undertaking from such
pledgee not to transfer such Investor Shares in violation of the Securities Act
or applicable Blue Sky Laws.
(10) RESTRICTIVE LEGEND. The certificates from time to time
evidencing the Investor Shares may, at the Company's sole option, bear a legend
that provides that the Investor Shares have not been registered under the
Securities Act or any applicable Blue Sky Laws and that the Investor Shares may
not be transferred unless the Company is first delivered a legal opinion,
satisfactory to the Company in its sole discretion, to the effect that such
transfer may be made without compliance with the registration and prospectus
delivery requirements of the Securities Act and applicable Blue Sky Laws. Such
legal opinion shall be given by counsel satisfactory to the Company in its sole
discretion, at the Investor's expense. Under the terms of the Securityholders'
Agreement, the certificates representing the Shares are required to bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY APPLICABLE STATE SECURITIES LAWS, AND ARE SUBJECT TO THE PROVISIONS
(INCLUDING THE RESTRICTIONS ON TRANSFER) SET FORTH IN THAT CERTAIN
SECURITYHOLDERS' AGREEMENT DATED AS OF DECEMBER 31, 1996 AMONG DOMAIN
ENERGY CORPORATION (THE "COMPANY"), FIRST RESERVE FUND VII, LIMITED
PARTNERSHIP AND THE INDIVIDUALS AND TRUSTS SIGNATORY THERETO, AS SUCH
AGREEMENT MAY BE AMENDED (AS AMENDED, IF AMENDED, THE "SECURITYHOLDERS'
AGREEMENT"), A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT (AND THE HOLDER OF
THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES THAT SUCH
SECURITIES MAY NOT AND WILL NOT) BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE
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DISPOSED OF (1) EXCEPT IN COMPLIANCE WITH THE SECURITYHOLDERS' AGREEMENT
AND (2) EXCEPT AS OTHERWISE PROVIDED IN THE SECURITYHOLDERS' AGREEMENT,
UNLESS AND UNTIL SUCH SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL FOR THE
HOLDER SATISFACTORY TO THE COMPANY IS OBTAINED TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED. ADDITIONALLY, IF THE HOLDER IS A CITIZEN OR
RESIDENT OF ANY COUNTRY OTHER THAN THE UNITED STATES, OR THE HOLDER
DESIRES TO EFFECT ANY SUCH TRANSACTION IN ANY SUCH COUNTRY, THE COMPANY
MUST BE FURNISHED WITH A SATISFACTORY OPINION OR OTHER ADVICE OF COUNSEL
FOR THE HOLDER THAT SUCH TRANSACTION WILL NOT VIOLATE THE LAWS OF SUCH
COUNTRY."
The Investor has read and understands the restrictions on transfer set forth in
such legend and in the Securityholders' Agreement and agrees to comply with all
such restrictions.
(11) FURTHER ACTIONS. The Investor shall, at the Company's expense,
take all further actions necessary to facilitate the issuance of the Investor
Shares to the Investor under an appropriate exemption from registration under
the Securities Act and applicable Blue Sky Laws, including without limitation
providing the Company with such information as the Company may require to
complete a Form D and any related or similar forms or applications required
under the Securities Act or applicable Blue Sky Laws.
(12) AUTHORIZATION; LEGAL COMPETENCE. The Investor has full power
and authority to execute this Investment Agreement and to invest in the Investor
Shares, and this Investment Agreement constitutes the valid and legally binding
obligation of such Investor, enforceable against such Investor in accordance
with its terms.
(13) ACCREDITED INVESTOR; BLUE SKY LAWS. The Investor is an
"accredited investor" as that term is defined in Rule 501 of Regulation D
promulgated under the Securities Act of 1933, as amended. The Investor
understands that no commissioners of securities or equivalent officials of any
state have made any finding or determination relating to the fairness of an
investment in the Shares and that no such person has recommended or endorsed the
Shares. The Investor is a "sophisticated investor" as such term is defined by
the Texas Blue Sky Regulations relating to limited offering exemptions, in that
the purchase of the Investor Shares by the Investor does not exceed 20% of the
Investor's net worth
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on the date hereof, and the Investor has knowledge of finance, securities and
investments, generally.
This Amended and Restated Management Investor Subscription Agreement
amends, supersedes and restates in its entirety the Management Investor
Subscription Agreement by the Investor for the benefit of the Company dated as
of December 31, 1996. The provisions hereof shall inure to the benefit of the
Company, its successors and assigns and shall be binding upon the Investor, its
legal representatives, successors and assigns.
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IN WITNESS WHEREOF, the Investor has executed, or duly authorized
and caused the execution of, this Investment Agreement on February 13, 1997, to
be effective for all purposes as of December 31, 1996.
INVESTOR
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Acknowledged and Accepted on February 13, 1997, to be effective for all
purposes as of December 31, 1996:
DOMAIN ENERGY CORPORATION
By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President and Chief Financial Officer
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Management Investor Subscription Agreement
EXHIBIT A
PROMISSORY NOTE
$249,200.00 Houston, Texas
February __, 1997
FOR VALUE RECEIVED, the undersigned, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (the
"Executive"), hereby unconditionally promises to pay to the order of Domain
Energy Corporation, a Delaware corporation (the "Company") at its offices, in
lawful money of the United States of America, the principal amount of TWO
HUNDRED FORTY-NINE THOUSAND, TWO HUNDRED DOLLARS ($249,200.00). The principal
amount shall be paid on the earliest to occur of (i) if there has occurred a
Qualified Public Offering (as such term is defined in the Securityholders
Agreement (the "Securityholders Agreement") dated as of December 31, 1996 by and
among the Company, the Executive and the individuals and trusts party thereto),
the Executive's termination of employment by the Company for Cause or without
Good Reason by the Executive, (ii) if there has occurred a Qualified Public
Offering, one year after the Executive's termination of employment without Cause
by the Company or with Good Reason by the Executive, (iii) the disposition of
any of the Investor Shares (as such term is defined in the Management Investor
Subscription Agreement referred to below) by the Executive, provided, that the
Executive shall be required only to pay that amount of the principal amount
which is equal to the proceeds received from any such disposition (with any
outstanding unpaid principal remaining subject to this sentence) and (iv)
December 31, 2003 (the "Maturity Date"). The Executive further agrees to pay
interest in like money at such office on the unpaid principal amount hereof from
time to time outstanding at an interest rate equal to 8% on (x) June 30 and
December 31 of each year (each such date, a "Interim Interest Payment Date"),
(y) the Maturity Date and (z) with respect to the amount of any optional
repayment, on the date of any such optional repayment; provided, however, that
with respect to interest payments due pursuant to clause (x) above, on written
notice given to Company not less than 15 days prior to any Interim Interest
Payment Date the Executive may elect to satisfy his or her interest payment
obligations by increasing the principal amount of this note by the amount of
such interest due. Such an election shall apply to all interest payments due on
all future Interim Interest Payment Dates until revoked. "Cause" shall mean,
except as otherwise provided in an employment agreement between the Company and
the Executive, (i) the commission of an act of fraud or embezzlement or other
willful misconduct against the Company or its affiliates (including the
unauthorized disclosure of confidential or proprietary
information of the Company or any of its subsidiaries which results in material
financial loss to the Company or any of its affiliates), (ii) the commission by
the Executive of a felony, or (iii) the willful failure to render services to
the Company or any of its affiliates in accordance with his or her employment
which failure amounts to a material neglect of duties to the Company or any of
its affiliates; and "Good Reason" shall mean, except as otherwise provided in an
employment agreement between the Company and the Executive, (x) any material
reduction by the Company of the Executive's authority, duties or
responsibilities (except in connection with the termination of the Executive's
employment for Cause, as a result of Permanent Disability, as such term is
defined below, or as a result of the Executive's death or Retirement, as such
term is defined below), (y) any reduction by the Company in the Executive's base
salary or (z) the Company's moving the Executive's place of employment outside
the Houston, Texas metropolitan area. Notwithstanding the immediately preceding
sentence, the definitions in any employment agreement in effect on the date
hereof between the Company and the Executive of "Cause" and "Good Reason" shall
supersede and replace the definitions of "Cause" and "Good Reason" in the
immediately preceding sentence and shall be deemed incorporated by reference in
this Note in their entirety.
The following shall constitute "Events of Default" under the terms
of this Note:
(i) default in payment when due and payable, upon acceleration
or otherwise, of principal of this Note;
(ii) default for five (5) days or more in the payment when due
of interest on the Note.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
For purposes of this Note, the Executive shall be deemed to have a
"Permanent Disability" if the Executive is unable to engage in the activities
required by the Executive's job by reason of any medically determined physical
or mental impairment which can be expected to result in death or which can be
expected to last for a continuous period of not less than 12 months.
For purposes of this Note, "Retirement" shall mean the voluntary
termination of employment by the Executive at age 62 or older (or such other age
as may be approved by the Board of Directors of the Company) after having been
employed by the Company for at least three years after the date hereof.
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This Note is subject to optional prepayment in whole or in part at
any time. Reference is hereby made to the Pledge Agreement for a description of
the properties and assets in which a security interest has been granted.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable by the Company.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Capitalized terms not otherwise defined herein shall have the
meanings assigned to such terms in the Management Investor Subscription
Agreement dated as of February __, 1997 between the Company and the Executive
(the "Management Investor Subscription Agreement").
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Management Investor Subscription Agreement
EXHIBIT B
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of February __, 1997, made by ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ (the "EXECUTIVE") in favor of Domain Energy Corporation, a Delaware
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company has agreed to make a loan (the "Loan") to the
Executive for the acquisition of Investor Shares (as defined in the Management
Investor Subscription Agreement of even date herewith between the Company and
the Executive (the "Management Investor Subscription Agreement")), to be
evidenced by a note substantially in the form of Exhibit A to the Management
Investor Subscription Agreement (the "Note");
WHEREAS, the Executive will be the legal and beneficial owner of the
shares of Pledged Stock (as hereinafter defined) issued by the Company; and
WHEREAS, it is a condition precedent to the obligation of the Company to
make the Loan to the Executive that the Executive shall have executed and
delivered this Pledge Agreement to the Company.
NOW, THEREFORE, in consideration of the premises and to induce the Company
to make the Loan, the Executive hereby agrees with the Company, as follows:
1. DEFINED TERMS. (a) Unless otherwise defined herein, terms defined in
the Note or the Management Investor Subscription Agreement and used herein shall
have the meanings assigned to them in the Note and the Management Investor
Subscription Agreement, respectively.
(b) The following terms shall have the following meanings:
"AGREEMENT": this Pledge Agreement, as the same may be amended, modified
or otherwise supplemented from time to time.
"CODE": the Uniform Commercial Code from time to time in effect in the
State of New York.
"COLLATERAL": the Pledged Stock and all Proceeds.
"COLLATERAL ACCOUNT": any account established to hold money Proceeds,
maintained under the sole dominion and control of the Company.
"DEFAULT": any event that is or with the passage of time or the giving of
notice or both would be an Event of Default under the Note.
"OBLIGATIONS": the collective reference to the unpaid principal of and
interest on the Note and all other obligations and liabilities of the Executive
to the Company (including, without limitation, interest accruing at the then
applicable rate provided in the Note after the maturity of the Loan and interest
accruing at the then applicable rate provided in the Note after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Executive, whether or not a
claim for post-filing or postpetition interest is allowed in such proceeding),
whether direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection
with the Note and this Agreement or any other document made, delivered or given
in connection therewith, in each case whether on account of principal, interest,
costs, expenses or otherwise.
"PERSON": any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"PLEDGED STOCK": the shares of capital stock listed on SCHEDULE 1 hereto,
together with all stock certificates received upon exercise of any such options
or rights of any nature whatsoever that may be issued or granted by the Company
to the Executive while this Agreement is in effect.
"PROCEEDS": all "proceeds" as such term is defined in Section 9-306(l) of
the Uniform Commercial Code in effect in the State of New York on the date
hereof and, in any event, shall include, without limitation, all dividends or
other income from the Pledged Stock, collections thereon or distributions with
respect thereto.
"SECURITIES ACT": the Securities Act of 1933, as amended.
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(a) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section and
paragraph references are to this Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. PLEDGE; GRANT OF SECURITY INTEREST. The Executive hereby delivers to
the Company all the Pledged Stock and hereby grants to the Company a first
security interest in the Collateral, as collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations.
3. STOCK POWERS. Concurrently with the delivery to the Company of each
certificate representing one or more shares of Pledged Stock to the Company, the
Executive shall deliver an undated stock power covering such certificate, duly
executed in blank by the Executive with, if the Company so requests, signature
guaranteed.
4. COVENANTS. The Executive covenants and agrees with the Company that,
from and after the date of this Agreement until this Agreement is terminated and
the security interests created hereby are released:
(a) If the Executive shall (i) as a result of its ownership of the
Pledged Stock, become entitled to receive or shall receive any stock certificate
(including, without limitation, any certificate representing a stock dividend or
a distribution in connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any reorganization), option
or rights, whether in addition to, in substitution of, as a conversion of, or in
exchange for any shares of the Pledged Stock, or otherwise in respect thereof or
(ii) acquire ownership of shares of Common Stock upon the exercise of stock
options, the Executive shall accept the same as the agent of the Company, hold
the same in trust for the Company, and deliver the same forthwith to the Company
in the exact form received, duly endorsed by the Executive to the Company, if
required, together with an undated stock power covering such certificate duly
executed in blank by the Executive and with, if the Company so requests,
signature guaranteed, to be held by the Company, subject to the terms hereof, as
additional collateral security for the Obligations.
(b) Without the prior written consent of the Company, the Executive
will not (1) sell, assign, transfer, exchange, or otherwise dispose of, or
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grant any option with respect to, the Collateral, (2) create, incur or permit to
exist any lien or option in favor of, or any claim of any Person with respect
to, any of the Collateral, or any interest therein, except for the security
interests created by this Agreement or (3) enter into any agreement or
undertaking restricting the right or ability of the Executive or the Company to
sell, assign or transfer any of the Collateral.
(c) The Executive shall maintain the security interest created by
this Agreement as a first, perfected security interest and shall defend such
security interest against claims and demands of all Persons whomsoever. At any
time and from time to time, upon the written request of the Company, and at the
sole expense of the Executive, the Executive will promptly and duly execute and
deliver such further instruments and documents and take such further actions as
the Company may reasonably request for the purposes of obtaining or preserving
the full benefits of this Agreement and of the rights and powers herein granted.
If any amount payable under or in connection with any of the Collateral shall be
or become evidenced by any promissory note, other instrument or chattel paper,
such note, instrument or chattel paper shall be immediately delivered to the
Company, duly endorsed in a manner satisfactory to the Company, to be held as
Collateral pursuant to this Agreement.
(d) The Executive shall pay, and save the Company harmless from, any
and all liabilities with respect to, or resulting from any delay in paying, any
and all stamp, excise, sales or other taxes which may be payable or determined
to be payable with respect to any of the Collateral or in connection with any of
the transactions contemplated by this Agreement.
5. CASH DIVIDENDS; VOTING RIGHTS. Unless an Event of Default shall have
occurred and be continuing and the Company shall have given notice to the
Executive of the Company's intent to exercise its corresponding rights pursuant
to Section 6 below, the Executive shall be permitted to receive all cash
dividends paid in respect of the Pledged Stock and to exercise all voting and
corporate rights with respect to the Pledged Stock.
6. RIGHTS OF THE COMPANY. If an Event of Default shall occur and be
continuing and the Company shall give notice of its intent to exercise such
rights to the Executive the Company shall have the right to receive any and all
cash dividends paid in respect of the Pledged Stock and make application thereof
to the Obligations in such order as the Company may determine.
7. REMEDIES. (a) If an Event of Default shall have occurred and be
continuing, at any time at the Company's election, the Company may apply all or
any
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part of Proceeds held in any Collateral Account in payment of the Obligations in
such order as the Company may elect.
(b) If an Event of Default shall have occurred and be continuing,
the Company may exercise, in addition to all other rights and remedies granted
in this Agreement and in any other instrument or agreement securing, evidencing
or relating to the obligations, all rights and remedies of a secured party under
the Code. Without limiting the generality of the foregoing, the Company, without
demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law referred to below) to or
upon the Executive or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, assign, give option or options to
purchase or otherwise dispose of and deliver the Collateral or any part thereof
(or contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, in the over-the-counter market, at any exchange, broker's
board or office of Company or elsewhere upon such terms and conditions as it may
deem advisable and at such prices as it may deem best, for cash or on credit or
for future delivery without assumption of any credit risk. The Company shall
have the right upon any such public sale or sales, and, to the extent permitted
by law, upon any such private sale or sales, to purchase the whole or any part
of the Collateral so sold, free of any right or equity of redemption in the
Executive, which right or equity is hereby waived or released. The Company shall
apply any Proceeds from time to time held by it and the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred in respect
thereof or incidental to the care or safekeeping of any of the Collateral or in
any way relating to the Collateral or the rights of the Company hereunder,
including, without limitation, reasonable attorneys' fees and disbursements of
counsel to the Company, to the payment in whole or in part of the Obligations,
in such order as the Company may elect, and only after such application and
after the payment by the Company of any other amount required by any provision
of law, including, without limitation, Section 9-504(l)(c) of the Code, need the
Company account for the surplus, if any, to the Executive. To the extent
permitted by applicable law, the Executive waives all claims, damages and
demands it may acquire against the Company arising out of the exercise by it of
any rights hereunder. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed reasonable and
proper if given at least 10 days before such sale or other disposition. The
Executive shall remain liable for any deficiency if the proceeds of any sale or
other disposition of Collateral are insufficient to pay the Obligations and the
fees and disbursements of any attorneys employed by the Company to collect such
deficiency.
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8. EXECUTION OF FINANCING STATEMENTS. Pursuant to Section 9-402 of the
Code, the Executive authorizes the Company to file financing statements with
respect to the Collateral without the signature of the Executive in such form
and in such filing offices as the Company reasonably determines appropriate to
perfect the security interests of the Company under this Agreement. A carbon,
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement for filing in any jurisdiction.
9. NOTICES. All notices, requests and demands to or upon the Company or
the Executive to be effective shall be in writing (or by telex, facsimile or
similar electronic transfer confirmed in writing) and shall be deemed to have
been duly given or made (1) when delivered by hand or (2) if given by mail, when
deposited in the mails by certified mail, return receipt requested, or (3) if by
telex, facsimile or similar electronic transfer, when sent and receipt has been
confirmed, addressed to the Company or the Executive at its address or
transmission number for notices provided on the signature page hereto. The
Company and the Executive may change their addresses and transmission numbers
for notices by notice in the manner provided in this Section 9.
10. SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
11. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES. (a) None of the
terms or provisions of this Agreement may be waived, amended, supplemented or
otherwise modified except by a written instrument executed by the Executive and
the Company, PROVIDED that any provision of this Agreement may be waived by the
Company in a letter or agreement executed by the Company or by telex or
facsimile transmission from the Company.
(b) The Company shall not by any act (except by a written instrument
pursuant to paragraph 11(a) hereof), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default ot Event of Default or in any breach of any of the terms and conditions
hereof. No failure to exercise, nor any delay in exercising, on the part of the
Company, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Company of any right or
remedy hereunder on
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any one occasion shall not be construed as a bar to any right or remedy which
the Company would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
12. SECTION HEADINGS. The section headings used in this Agreement are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
successors and assigns of the Executive and shall inure to the benefit of the
Company and their successors and assigns.
14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
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IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly
executed and delivered as of the date first above written.
By:
Spouse:
Address for Notices:
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (____) ____-______
Accepted this ____ day of February, 1997
DOMAIN ENERGY CORPORATION
By:
▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President and Chief Financial Officer
Address for Notice:
Domain Energy Corporation
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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SCHEDULE 1
TO PLEDGE AGREEMENT
DESCRIPTION OF PLEDGED STOCK
1. Stock Certificate No. 0002, representing 237.9868 shares of Common Stock,
par value $.01 per share, of Domain Energy Corporation.